By  on July 13, 2010

Online private shopping club Beyond the Rack said Monday it has received a $12 million equity investment from Highland Capital Partners LLC and BDC Venture Capital Inc.

The proceeds will be used to finance accelerated growth and expansion of operations of the Montreal-based firm, which, until this point, had been funded exclusively by angel investors. The percentage of equity to be held by the new investors wasn’t disclosed.

“The investment is a great vote of confidence,” Beyond the Rack chief executive officer Yona Shtern told WWD.

Shtern said Highland, whose previous investments have included Lululemon Athletica Inc., MapQuest Inc. and Lycos Inc., will “have a favorable impact on its business” both “logistically” and “financially.”

Highland’s experience would also help the company continue its “rapid growth,” Shtern said, adding that he expects the 18-month-old firm to be profitable by the fall with annualized sales of about $100 million by the end of the year.

Operating similarly to other private sales Web sites like, and, Beyond the Rack said it is increasing top-line sales at a rate of more than 30 percent a month.

“We see ours as a billion-dollar company in five years,” Shtern said. “We want to be a general merchant like Amazon.”

He said current membership of 1.5 million is projected to exceed 2.5 million by yearend.

What sets the direct business apart from its competitors is that, with divisions in the U.S. and Canada, the company caters to a wide range of customers. In addition, the firm offers 10 merchandise categories, including men’s and women’s apparel, home, accessories and footwear, at a variety of price points.

Shtern, who described Beyond the Rack as “the broad middle” or “the Macy’s” of its segment, said apparel is the company’s biggest category, with women’s sales constituting about 25 percent of revenues and men’s more than 5 percent.

The ceo also touted the company’s quick speed-to-market capabilities, strong “partnership” with its brands and flexibility as key to the company’s success.

“Maybe it’s our Canadian desire to please,” he said. “We’re trying to be everything to a lot of people.”

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