Under-the-radar indie e-tailer ModCloth has raised $19.8 million in funding from Accel Partners to further develop social commerce and expand its operations.
Founded in 2002 as an online vintage store by now-married partners Susan Gregg Koger and Eric Koger when they were teenagers, ModCloth was run out of a dorm room while the two attended Carnegie Mellon University. After graduating in 2006, they added inexpensive, vintage-inspired new clothing to the site, which grew quickly. In 2009, ModCloth had $19 million in revenues and became profitable.
The company was an early pioneer of using social media for online marketing, including holding contests and building community through its own and other blogs and sites such as MySpace, Flickr, Polyvore and Twitter. In November, the company started its Be the Buyer program, which allows any visitor to vote on which clothing samples should be produced for sale.
“We want to fundamentally change the fashion industry,” said Gregg Koger. “For so long, creating fashion has been this top-down process where the few ‘insiders’ at the top get to say what’s cool. We’ve already started to change that through programs like Be the Buyer, which empowers customers to vote samples from indie designers into production. But that’s just the beginning; our list of to-dos is a mile long.”
The funding closed in May, although ModCloth revealed it Wednesday, and the company moved its headquarters from Pittsburgh to San Francisco the same month. The company wanted to attract top technology talent to create its customer experience and continue to develop a proprietary social e-commerce platform, said Gregg Koger. ModCloth plans to open a third office in Los Angeles in the next few months to manage its supply chain. Pittsburgh will handle distribution and customer service. The company has more than 150 employees.
“ModCloth is helping to change the way people shop in the same way that Facebook changed the way we communicate,” said Theresia Gouw Ranzetta, lead investor on the Accel team. “In a very short period of time and with little outside capital, the company has leveraged the social Web to empower a wildly loyal and engaged customer base.”
Accel is also an investor in Facebook, crafts marketplace Etsy and group-buying site Groupon. Ranzetta will join the board. Other investors include First Round Capital and Floodgate, who also participated in an earlier round of funding for $2 million in March 2009 and $1 million in June 2008. They also have seats on the board, along with ModCloth’s founders.
ModCloth recently added plus-size clothing. Venture capital firms have lately shown increased interest in online retail, particularly private sale companies such as Gilt Groupe.
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