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Bluefly Inc. has a new investor, a new adviser and a new chief merchant who just happens to be the former chief executive officer.

This story first appeared in the February 13, 2014 issue of WWD.  Subscribe Today.

The online retailer, acquired in May by affiliates of Clearlake Capital Group for $13 million, has received an unspecified equity investment from CrunchFund, an early-stage venture capital firm specializing in information technology companies.

Melissa Payner, who served as Bluefly’s ceo from 2004 to 2012, has rejoined the firm as chief merchandising officer and takes over supervision of the merchandising team from Scott Erdman, who now heads Bluefly’s marketplace.

Jeffrey Sherman, president of The Echo Design Group, has been named a senior adviser to Bluefly’s board. Sherman is the former president and ceo of Hudson’s Bay Co. and former president of Bloomingdale’s. Neel Grover, ceo of Bluefly, said, “He has a wealth of industry knowledge and having him guide us in certain situations is a great benefit to the business going forward.”

Grover also lauded CrunchFund’s investments to date in Web companies and said the firm decided to get involved in Bluefly because it is enthusiastic about the efforts that have been made since Clearlake’s acquisition. He elaborated that losses at Bluefly have been “cut down more than 50 percent, while we have continued to grow our gross profit and increase the business overall.”

Grover noted that Bluefly intends to expand the marketplace business substantially.

Even before Payner returned to the company, Grover solicited her thoughts on Bluefly. “Over the last several months, we had discussions about the business, and I could tell that she still had a passion for the business, and she seemed excited about what we are doing,” he said. “Her experience and knowledge are going to be a help for us and the fact that she had run the business for so many years is a bonus.”

Payner said, “I’m focusing on bringing the right brands to the consumer, and I’m excited to be able to reintroduce Bluefly to some brands and to continue to develop the business as it relates to the customer experience,” she said.

CrunchFund’s investment will be reflected in Bluefly’s board with the addition of CrunchFund cofounder Patrick Gallagher as a director. “We join in our partners’ enthusiasm in backing the team to build a differentiated leader in the fashion e-commerce sector,” he commented. “Bluefly’s strong foundation and history, coupled with an attractive industry backdrop driven by evolving consumer buying habits and well-curated, convenient online offerings, make this a very exciting time for the company.”

In addition to Bluefly, Clearlake has investments in Swiss Watch International and Buy.com. Grover, former ceo of Buy.com, was named chairman and ceo of Bluefly in August after serving for a year as an executive operating partner at Clearlake. Greg Giraudi, an operating adviser to Clearlake and former chief operating officer of Buy.com, is Bluefly’s president.

Sherman said Bluefly “has always been an innovator in online retail, and I share in Clearlake’s vision of building it into the leading online fashion retailer by providing a unique assortment of high-end fashion at great prices to its loyal customer base.”

CrunchFund’s investments include stakes in Uber, Square, Airbnb and Redfin.

Clearlake currently has about $1.4 billion in equity capital under management.

Founded in 1998, Bluefly was a pioneer among online fashion retailers and in 2011 expanded with the launch of Belle & Clive, a members-only flash-sale site. Despite cash infusions from George Soros and others, the company never found a path to profitability during its days as a public company, racking up losses of $56.1 million in the five years through 2012, when its revenues declined 29 percent to $93.4 million.

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