SCOTLAND’S growing crop of mobile app businesses are celebrating another breakthrough following a £2.5 million fundraising by Edinburgh start-up Mallzee.
The mobile shopping application has secured major new backer Royal Mail Group as part of the deal. Other new and existing investors – including the Scottish Investment Bank, Par Equity and Skyscanner’s Gareth Williams – also gave fresh funds.
Founded in 2013 by Cally Russell, Mallzee gives users access to more than 100 fashion stores at a single go, while also allowing shoppers to build their own “style feeds”. Roughly three-quarters of its estimated 300,000 users are based in the UK, with the new money to expand that user base to one million by the end of the year.
The deal took a couple of months to put together and gives the business a “significantly higher” valuation than the £75,000 Dragons’ Den offer Russell walked away from earlier this year.
The 27-year-old said the mix of investors will allow Mallzee to become the leading fashion shopping app in the world. New backers such as tech veteran Chris Van Der Kuyl and 4J Studios’ Paddy Burns are experienced in scaling up global businesses, while Royal Mail’s role in online shopping will allow the company to access new retailers.
“It is one of those kind of deals that makes fantastic sense once you get into it,” Russell said.
Royal Mail, which acquired e-commerce software specialist StoreFeeder in February, said the Mallzee investment is part of its “continued focus on digital innovation”. More than a third of UK online shoppers used a mobile device to make a purchase during the past three months, with shopping the fastest-growing app category.
Nick Landon, managing director of Royal Mail Parcels, said the deal will augment existing services while also providing “high-growth revenue streams further up the value chain”.
“We think we can rapidly add significant value to the Mallzee business by introducing their solution to a wider audience,” he said, “while the entrepreneurial and cutting-edge mobile capabilities that Mallzee have developed will complement our existing distribution services.”
Landon will take a seat on the board of Mallzee as part of the agreement, signalling Royal Mail’s status as the company’s largest single external shareholder. Russell and his management team still control more than 50 per cent, with the rest distributed among investors who to date have stumped up a total of £3.1m.
Mallzee takes a small commission from each sale and charges retailers to be featured on the app. Revenues are running in the “hundreds of thousands”, with Russell predicting break-even or profit by the second quarter next year.
Growth will lead to a doubling in headcount, which should reach 30 by year end. Expansion ambitions will focus on marketing in the UK, as well as targeting key regions internationally.
“The US is the most logical one just now, but we are examining other markets as well and zeroing in on one or two,” he said.