Episode #15: Developing the Circular Economy for People, Planet, and Profit

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  Speaker 1:
  In a world captivated by criticism, it’s easy to overlook the groundbreaking technologies shaping our future. Let’s shine a light on innovators who are propelling us forward. As the most active venture capital firm in the US, we have an exceptional view of tech’s real-world impact. Join us as we explore, celebrate, and contribute to the stories of those creating tomorrow. Welcome to the Tech Optimist.

  As a reminder, the Tech Optimist podcast is for informational purposes only. It’s not personalized advice, and it’s not an offer to buy or sell securities. For additional important details, please see the text description accompanying this episode.

  Welcome to another episode of The Tech Optimist. We have a different type of interview for you today. Today, we’re sitting down with Ron Levin, managing partner here at Alumni Ventures, and Sharif Barakat, the CEO and Co-founder of this really fascinating company called Swaplanet in Greece.

  Swaplanet has done something really innovative in the secondhand children’s merchandise donation space. I know it’s quite a mouthful, but you’ll understand here in a second. Within their platform, they’ve created their own currency. Parents receive credits for clothes that they give to Swaplanet, which they can then use to shop for donated clothes from other families. I’ll let Sharif tell you more in just a minute.

  But they’re a sort of one-stop shop for busy families trying to downsize their kids’ closets and dressers. Swaplanet works as a hassle-free secondhand clothing merchandise platform. Ron and Sharif have a fascinating conversation about this—how he started his company, why he started it, and how he’s trying to help serve families not only in Greece but eventually venture outside to the rest of the globe. So please enjoy this conversation between Ron and Sharif.

  Ron Levin:
  Hi everyone. Ron Levin here, managing partner of the Alumni Ventures Seed Fund. Excited to join the Tech Optimist podcast today with Sharif Barakat, co-founder and CEO of Swaplanet in Athens, Greece. A very exciting and impactful company on multiple dimensions, I would say, and very happy to share the story with our community here today. So Sharif, welcome. Thank you for joining us. Digitally, I guess it doesn’t matter that you’re so many time zones away, but happy to have you with us.

  Sharif Barakat:
  Thank you. Thanks for the invitation. It’s really great to be here.

  Ron Levin:
  Yeah. Why don’t you get started by just telling us a little bit about your background and how you came to start Swaplanet?

  Sharif Barakat:
  Sure. Well, I have kind of a mixed background. I grew up in the Middle East, but then quickly moved to Montreal in Canada, studied engineering there. Worked as an engineer basically in my 20s, and then got my MBA and worked in finance and development banking in my 30s.

  When my 40s came, I decided to take a sabbatical and move to Greece—because I have some Greek family—for the first time and find something to do. I’d taken a sabbatical year and was traveling around with my wife. We had one daughter and were expecting a boy, so we were kind of dreading the return to Athens and having to unpack so many boxes of girls’ clothes while also needing to buy so many boys’ clothes at the same time.

  We thought, “This doesn’t make any sense. There must be a solution out there for us to exchange—to swap—what we don’t need for what we need.” We couldn’t be the only parents facing this. Around that time, I met my co-founders here in Athens, and we were all looking to start a purpose-driven, impact startup.

  As soon as we started researching the textile and fashion sector and what it was doing to the world—and we considered ourselves people who’ve traveled, who are reasonably well-read and know enough about the world—we were really shocked by the numbers: 10% of global CO2, 20% of wastewater caused by the fashion industry. More polluting than plastic, aviation, and maritime shipping combined.

  It was staggering, and we thought, “This needs to get out there.” There’s also a great business opportunity because this is about cost savings and sustainability. The only question was: how come nobody has done it yet?

  So we quickly looked up the competition. We found that there was room, especially in the kids’ segment, and we jumped right in.

  Ron Levin:
  Yeah, that’s amazing. I mean, truly seeing the need and jumping right in. And obviously, trying to create a platform to help solve for the planet and climate is a very important goal, but you’re also really helping families in different ways. Maybe talk a little bit more about the mission and maybe a bit about your business model and how it brings it all together.

  Sharif Barakat:
  Absolutely. Well, the easy part of it was that I was solving for a problem that I was facing myself at home. So I could instantly do that feedback loop and see: does it work? Would it work for me? I could check with my wife and even brought my daughter in to shop as well. So we were able to test and iterate very quickly based on our own needs.

  We also reached out to other parents to make sure we were solving a real need out there—it wasn’t something imagined or very specific to us.

  The way it works is that we were designing this for parents, and we wanted it to be as easy as possible. Convenience, ease of use, and trust were really the number one drivers. So we quickly crossed out the traditional marketplace approach—peer-to-peer platforms where you have to upload things, take photos, write descriptions, go to the post office, and ship.

  That was too much hassle. It was clear that parents don’t have time for that.

  Our model is about taking all of the work out of their hands and doing it ourselves. A courier will show up at their door, pick up everything they don’t need, and bring it to us—we pay for that. We sort it, issue credit to the parents for everything they’ve sent and that we’ve accepted. We then wash it, photograph it, upload it to our website, and they can start shopping with the credit they’ve earned.

  So they don’t even need to leave the house. They get paid almost instantly. To get around cash flow problems and the consignment issue that most competitors have, we created our own currency, which we call “Planets.” Customers are paid in that currency right away. It’s virtual—they log in, see it in their online wallet, and can start spending it immediately.

  There’s no lag, no need to leave the house. The clothes arrive washed and ironed, with free returns for 14 days. We really wanted to make it as easy as possible—a no-brainer for parents. That’s what we built.

  Ron Levin:
  So parents, in other words, have the opportunity both to sell unused—but still usable—clothes or perhaps other children’s items and get some money back for that. As well as recycling products that can be recycled, while others, I presume, have the opportunity to pick up these goods cheaper than buying new. So it can save families money as well, right?

  Sharif Barakat:
  Absolutely.

  Meera Oak:
  Hey everyone, just taking a quick break so I can tell you about the Seed Fund from Alumni Ventures. AV is one of the only VC firms focused on making venture capital accessible to individual investors like you. In fact, AV is one of the most active and best-performing VCs in the US, and we co-invest alongside renowned lead investors. With our Seed Fund, you’ll have the opportunity to invest in a portfolio that aims to back some of the most innovative and scalable early-stage tech ventures, all while focusing on the beginning of the venture funnel where valuations are typically most reasonable and the potential upside is greatest. To get started, visit us at av.vc/funds/seedfund.

  Sharif Barakat:
  And a lot of the things—not a lot but quite a few—are new, still with tags, because sometimes people will get gifts and it might be the wrong season. By the time the right season comes along, the kids have grown. But we do create a solution both for sellers and for buyers.

  We started off with clothes and shoes. We’ve added books as well, and at the end of last year, we added toys. So we’re really moving into that kind of one-stop shop. Anything that you have lying around the home that revolves around kids, we are the people to take it off your hands. You can earn from that and also shop from that.

  Ron Levin:
  And you obviously went to market in Greece because that’s your home, that’s where you are, and that’s where you saw the immediate market opportunity. But how are you thinking about scaling this across borders?

  Sharif Barakat:
  Well, the way it’s been working in Greece is really promising. Greece is a country—if I may say—that’s not really the most progressive in Europe in terms of prioritizing sustainability when shopping. I say this because it’s what I hear from Greek customers and from the market around us. It’s also what we’ve seen.

  The fact that we’ve had such great traction here is really promising. Greece is a small market: 10 million people, one and a half million kids. For us, it’s a great country to experiment with the model and see that it works. It’s a country that’s not too small and not too large. We’re the only players here. Running costs are low, so burn is low, which is great for startups and investors.

  But the real idea is to go to much bigger markets. We have our eyes on Western Europe—France, Germany, Spain, Italy, Poland. We can also expand into larger nearby countries such as Turkey and Egypt. Those two countries alone have 50 million kids. And the US is always the tempting large market because in one strike, you’ve got the whole population of Europe and more, and it’s one language, no borders. But we haven’t yet decided whether we will go there. For now, it’s just something that might be a bit distant.

  Ron Levin:
  Yeah, absolutely. Well, I’m curious—as an entrepreneur, what has been your biggest positive surprise since you got into this and maybe your biggest challenge or negative surprise?

  Sharif Barakat:
  The positive surprise is how quickly we could reach unit economics and positive gross profit. We were really challenged in the beginning by investors when we were still in the idea and launch phase about the operational intensity of our model.

  Because as I mentioned, we do everything in-house. We do everything ourselves. We’re not a peer-to-peer marketplace where you can just launch and kind of manage the transaction behind the scenes. We do all the work. And so we were really worried whether this could make sense on a unit economic level—whether we would be able to bring the unit costs down for shipping, laundry, sorting, and all of that to a cost point that’s below the price point.

  We were able to do that much faster than expected. That was a really positive surprise: people are willing to pay—and pay enough—to cover the costs and allow for some profit. That was great, and we reached that quite quickly.

  The negative surprise, I would say, is what I touched upon earlier: sustainability is really not the biggest driver. We’re not sure how it’s going to be in other countries, but at least what we’ve seen here is that it isn’t the main driver.

  People are more concerned about how much they’re paying and what brands they’re getting. So the value proposition becomes: what am I getting from Swaplanet compared to what I would get if I just go down to the mall or to commercial shops, especially when there are sales and discounts?

  So it’s really that kind of mentality we’re struggling with. We thought there might be a willingness to pay a little bit of a premium or go through extra waiting time—because this is an eShop, after all—in order to choose the more sustainable option. But it hasn’t really been the case.

  We’ve had to change our communication and messaging to focus on the cost benefits and the convenience of being able to declutter homes and empty out wardrobes, rather than on the environmental benefits. Environmental benefits so far are kind of the cherry on top. We educate, we raise awareness, we pat our customers on the back and make them feel like they’re making a difference—but that’s not the main driver. So that was a bit of a surprise.

  Ron Levin:
  Yeah. And one question for most of our audience here in the US—we have investors, entrepreneurs, and people just interested in technology in general. What do we, as Americans, not know or what should we know more about in terms of the European tech ecosystem and innovation that’s coming out of Europe?

  Sharif Barakat:
  In general, Europe does pay very close attention to what’s happening in the US because the US has much heavier investment in innovative startups. The ticket sizes are bigger for startups, and there’s a lot more money that startups can spend on innovation and technology.

  So I would say, to be honest, that probably most of the knowledge and innovation are coming from the US to here. What’s great about Europe is that, maybe due to the smaller sizes, there’s more opportunity to build connected and community-type startups.

  This is the case, for example, with Swaplanet because we are creating a community of swappers here in Greece, and we try to do something like that in each country that we go to. Innovation-wise, there might be a bit more grants and support from governments and states here, but overall, I would say most of it is still coming from the US.

  Ron Levin:
  Yeah.

  Speaker 5:
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  Ron Levin:
  And just as a final question, I’m curious to understand if you have any asks for our community. We have a broad audience of people that follow us. Is there any way—unless we happen to be living in Greece—we might not be able to be customers today, but is there anything you’re looking for in the way of partnerships or expertise?

  Sharif Barakat:
  Yeah, there’s so much that we would love to get support on. We’re trying to really change mentalities and behaviors. We’re trying to make people think about how to prioritize secondhand over new, even when new is cheaper.

  So changing habits so that people look to online solutions like Swaplanet or other secondhand platforms. Any people who might be aware of cognitive psychology or consumer behavior—that might help us fine-tune and hone our messaging so that people make that choice—would be great.

  Another thing is finding the right price points. We need people who are really good at pricing strategy and understanding how consumers think about it so that we can find the right pricing policy in general. We’re still struggling with whether to do individual pricing or a subscription model, for example—a membership model that’s kind of like Netflix, where you pay a fixed fee and then have unlimited swaps.

  That sounds like an amazing value proposition for a customer, but we need to know whether it makes sense for both sides.

  And the big question I mentioned earlier is the US. Should we be focusing on it because it’s such a big market? Is it ready? Is it attractive given that there are so many cheap alternatives available, including discount and outlet stores? Is it a place where this might work?

  We don’t see many solutions there yet. I mean, there’s ThredUp and a couple more, but nothing really for kids. So we’d love to hear from people with that kind of insight.

  Ron Levin:
  And if folks want to learn more, swaplanet.com is the place to go.

  Sharif Barakat:
  Absolutely—swaplanet.com with one “P.”

  Ron Levin:
  Excellent. Well, thank you, Sharif. It’s been such a pleasure having you and sharing your story. I think it’s an interesting one, and I hope it’s something that really starts scaling because there’s a lot of good to come from it, I believe. Really appreciate—

  Sharif Barakat:
  Thank you so much, Ron. Thank you again for the invitation. It’s really great to be here and to have our voice heard across the US.

  Ron Levin:
  Pleasure.

  Sharif Barakat:
  Hope we speak again soon, and to your US consumers—thanks.

  Ron Levin:
  Absolutely. Thank you.

  Speaker 1:
  Thanks again for tuning into the Tech Optimist. If you enjoyed this episode, we’d really appreciate it if you’d give us a rating on whichever podcast app you’re using and remember to subscribe to keep up with each episode. The Tech Optimist welcomes any questions, comments, or segment suggestions. Please email us at [email protected] with any of those, and be sure to visit our website at av.vc. As always, keep building.