Daniel “Danny” Govberg has worked at the 105-year-old Govberg family jewelry business since he was a teenager.
Now 61, Govberg and his partners have just raised $165 million for the family spinoff business, Bala Cynwyd-based WatchBox, from an investor group that includes all-time NBA great Michael Jordan, Milwaukee Bucks superstar Giannis Antetokounmpo, and former New York Giant-turned-media-personality Michael Strahan.
The watch reseller, founded in 2017, has both brick-and-mortar and e-commerce outlets and estimates that it will notch $250 million in sales this year, for a total of $1 billion since its founding. Govberg’s traditional retail business is expected to bring in $50 million.
Lead investors in this round are Philly-based funds the Radcliff Cos., Spruce House Partnership, and CMIA Capital Partners, a Singapore-based private equity firm.
Other athletes also joined the investment round, including current NBA greats Chris Paul, Devin Booker, and Karl-Anthony Towns, and NFL Pro Bowl receiver Larry Fitzgerald. Current investors include watch enthusiasts such as hedge fund managers Bill Ackman and Marc Lasry; Carvana lead shareholder Ernie Garcia; Mike Lazerow, an early investor in Twitter, SpaceX, Facebook and Pinterest; and executives from Warby Parker and retailer Allbirds.
With the latest investment, WatchBox also added to its board of directors Jeff Saunders, chief technology officer of of Warby Parker; Eli Goldstein, co-founder of the Radcliff Cos.; and David Berkman, managing partner with Associated Partners.
“My partners and I will remain large shareholders,” Govberg said in an interview, but will no longer be majority shareholders after the latest equity funding round. He declined to give a valuation, but said profit margins approach 15%, and the dream is one day to take the company public.
WatchBox will use the money to build up its digital platform, expand its inventory, and reach new markets such as Asia and the Middle East, Govberg said. The total market for pre-owned watches is about $20 billion, according to a recent report from Deloitte.
Brand executives see the pre-owned market as a way to find new audiences, especially younger buyers, the report said.
Younger consumers see less stigma in buying pre-owned items. Those surveyed like pre-owned watches for their sometimes lower price (44%), the chance to own a discontinued model (31%), and as an investment (26%).
Luxury watches as an asset
Twenty years ago, Govberg expanded from in-person store sales to selling high-end timepieces on eBay.
“At that time, our average sales price was $6,000 or $7,000,” he said. That’s risen to an average $25,000 today, he said, citing sales from WatchBox globally. The big differentiator for WatchBox is that the company owns its watches, unlike an eBay or other online retailer, with an inventory valued at about $200 million currently, he said.
“We’re not a middleman like eBay, which takes a 3% or 4% commission, or a consignment operation. We own our inventory. Govberg sells at retail, but WatchBox sells at market price,” he said.
Best sellers are Rolex and Patek Philippe brand watches. Why? “Brand integrity and desirability. Collectability and resale value. They’re the Ivy League of watches. One’s Harvard, the other is Yale. If you’re a waiter in India, or the wealthiest guy in a hedge fund, everybody knows and likes a Rolex.”
His dream watch: a Patek Philippe Nautilus 5990. “It has everything I want in a time piece. I can wear it to the beach or with a tux,” and retails for $55,000. On the secondary market, such as WatchBox or competitor Chrono24, the same watch may fetch $155,000.
“They’re impossible to get. A lot of product today at retail stores sells for more on the after market. Retailers have to sell at official prices.”
The most expensive watch on offer on WatchBox? Some Patek Philippes can fetch $3 million.
“Our customers want to talk to someone first, get educated, either on the phone or via Zoom. They don’t want to just click and buy a $25,000 watch. It’s a collector’s market. I want to remove friction by building trust. The number-one luxury is time, we’re all so busy. I save people time and let them digest watch-collecting the way they want,” he said.
Another change in Govberg’s business since its founding in 1916: selling by Instagram and other social media. “Now businesses can think local and be global. Marketing is less expensive than it will ever be again.”
Some new investors are Penn grads
“The founders of Radcliffe and Spruce House are both from Philadelphia, both super successful entrepreneurs. They’re young, hard working, and went to Penn. They care about being involved and it’s the next generation getting into watches.”
And going public would mean Govberg’s family business “lives as a public company. It’s the next chapter. It would be like Comcast. It’s a family business and Brian Roberts still runs it.”
WatchBox operates retail stores in Bala Cynwyd, Hong Kong, Switzerland, Singapore, and Dubai, and plans to open eight new stores worldwide. Danny Govberg remains the key local co-founder. He’s the third-generation owner of the firm — which has 230 employees, stores in Rittenhouse Square and in Ardmore, plus the 20,000-square-foot facility on Levering Mill Road in Bala Cynwyd where WatchBox was born.
That’s fast growth since 2017, when Govberg joined up with Hong Kong-based watch dealer Liam Wee Tay and Presidio Capital cofounder Justin Reis in taking WatchBox global.
“It is a smart move for Danny to involve superstar athletes in his business as we do at SeventySix Capital” with its Athlete Venture Group, said Wayne Kimmel, co-founder of SeventySix Capital in Philadelphia. The firm also enlists professional athletes who want to invest in and work directly with sports start-ups and entrepreneurs.
The $165 million capital raise shows the kind of eye-popping valuations startups are fetching today, said angel investor Mindy Posoff.
Start-ups “generally take eight to 10 years before they get to this point. So good for them,” said Mindy Posoff, member of Golden Seeds, which has funded more than 200 companies and raised $150 million for start-ups, including Cognition Therapeutics, whose lead drug is for Alzheimer’s disease.
WatchBox “was an early adopter to selling online, and they’ve been profitable for a while,” said Marc Kramer, executive director of the Private Investors Forum, which is holding the 24th Annual Angel Venture Fair online and in-person at the Union League of Philadelphia on Dec. 7.
“WatchBox are selling hard-to-get watches, and they’ve modeled themselves after Sotheby’s, putting together a long list of very wealthy clients,” Kramer said. And the athlete connection? Govberg “realized all the sports players and athletes buy expensive watches. It makes a lot of sense.”