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Flight Club, the 12-year-old retailer that has developed a rabid fan base among sneaker enthusiasts across the globe, has merged with GOAT, a fast-growing startup that sells hard-to-find sneakers through a mobile shopping app that has become one of the most popular in the U.S.
Flight Club’s two stores, in New York City and Los Angeles, will remain under its own name, and a few more flagship locations are expected in other major cities in the coming years. It will also continue to run its website, FlightClub.com, where it now generates a majority of its sales thanks in large part to high rankings in Google search results.
GOAT will continue to operate its app as well as its website, which just launched late last year.
While the companies are calling the transaction a merger, it certainly appears that GOAT is acquiring Flight Club. The combined company has raised a new $60 million investment from Index Ventures at a valuation around $250 million, but a majority of those funds are being used to pay out Flight Club’s shareholders, according to people familiar with the deal. Flight Club has never raised any money from outside investors and is profitable.
GOAT co-founder and CEO Eddy Lu will run the combined entity, while Flight Club founder Damany Weir will be the company’s chief strategy officer. Both Weir and Index Ventures’ Danny Rimer will also join the board of directors.
“They are best in class at retail, have great [search engine optimization] to their web presence and tons of social following,” Lu said of Flight Club, which has more than two million Instagram followers. “We’re great on technology, great on mobile and don’t have stores.”
“The pieces of the puzzle perfectly fit together,” he added.
The combination of GOAT and Flight Club is expected to create a powerhouse in the burgeoning sneaker resale market, which has exploded into mainstream pop culture over the last decade, especially among teen boys and men in their 20s.
EBay is still a destination for sneaker collectors and enthusiasts, but the younger generation has increasingly turned to places like GOAT, Stadium Goods, StockX and even Instagram to buy and sell the most coveted footwear.
The combined entity does more than $300 million in gross annual sales, though each business has its own model and different economics. Flight Club operates on a consignment model, where sneaker sellers send in their kicks before they are displayed to buyers; the company takes a 20 percent commission on each sneaker it sells.
Sellers on GOAT list their goods directly to the app and only ship them to GOAT to make sure they are authentic after a buyer selects them. GOAT’s commission is around 12 percent for sellers that want to cash out their proceeds, or 9.5 percent if they use the funds from a sale to make a purchase on the site.
In the future, Lu says sneaker sellers will be able to sell their goods across the company’s multiple properties, which would lead to a greater chance of a sale while giving shoppers a bigger selection to browse through from each brand. At some point, buyers and sellers across the two brands could also use the stores as pick-up and drop-off locations.
The transaction is the latest breakout moment for GOAT — a popular acronym in sports that stands for Greatest of All Time — which only launched in the summer of 2015 and has been an unlikely success story. Lu and his co-founder Daishin Sugano started the company with about $1.5 million in investor money that was left over after their dining startup, and several follow-up projects, had failed.
The duo, along with their investor and board member Greg Bettinelli of Upfront Ventures, agreed that the sneaker resale market could use a makeover for a generation of shoppers that lived with their heads staring down at their phones. It was a last-gasp idea.
The company went on to raise $30 million from Matrix Partners and Accel Partners over two investment rounds as the app took off. Last summer, former Twitter Chief Operating Officer Adam Bain joined GOAT’s board.
With Flight Club now in the fold, Lu is discussing loftier goals. He doesn’t want to just dominate the secondhand sneaker market, but “transform sneaker retail” broadly.
“We’re gunning for the Foot Lockers of the world,” he said.
Clarification: A previous version of this story characterized the new company’s valuation as “north of $200 million.”
This article originally appeared on Recode.net.
