LONDON — London-based start-up Heat has closed a $5 million seed round funding led by venture capital firm Antler, and LVMH Luxury Ventures, the investment entity operating within LVMH Moët Hennessy Louis Vuitton.
Angel investors this round include OTB Group’s Stefano Rosso, the Hermès family, L Catterton partner Michael Mitterlehner, German grocery start-up Flink founder Oliver Merkel and Spotify’s director of global growth Sven Ahrens.
The fresh capital injection will be used to create more innovative and immersive e-commerce experiences — which include implementing gamification, AI-driven personalization and interactive drops — while continuing to drive sustainability.
Joe Wilkinson, chief executive officer of Heat, added the funding will enable the company to further create “a shopping platform for a digital generation and [we] are positioned to continue to innovate and make an impact in this space.”
Martell Hardenberg, partner at Antler, said, “We are sitting on one of the greatest opportunities in luxury retail with consumer behavior changing dramatically over the coming years. Heat has created a unique platform for consumers and brands alike to create a new shopping and selling experience while protecting brand integrity.”
Cofounded by Wilkinson and Mario Maher in 2019, the London-based company has sold more than 20,000 mystery boxes to its 600,000-plus Gen Z-led online community.
A normal box, which claims to guarantee to have 500 pounds-plus worth of items, is priced at 299 pounds, while the premium version, which comes with items worth more than 850 pounds, costs 500 pounds.
Heat operates distribution hubs in Sheffield, England, and in Milan and has plans to further expand the network in Europe and the U.S.
Wilkinson describes the company as a disruptor of traditional luxury fashion retail, and said Heat is standing “at the forefront of next-generation routes to market for a Gen Z audience.”
From the brands’ perspective, Heat was an appealing outlet for surplus stock. By partnering with Heat on the boxes, brands don’t have to discount the inventory or find other ways to shift it.
“A lot of brands don’t want to put their excess stock on sale or dispose of it in landfill. They need a new way of getting rid of the stock that protects the brand values,” Wilkinson told WWD in an earlier interview.
He said the company began by sourcing products directly from department stores, but soon brands with similar surplus stock issues came calling.
Now Heat is working with more than 60 brands directly, including Off-White, Palm Angels, Amiri, Billionaire Boys Club and Casablanca, and has expanded its scope beyond the streetwear niche to men’s and women’s contemporary and luxury fashion, offering items from brands like Balenciaga, Loewe, Jacquemus and JW Anderson.
The company has also evolved from its initial focus of sourcing previous seasons’ stock to working with brands to launch products via its mystery boxes, namely with Haider Ackermann and British men’s label Represent.
“It’s really turned into a customer acquisition and marketing tool for brands. They now come to us and say that they want to get new season products into the boxes. Because so many influencers are opening the boxes on their Instagram Stories, people are seeing the products and want to go out and buy them at full retail price,” Wilkinson said.
This way of working with new and old season products allows Heat to offer added value to its customers and keeps them coming back for more, while brands get to experiment with a different way of selling and talking to the sought-after Gen Z and Millennial consumer.
“Brands have been coming to us through referrals, say, from their wholesale directors, so we’ve seen organic growth. We are aware we are a new chapter for these brands,” Maher said.
Wilkinson, at the time, touted that the next stage for the company is to launch a kids’ wear mystery box and to have more collaborations with brands on exclusive products that will only be available in the boxes.