Back Market, an online marketplace for refurbished electronics, announced Tuesday it has closed on a massive $335 million Series D, bringing the startup’s total valuation to $3.2 billion. The round was led by General Atlantic, with participation from Generation Investment Management and various existing investors, including Goldman Sachs.
Founded in 2014, Back Market offers an alternative solution for people who don’t want to pay full price for a brand new electronic device. The site sells refurbished smartphones, laptops, blenders, rice cookers, electric scooters — “everything that you plug into the wall at your home and office,” says Lauren Benton, the company’s head of U.S. consumer and global supply and operations.
The mission of Back Market is twofold. The first is to save users money — Back Market says that users can save as much as 70 percent when using its site. The second is to help build a more sustainable, eco-friendly consumer culture that keeps perfectly good electronics out of landfills. In fact, Benton says buying a refurbished smartphone has a third of the impact on the environment as buying a new one.
Of course, at first blush this model goes against America’s culture of consumerism. We all know at least one person that is first in line to get that new iPhone as soon as it hits the shelves. But Benton says Back Market leans into that consumer mindset, then tweaks it to be more environmentally conscious.
“We’re still in a consumer marketplace, right? We’re still telling you to buy something. But that’s it. We’re trying to break that behavior,” Benton told Built In. “We want customers that, when they say, ‘Hey, I need X in my life,’ they’re not walking into a store and buying it new right away. Instead, they think ‘I can get this at a 30 to 70 percent discount and I can help Mother Earth along the way.’”
So far, Back Market’s approach appears to be resonating. The company says it is rapidly approaching five million customers globally, hitting tailwinds that Benton says can be attributed to shifting consumer behaviors amid the pandemic.
“This past year has been super interesting from a couple behavioral perspectives. E-commerce became more popular — kind of out of force — and we became much more habituated to purchasing online,” Benton said. “We’ve also had a greater shift in environmental awareness. We’re starting to see that we can combine our e-commerce behavior with feeling good about a purchase.”
Plus, consumers have grown increasingly comfortable participating in a more circular economy over the years, with companies like NYC-based Rent the Runway and Chicago-based Rheaply pulling in millions of dollars for their unique takes to the principle. Benton says this has also been shown in Back Market’s own research, claiming that, in 2019, 65 percent of people the company surveyed said they were not comfortable buying a refurbished product. Today, she says that number has flipped as 65 percent say they would feel comfortable doing so.
“That’s huge for us, because that’s exactly what Back Market has to deliver on. We have to show you the dream on our site, but then make sure that, when you open that box and turn on that laptop or smartphone, you are having an experience that is just as good as new,” Benton said. “We have rapid growth, and that’s great. We’re taking the refurbished world by storm. But our target is actually on new. That’s the market that we want to penetrate into.”
Benton says new smartphones typically have about a 3 percent defect rate. A refurbished smartphone from Back Market is at about 5 percent on average, an “incredibly competitive” statistic, according to Benton. The company is working to drive that number down even more by remaining selective about who can sell their refurbished products on their site, and partnering closely with the ones they do work with.
Back Market works with these third parties on everything from sourcing the best materials to do the refurbishing, to assisting with shipping. The company also has a buy-back program, which is good for merchants because these devices can be refurbished by them again. And, of course, it’s good for the environment, which is largely what attracted Generation Investment Management to participate in this round. After all, the firm was co-founded by Al Gore, and was among the first in the VC space dedicated to sustainability.
“The world generates over 50 million tonnes of electronic waste each year. Back Market offers an alternative that has the potential to radically shift unsustainable consumption patterns,” Shalini Rao, Generation Investment Management’s director of growth equity, said in a statement. “We look forward to supporting Back Market as it doubles down in the U.S. and elsewhere globally.”
This latest financing comes about a year after Back Market brought in a $120 million venture round. In that time Benton says its Brooklyn-based team more than doubled. She added that the team will likely double again in light of this recent funding, and the company plans to expand into more markets.
Back Market was originally founded in France, but it is now active in 13 different countries, including the U.S. and Japan. Next, the company will launch in Canada, Greece, Sweden and Slovakia.
