The insolvency announcement of online made-to-measure clothing site YouTailor can be considered the surprise of the year. According to inside sources who spoke to Gruenderszene, the demise of YouTailor and the bowing out of the three founders of the website can be attributed to alleged corruption and dodgy dealings.
Until recently, YouTailor seemed like a sure-fire success story, with the startup receiving funding from internet giants Tengelmann and Holtzbrinck Ventures. However, an inside source associated with the firm claims that it was YouTailor’s exorbitant costs that led to the Berlin startup’s insolvency.
The source believes the root of the problems lie in the proceedings of the three founders of YouTailor: Martin Zapart, Helmut Krenslehner and Peter Vavra. Serious accusations against the founders were made by the source, including allegations that they operated out of their own pockets, acquiring provisions and logistics from manufacturers and recording them personally. These dealings could mean that the founders earned money from the production and shipment of clothing wares ordered by YouTailor.
Claims of syphoned profits
The informant also claims that wares intended for YouTailor were sold on to third party firms by the founders. This resulted in income that should have flowed into YouTailor being redirected to these other firms involved with the founders. YouTailor was left with the costs of these overpriced items and subsequently without the profits from the sale of the wares.
However founder Mark Zapart, denied these accusations when he spoke to Gruenderszene last week. While a Gentleman’s Agreement with the current directors means that Zapart will not outline the reasons that he and his cofounders left the company, he denies that YouTailor inventory was sold via third-party firms, asking how that would be possible in an inventory control system such as YouTailor. Zapart did admit that it is common to pay provisions to middlemen, as otherwise wares must be sold at a higher price, however he claims that the founding team received none of the provision money personally.
A black mark for founders
Regardless of what he may say, Zapart and his co-founders now face a difficult process, as advice warning investors against working with the three founders is already making the rounds in Berlin.
The insolvency looks bad for major YouTailor investors Holtzbrinck Ventures and Tengelmann. Holtzbrinck will have to ask themselves if they should continue to invest with the Samwers, with whom they have until now had predominately successful dealings.
Tengelmann, in contrast, is contending with the second case of operative problems in their portfolio after Brands4Friends came to notice due to irregularities in the bookkeeping. It is surprising that retail giant Tengelman, well versed in world market prices for fashion through fashion chain Kik, could be let down by YouTailor.
Future sewn up?
As for the future of YouTailor, Zapart says, “YouTailor is a fully workable business model. There are now a variety of scenarios-ranging from break-even to aggressive growth. We are in talks with potential investors for every scenario. The request to be involved is huge. I’d think from this that we will have a solution for our clients and team in August”.
Whether YouTailor can be saved from insolvency remains unknown. Why Tengelmann and Holtzbrinck are not offering further funding raises doubts, however the products from YouTailor were always impressive, a good sign for the fate of the company.