Meet Kidsy, a kids' clothing startup that sells what parents need at a discount

All parents know that raising kids is expensive. Especially in those early years when they quickly outgrow clothes or toys, leaving parents on a never-ending cycle of buying new stuff when the old stuff is hardly worn or used.

Enter Kidsy, a new Chicago-based e-commerce startup that aims to give consumers greater access to discounted baby and kids products by partnering with large brands, retailers and liquidation companies for their overstock and returns inventory. At the same time, it says, it can help prevent overstock and liquidation items — such as kids’ clothing — from ending up in landfills, which is obviously not good for the environment.

Kidsy is not just focused on clothes. It also sells new and open-box (aka new but returned) items such as strollers, car seats, toys, travel gear, nursery furniture and “other baby essentials.”

The company’s founders are Indian-born former business journalist Shraysi Tandon and Turkish-born software engineer Sinan Sari, who also co-founded Y Combinator–backed SaaS startup Cuboh (a startup that was just sold to competitor ChowNow). The pair teamed up in April of 2022 to start the company, which recently closed what Tandon described as  an “oversubscribed” $1 million in pre-seed funding.

“Almost all the big retailers such as Amazon, Macy’s, Target, Kohl’s, Walmart, Bloomingdales don’t restock customer returns because it is too capital and labor intensive for them to do so,” Tandon, who serves as Kidsy’s CEO, told TechCrunch. “These items are then usually shipped to other countries who buy liquidated American merchandise or they are destroyed in landfills.”

Investors were drawn to the company’s early success. Since emerging from its beta phase in September 2023, Kidsy managed to hit $1 million in annualized revenue by January — just four months later, according to Tandon.

New York–based Impellent Ventures led Kidsy’s financing, which also included participation from Hustle Fund, Everywhere VC, The Fund Midwest and Responsibly Ventures. Angel investors also put money in the round, including Initialized partner and Rent the Runway co-founder Jenny Fleiss, DraftKings founder/CEO Jason Robins, ButcherBox founder Mike Salguero, Trucks VC managing partner Reilly Brennan and Kalibrr co-founder Sanuk Tandon.

Kids’ clothing: A massive market

Tandon’s road to founding Kidsy started when she founded her own media production company after working as a journalist for Bloomberg TV and ABC News. Through that company, she spent three years directing an award-winning feature documentary on child labor in global supply chains. During that time, she learned about the inventory glut that existed in the U.S. as well as “all the supply chain issues faced by retailers.”

She also learned that liquidation and returns is a $761 billion industry in the U.S. annually.

But it was when Tandon was pregnant with her first child that she decided to be a “smart” consumer and shop for liquidated baby products instead of paying full price. That’s when she noticed the gap in the market, asking herself, “Where is the TJ Maxx or Burlington for all the baby gear and kids items?”

While there are liquidation and overstock e-commerce companies galore, few specialize in just kids’ gear, or they are really more focused as a used-gear marketplace for parents.

While still pregnant, Tandon launched her company.

When she started fundraising as an expecting mother, Tandon said she was “nervous constantly reading statistics related to how difficult it was for female founders, the dominant ‘boys club’ that existed within the VC world and also how much harder it is in general for companies raising in 2024 compared to just two years prior.”

“I didn’t want to be a statistic, so I hid my pregnancy,” Tandon told TechCrunch.

She later decided she would “never do that again,” and now she tells VCs upfront that she’s a mom to a baby. VCs who think that’s a problem “aren’t the right investors for me,” she said.

Investors, Tandon said, grew excited to back a TJ Maxx for kids, noting that the retailer has outperformed the S&P 500 for the past 5 years and that the market for secondhand baby and kids products is expected to reach $12.8 billion by 2030.

“We get these items shipped directly to our warehouse in Nebraska, inspect them, grade them and then sell them, rather than on consignment or through a third-party logistics provider,” she said.

The majority of the products are brand-new and unused. About 10% are gently used, which Kidsy also sells.

Kidsy already has tens of thousands of customers, according to Tandon. The company gets a “take rate” on every item it sells. Its percentage varies across the brands and categories it sells, but on average it is 35%, according to Tandon.

Tandon is aware that there are plenty of competitors selling kids wares.

But investors like David Brown, managing partner of Impellent Ventures, believe Kidsy “is solving several very real pain points for parents and breathing innovation into a staid marketplace.”

“Yes, the offering is cheaper than others and has benefits for the environment, but it’s how they are leaning in to the parents’ evolving needs that has, and will continue to, set Kidsy apart.”

Kidsy plans to use its new capital for classic growth needs of hiring to expand its 12-person team, adding more partners. It also plans to embed artificial intelligence and machine learning into its offering “to increase operational efficiencies.”

For now, the startup is focused on the U.S. market, though Tandon believes that Kidsy could expand into any country that “has lenient retail returns policies and where brands are struggling to manage both their returns and their excess inventory.”