The line-up of speakers for this year’s Breakthrough talks at Second Home Clerkenwell had strength in depth. It was hard to pick out the star attraction but the crowd-pulling appeal of José Neves is undeniable. The founder of Farfetch has built a $6bn business out of what he calls a simple founding proposition. “There are all these amazing boutiques and designers around the world. And they’re only open nine hours a day, six days a week. What if we made them visible in a digital platform to people who love fashion from all around the world, 24/7?”
Danny Rimer, a partner of VC Index Ventures, took a bet on that idea eight years ago, three years after Farfetch’s launch (two weeks after the collapse of Lehman Brothers bank). Introducing Neves at Second Home, Rimer says he put faith in the Farfetch founder’s “superpowers”, already evident but stretched and proven since then. “He is a visionary,” says Rimer, “who was thinking decades ahead about how the industry was going to develop.”
“Innovation is not something you do when you realise that your business model is outdated,” Neves says. “It’s too late by then so innovation is something you have to do constantly.” And Neves’ focus on the future of retail is still sharpening, in perhaps surprising ways. “I think of Farfetch as a curated community, an enabler for an entire industry, but if you want you can call it marketplace, OK.” He says. ”The question is, what is the marketplace of the future going to look like. Are they just going to be websites and apps? Are they going to be voice-enabled? Or are they going to be physical-meets-digital? Four years ago, it wasn’t clear. Now I think it is. If you look at what Amazon and Alibaba are doing, two of the most successful marketplaces in the world, they are investing massively in physical retail. And someone has to do it in the high-end fashion segment.” That someone is Farfetch of course.
Two years it launched Store of the Future, a moving platform and pick-and-mix suite of tools that promise the data-driven opportunities of online retailing while enhancing the experiential hit of physical retailing. Last year it announced a deal with Chanel and in November the French brand launched a new five-storey Paris flagship which incorporates Farfetch’s ‘Augmented Retail’ tech. Clearly Neves sees enabling this physical/digital straddle as central to its future plans.
The Chanel partnership is also evidence, Rimer says, that Neves has mastered the art of the deal. “I think deal-making should be a core strategy of any company,” argues Neves, “because we live in an era of partnerships. Companies have to partner with each other. Even the big rivals in the industry have to be partners. Google powers search on iPhones. You have to be able to develop that muscle, spotting where you are going to need local or specialists expertise.” And Neves insists that when those deals and partnerships are potentially transformative for a business, it’s the CEO who has to get involved with the nitty gritty. “When you get to a certain size, there are hundreds of startups and even big companies reaching out and that can be very distracting for management. So you do need a team to cut through the noise, evaluate the opportunities and do due diligence. But with the big deals it has to be down to the CEO, and talking CEO to CEO.”
And, Neves says, it is crucial to get your non-negotiables in order before the talking starts. “You have set limits in financial terms, this is how far I want to go, and have a very clear picture of why you are doing the deal. Otherwise emotions can get involved and you end up paying to high a price. But you also need to put yourself in the shoes of the other side. If it’s too good a deal for you, you should ask yourself why? It can be uncomfortable but you have to find that sweet spot.”
Rimer insists that the development of a distinct corporate culture at Farfetch has also been crucial to its success. Neves though admits he was slow to see the benefits of this kind of self-defining codification. “When you start a startup, you’re too busy signing your first customers, finding your tech team, developing a product, getting funded. And I thought culture and values were the stuff of management books. I didn’t think I needed to work on culture and values, to stop everyone for two days and sit down and think about it. People are living the values, everyone feels that energy and the culture is unspoken. And I think actually that is true until you get to about 100 people.”
The wake-up call came for Neves when he made a senior management appointment and there was a serious case of values mis-alignment. “So this person came in, from a big company, and we thought she would add a lot of value. We couldn’t believe that she wanted to work for us, it was incredible. But she arrives and she couldn’t stand it. Everything was a problem. I realised that through the interview process, I was pitching my company to her without really articulating what the culture of the company was. So it’s my fault, not hers. But her departure shook the team and it took us a little while for us to recover. So that was the point I really thought we need to write down what the values of this company are. We should be much more candid and transparent about the culture we have. And people may like them or not like them but they know what they are.”
And Neves suggests that the self-examination can and should be more celebration than forced grasp at intangibles. “The exercise consists of going back in time and thinking about the moments of the life of your company where you were really great, the moments that you are really, really proud about. And then think about the behaviours and the traits and the team spirit that you experienced in those moments. It’s not about changing who you are, it’s the opposite of that. It’s about going back to your wins and successes, celebrating them and saying, okay, in these moments, we were living these values.”
And Neves insists that moving from plucky start-up status to public company – it debuted on the New York Stock Exchange last September – with shareholders demanding regular rewards isn’t going to change those values or push Farfetch off course. “There is this myth that public companies stop being innovative, that they become short-term focused,” Neves says. “But some of the most innovative companies in the world, the Googles, the Apples, they are public companies. It really depends on the culture of the company and the equity story, what you promise investors. We were very clear in our prospectus, we are going to continue to innovate. We are going to continue to invest aggressively in innovation and inventing the future of fashion.”
That investment includes Dream Assembly, Farfetch’s own Lisbon-based fashion and retail-tech startup accelerator launched last year. “That innovation shouldn’t be just internal,” he says. “It should be thinking about how an ecosystem of startups can leverage what we’ve built so far, to build new business models and new ideas on top of what we have.” Farfetch has already invested in one startup from the programme’s first co-hort. But Neves insists that launch of the programme has also brought new energy to his business with 75 members of his team involved in mentoring. “When I sit with these entrepreneurs, they really believe that can change the world. They have this energy, this drive. And ten years after starting a business that kind of energy can wane a little bit. These startups somehow re-inject that in our team. And that’s incredibly valuable.”
Written by Nick Compton
Jose Neves was speaking at Second Home Clerkenwell Green as part of our Breakthrough Fortnight, where together with Index Ventures and Sifted we brought the entrepreneurs and innovators behind now famous companies like Deliveroo, Farfetch, Mumsnet and Bulb together to reveal the stories behind their world-changing businesses.