Farfetch, a London-based online marketplace that helps independent boutiques sell their luxury wares, this morning announced that it has raised $86 million in new venture capital funding at a valuation of around $1 billion.
DST Global led the round, and was joined by return backers Condé Nast International and Vitruvian Partners. The company previously raised over $100 million from firms like Advent Venture Partners and Index Ventures (neither of which participated this time, as the deal became a bit too large and rich).
Danny Rimer is a partner with Index who led his firm’s original investment in Farfetch three years ago. He has published a blog post on the company and his broader thoughts about ecommerce, and spent some time on the phone with Fortune. What follows is an edited transcript of our conversation:
Fortune: You talk in your blog post about revenue inflection points for e-commerce companies, but the largest one you list is $100 million. Farfetch surpassed that a while ago. What’s its next revenue inflection point?
Danny Rimer: For them it’s probably $1 billion. As these marketplaces and models work, the $1 billion number is a big one. By that point, you have to have a growth rate that’s maintainable and sustainable for a longer period of time, probably in the 25% to 30% range. For Farfetch, it really will come down to execution and internationalization, which is really what this funding is about.
You also cite Apple (AAPL) as the epitome of melding online and offline commerce from an aesthetic point of view, and also giving online buyers the opportunity to see and feel the goods before purchase. How does that work for Farfetch, though, when the actual boutique may be an ocean away?
They’ve aggregated the boutiques around the world that have the greatest followings of customers. It might not be right down the street like an Apple store, but it might be in a city close to you. In general, Farfetch creates an online opportunities for those offline boutiques and, in doing so, gives consumers a flavor of what the selection is in each boutique.
You claim to not be ‘fashion-savvy,’ but you sure have made a bunch of fashion investments. Not just Farfetch, but also Nasty Gal, Tamara Mellon and, to some extent, 1stdibs. So what is it you do understand about fashion?
With the notion of fashion and clothes, you can’t beat the convenience and sense of service from ordering online. One of the things that women, who represent around 80% of fashion purchasing, often like to do is try things on and try things on their their friends. You can’t replicate that online. We’ve seen that with the first boutique that Nasty Gal launched on Melrose. That experience of the brand is something women have flocked to, and we’re investing in it.
What have you learned from Farfetch that has informed future deals you’ve done? Or maybe ones you haven’t?
It’s probably the latter. José Neves is a very talented individual who comes out of the fashion industry but also was a coder from a very young age. His background, plus wanting to disrupt, is a very rare blend to find in an entrepreneur. It made us aware that, in many cases, we’re not going to find the best companies in a sector by only looking in Silicon Valley or at entrepreneurs who have a novel business model without really knowing the sector well. You need a lot of industry expertise for this.
Part of my job is to be aware of disruptive business models but, in many ways, fashion has been one of the spaces most difficult to comprehend. What’s really important is to work with people who understand and have insights into the segment, who have been a part of it.
Another ecommerce startup that recently raised big funding was Jet, which is aiming directly at Amazon’s (AMZN) core competency rather than trying to slice off a smaller vertical. Its founder, Marc Lore, has suggested that there hasn’t been much e-commerce innovation in the past two decades. Do you agree?
I would probably not agree with that. Amazon is an unbelievably versatile 10-ton gorilla. They’ve demonstrated their ability to innovate and be a thought leader many times over. And, honestly, a big part of our strategy is to think of areas not directly competitive to Amazon and go after them. I also think that there has indeed been a lot of innovation in e-commerce, but it’s just that e-commerce has gone from something that was fairly niche two decades ago to something that’s become second-nature to trhe majority of people who are connected to the Internet.
Sign up for Term Sheet, Fortune’s newsletter on deals and deal-makers.
