A Journey into Personalized Luxury Fashion: Editorialist YX CEO Rafael Ortiz (Part 4)

Sramana Mitra: If I remember correctly, NexTag was a vertical search engine right? These half a million keywords were all within the domain of electronics.

Rafael Ortiz: Initially yes. We added other categories like home goods and clothing.

Sramana Mitra: How big a business did the tech product vertical search engine become?

Rafael Ortiz: By the time we sold it, the entire business was doing $200 million in revenue. The tech portion of that was over half.

Sramana Mitra: After how many years after that initial traction did you start adding categories beyond electronics?

Rafael Ortiz: Probably four years later.

Sramana Mitra: When was the exit?

Rafael Ortiz: That was in 2008.

Sramana Mitra: Remind we who bought the company?

Rafael Ortiz: Providence Equity Partners.

Sramana Mitra: Did you have to stay?

Rafael Ortiz: No. I retired and decided that I wanted to get to know my wife and kids. I moved to Paris.

Sramana Mitra: For how long?

Rafael Ortiz: For a year. Paris weather is atrocious.

Sramana Mitra: When you came back, what did you do?

Rafael Ortiz: I moved to Santa Cruz and dedicated my life to walking my kids to school, surfing, and doing a bit of investing.

Sramana Mitra: For how long?

Rafael Ortiz: I did that for eight years.

Sramana Mitra: Then you started this company?

Rafael Ortiz: Yes. When we sold NexTag, I got feedback from my co-founder. He was very blunt. He said, “You look terrible. We’re going to sell this to private equity. You need a suit. Get yourself a proper suit.” I did. That was my entry into luxury goods. It’s a fascinating category. I bought more of them when I went to Paris. I liked it and decided that it was a fairly antiquated and non-digital experience.

I didn’t want to go back to being an operator again. I was still traumatized from the last company. I tried to hire an MBA to work on it. In the end, I just had to do it myself. The thesis was luxury goods need to come online, but the luxury goods experience can’t just be a normal shopping experience. It has to feel special which involved personalization. How do you deliver a personalized experience digitally? Gucci shoes are there. You can buy them or not. That’s it. I liked the category.

Sramana Mitra: When I did my luxury venture, that was right before the market crashed. My thesis was on high-end women’s clothing. We focused it on busy professional women. It was one of the first clothing shopping ventures online. It was a little early and it was at the market-crash time. My thesis is correct which aligns with your thesis.

The category that we chose was women of a certain age group who would be comfortable shopping online. Today, it’s different because almost everybody is comfortable shopping online. At that time, only a small percentage was comfortable. Secondly, we went for the busy professional women who are interested in style.

We chose our designer brand partnerships accordingly. Ralph Lauren tried to acquire us. I did not sell because I wanted to build the company. After that, my term sheet fell through when the market crash happened.

Tell me where did you position yourself when you started your venture?

Rafael Ortiz: Your thesis was correct. My thesis was that the opportunity was with the reluctant luxury goods shopper. A lot of Silicon Valley women are not fashionable and not avid purchasers of luxury fashion. That’s how I built the prototype. I remember it as clear as day. I went to London to preview this with some luxury brands.

One of my meetings was with Natalie Massenet’s ex-husband. He said, “Who’s the target market?” I told him and he said I’m wrong. All of the luxury products are purchased by women who are really style enthusiasts. I walked out of the room and I thought, “I better test this out. I don’t want to go too far.” That reluctant segment is still there.

Sramana Mitra: The reluctant segment doesn’t buy. The ones that buy in the fashionista category are the ones. That category spends $10,000 a year on fashion. I know this market inside out actually.

Rafael Ortiz: Or even $100,000 a year actually.

This segment is part 4 in the series : A Journey into Personalized Luxury Fashion: Editorialist YX CEO Rafael Ortiz
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