Ten Questions for Gilt Groupe's CEO Kevin Ryan After His Big Funding Round

Here are the highlights from my interview with Gilt Groupe’s Founder and CEO Kevin Ryan, who just raised $138 million in capital to place the company in the upper echelon of today’s new e-commerce companies.

For more on the financing, including Softbank’s role in the deal, read the details here. Otherwise, continue reading below for excerpts from our chat.

When Ryan first started the company almost four years ago today, it focused on selling woman’s clothing and accessories to members who signed up for a daily email. Now Gilt, which targets affluent young professionals, has expanded into men’s apparel, travel, children’s items and home decor. In a matter of months, it will launch two new verticals: gourmet food and full-priced men’s clothing.

So, $138 million is a lot of money. Is an IPO next?

“It will be great not to have to do this [fundraising] for a long time. This will be the last time the company raises a private round. [We’ll be seeking an initial public offering] at some point, but we have no specific plans. It’s not happening any time soon, but that would be the next step.”

Why have you picked gourmet food and men’s full-priced apparel as your next two verticals?

We already announced that the men’s full-priced site was coming this summer. That’s a full store going head to head with department stores. It’s not Gilt-branded…It’s not flash sales, it’s full price, and in the next month or two, we’ll be launching our gourmet food business, where food is sent in the mail. It’s also full price, not discounted.

To find out what vertical we’ll do next, we generally do ten sales on the site and see how it works. We did a lot of men’s full-priced sales and they went very well. We’ve had a lot of pet sales, and they haven’t done as well. We try lots of things…Any of these could be set up as a new category.

What do you have in mind for acquisitions?

We’ve done two so far: Decorati and Bergine, and we have nothing specific in mind. But over time there will be a lot of consolidation in this space. For instance, if we were going to enter the art space, I would look at doing an acquisition, where there’s three to four players who have established a fair amount of expertise and relationships with galleries. There’s hundreds of sites. So many have entered this space, and they aren’t going to make it. We get approached every day by two to three about a potential acquisition.

What do you think of Amazon’s new flash sales site called MyHabit?

The site looks pretty good. We’ll see. They’ve had trouble in the past when they launched Endless to go after Zappos. It’s hard when you have lots of priorities. If you asked me who do you think will do better, eBay or Amazon, I think Amazon. Amazon has gotten better out the gate and will do a better job.

What about new competition, coming from international players entering the U.S.?

There’s only one player in the world to watch. Reports say Vente Privée will enter in the next next nine months. But if you weren’t covering this business, you would have asked “Who? I never even heard of them.” That’s the reality, and for them to enter, they’ll have to set up warehouses and sign up members. Basically, you are a start-up…I don’t worry about international players, even ones that are bigger than we are.

Same goes for Gilt if you enter a new market. You’ll have to start from scratch, too, right?

It’s not at the top of our list right now. The reason I went to Japan is that after three months, I asked, “Are there any large countries where no one is doing this?” That’s an opportunity you don’t want to miss. If I’d entered now and was the fourth player, there wouldn’t be anything compelling there. There’s an advantage to being the first player. Over the next six months, you won’t see any activity there. We’ll be focused more on verticals.

How many verticals will you go in?

Not tons, but every year we’ll enter one or two for the next one or two years. I don’t want to be in 100 verticals. I want to be in the big ones that make sense.

Where are you seeing the most growth right now?

It’s not very revealing. We are always seeing the most growth in our newest verticals. In terms of the largest, first women’s, then men, then Jetsetter, and then the other four.

In general, what do you think of the daily deals/group-buying/discount/sales business? Is it here to stay?

Yes. All you have to do is step back and ask how big is T.J. Maxx or Ross? You are talking about a $50 billion sector offline. It’s not a stretch to believe that some of that will move online. Duh, of course it will.

The fact that it’s flash sales doesn’t matter. If you walked into T.J. Maxx, you might see something that you won’t see a week later. They don’t call it a flash sale, but that is what it is. It’s a shift online. All you have to believe is that of the $50 billion-plus business, five percent will move online. That’s not ridiculous and that’s $2.5 billion.

What has surprised you about the business?

I thought the majority of our sales would come from outside New York, where people have access to sample sales all the time. But I was really wrong. It turns out that New York is by far our biggest market. People may be working only two blocks away, but they are busy. They are partners at Goldman Sachs. They don’t have time to go stand in line, but they can sneak online for five minutes.