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RETAIL | Staff Reporter, Hong Kong
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Online Apparel Brand GRANA Secures Undisclosed Financing from STI Group

Total funding is now at US$16M.

When Luke Grana, CEO and founder of the namesake direct-to-consumer online apparel brand GRANA, visited Peru, he discovered the luxurious, super-soft and inexpensive Peruvian Pima cotton - and literally the thread that would form the basis for his newest multi-million-dollar startup.

"Living in Australia, I felt that everything was so overpriced for the quality. You should be buying clothing that has a long lifespan in your wardrobe, not get destroyed after a few washes or itch your skin when being worn," said Grana. So when he encountered the long line fabric rolls in the Peruvian markets, he considered the possibility of creating a quality piece of clothing from the material for less than US$10. He then met with a local factory in Peru that was vertically integrated with generations of experience sourcing and making one of the longest fine cottons in the world.

Grana made a few simple t-shirt samples from Pima cotton, brought them back to Australia, and found a ready market among friends and family who thought the design and quality of the t-shirts for US$15 (HK$118) each was too good to pass up.

From this initial response and after some marketing research, GRANA was officially born in 2014. In three years it has become one of Asia’s fastest growing direct-to-consumer and e-commerce apparel brands, and a darling of financing opportunities.

Most recently, it raised an undisclosed amount of growth capital venture debt financed by STI Financial Group, a Hong Kong-based investment group that provides bespoke capital solutions. The company said funds will be used to fuel the company’s sustainable business growth, improve cash flow management and advance its use of artificial intelligence to improve customer engagement and website functionality.

"Being a young company, it’s important that we don’t rely on raising more equity," said Grana of the latest venture debt deal. "Right now, it’s about fueling long-term business growth, expanding our market penetration in key markets and continue making high quality basics at disruptive prices for our customers.”

Powered with additional financing, GRANA plans to expand its current collection of sustainable items next year.

Solid business model
To date, the three-year old startup has attracted a steady stream of financing that amounts to US$16m or roughly HK$125m. At the end of 2016, GRANA successfully closed a Series A round of US$10m in capital with lead investment from Alibaba’s Hong Kong Entrepreneurs Fund, along with continued support from Golden Gate Ventures and MindWorks Ventures. The brand has managed to attract high-profile investment and venture debt opportunities because of its unique approach to fashion and marketing, as well as its solid business model.

"I set out to research the fashion industry to create a brand that focused on making simple, comfortable and affordable basics - at a strict 2-3 times markup that didn’t sacrifice quality over cost," recalls Grana on when the startup was still being conceptualised.

"In Hong Kong and many parts of the world, mid-range brands like ours aren’t internationally available for everyone to buy from online but the demand is there with consumers wanting to wear consciously made clothing and we aim to close this gap by shipping to 67 countries," he added.

Creating a business model and finding market opportunities is second nature to Grana, a serial entrepreneur. He established GRANA from the HK$1.5M he had saved from his previous business ventures. (He has started up several espresso bars in Australia, which he has sold, and also founded electric vehicle infrastructure provider and network operator ChargePoint in 2008, which was acquired in 2012 by Leightons.)

He spent a year researching the inefficiencies of the fashion industry, and identified Hong Kong as a strategic location to set-up an e-commerce brand that could ship to an international market. He relocated to Hong Kong from from Australia to plunge straight on to his newest venture.

But despite his strong entrepreneurial track record, Grana still encountered difficulty finding financing for his admittedly disruptive and unconventional fashion brand.

"Raising the initial seed funding was a challenge as most angel investors are based in Singapore," he said. "I was very ambitious and proactive to get myself out there, pitch the business idea and get GRANA off the ground."

But he eventually struck a deal with Bluebell, MindWorks Ventures and Golden Gate Ventures, which supported GRANA's seed round to raise US$6m in the first year and a half after its launch.

With investments pouring in, Grana said resources have been focused on building a strong and talented team, and developing innovative technologies to improve the customer online shopping experience. He has also prioritised business analytics, as deeper data diving helps the team enhance business operations and services.

The company operates an 18,000-sq ft global distribution centre in Hong Kong, which enables it to ship products to 67 markets within two to five business days. The facility also houses 60 employees.

While GRANA’s business model is focused on online selling, it has not shied away from physical promotions, having staged 15 pop-up showrooms across Hong Kong, Singapore, the U.S and Australia.

It has also leveraged the power of influencers, improving its global reach after high-profile celebrities Jessica Alba, Gigi Hadid, Jamie Chung and Lily Collins were seen wearing the brand's quality basics. In a world where fast fashion brands seem to rule by sheer retail size and ubiquity, GRANA is trying to show consumers - and the global retail market - a compelling alternative.

"We believe in directly sourcing and making high quality basics at an affordable and honest price-point available for everyone to access online. Slow fashion is the future and we encourage more retail brands to move away from the fast-fashion business model to focus on conscious consumption," said Grana.

"We’re obsessed with searching the world to identify luxury fabrics, turning these fabrics into simple, comfy and affordable wardrobe essentials through our direct-to-consumer business model, operating online only and having a lean supply chain to lower the cost of owning quality apparel," he added.

The founder also highlighted the brand's efforts to educate the consumer - what they are wearing, where it comes from and why it is prices a certain way. "This is a new shopping mindset we’re trying to start, a wider conversation to make people more aware of traditional fashion practices that aren’t necessarily fair to those working within the supply chain but also the high mark-up consumers ultimately pay,” he said.
 

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