# 99dresses (2010 – 2014)

- URL: https://girisimcikafasi.com/en/startup-graveyard/99dresses/
- Sector: Marketplaces
- Country: Australia
- Total funding: $595K
- Cause of closure: Ran out of cash

## What did it do?

99dresses was a swapping marketplace where women uploaded clothes they no longer wore, earned a virtual currency called buttons in return and used it to get clothes from other users. The company first made money by selling extra buttons; in the US in 2013 it switched to a mobile-only app that charged a fee per swap.

## Why did it shut down?

After Y Combinator's Winter 2012 batch, Nikki Durkin agreed a USD 1.2 million seed round; but a day after the paperwork was signed, her two co-founders quit and the lead investor pulled out. Durkin eventually raised USD 595,000, but visa problems forced her to run the US market from Australia for months. The mobile app, launched at the end of September 2013, passed 1,000 swaps a week within three months, but as the average value of swapped items fell, revenue from value-based fees stalled. A bridge round that an existing institutional investor was to lead fell through when the firm's other partners grew wary of the competition. With only a few weeks of cash left, the company shut the app in June 2014.

## The story

Nikki Durkin started thinking about the idea behind 99dresses when she was just 16, and launched the site in Australia, based in Sydney. The model was simple: women uploaded dresses they no longer wore and earned a virtual currency called buttons, which they used to get clothes from other users. Durkin described it as an infinite wardrobe. According to a TechCrunch report from March 2012, more than 4,000 dresses were uploaded in the first four months in Australia.

Durkin went to the US with USD 10,000 she had won in a university business plan competition and was accepted into Y Combinator's Winter 2012 batch. After the programme she agreed a USD 1.2 million seed round. But a day after the paperwork was signed, her two co-founders told her they were leaving the company; the lead investor pulled out, and then another investor backed away. With the five investors who continued to believe in her, Durkin managed to raise USD 595,000.

The team rebuilt the product and launched it in the US, but the button system that had worked in Australia failed to win over American users, and Durkin's visa was delayed for months. At the end of September 2013 the company switched to a mobile-only iOS app, and within three months more than 1,000 swaps were taking place every week. Inventory turnover rose from 17 per cent to 50 per cent.

When growth slowed, the gaps in the business model became visible: the average value of swapped items was falling, and revenue from value-based fees was stalling. An existing institutional investor agreed to lead a bridge round, but the offer was withdrawn when the firm's other partners grew wary of the competition in the market. The other funds she spoke to wanted either to put in the first money or to lead a Series A. With only a few weeks of cash left, Durkin and her partner decided to wind the app down in an orderly way. In a long essay published in June 2014, Durkin wrote candidly about the loneliness of failure.

## Lessons

- Making a round depend on a single lead investor's terms and trying to close everyone at once can cost you all your funding in one unexpected crisis; close commitments one by one where you can.
- Talk openly with your co-founders about risk appetite and commitment before the investment is signed; if the team falls apart, the money walks out the door too.
- If your revenue depends on the value of the items being swapped, track average item value as transaction volume grows; more volume does not always mean more revenue.

## Sources

- [99dresses founder Nikki Durkin announces closure after 4 years](https://www.startupdaily.net/topic/99dresses-founder-nikki-durkin-announces-closure-4-years/)
- [My startup failed, and this is what it feels like](https://nikkidurkin.medium.com/my-startup-failed-and-this-is-what-it-feels-like-c5d64b3ae96b)
- [99dresses Wants To Give Women An Infinite Closet](https://techcrunch.com/2012/03/26/99dresses-wants-to-give-women-an-infinite-closet/)
- [99dresses (YC W12) launches iOS app and goes mobile-only for clothing swaps](https://www.ycombinator.com/blog/99dresses-yc-w12-launches-ios-app-and-goes-mobile-only-for-clothing-swaps/)