Beverly Hills-based FabFitFun just proved venture capital interest in subscription box companies hasn’t gone away.
The company said it raised $3.5 million in seed funding via a round led by New Enterprise Associates and Upfront Ventures. Other investors in the five-year-old company included Rachel Zoe Ventures, 500 Startups, Simon Ventures and Draft Ventures.
The skepticism over subscription commerce over the past few years has subsided as business strategies have been rolled out and tested over time, said cofounder and co-chief executive officer Daniel Broukhim.
“Time has actually proven out the model and shown that customers are really happy with these services,” he said. “I think companies have also gotten more innovative about continuously iterating on the customer experience and making sure what you’re doing today isn’t what you’re doing tomorrow.”
The company about a year ago launched a program for members called Select, which lets the recipient customize certain aspects of what’s in a box, and began layering in additional benefits to that tier of membership in its most recent set of gifts for fall. That will continue in future boxes, Daniel said by way of example.
FabFitFun ships boxes containing more than $200 in retail product, ranging from fashion to beauty items, on a quarterly basis at a cost of $49.99 each. An annual subscription costs $179.99. Members have the option of purchasing additional boxes on a one-off basis with all of the company’s orders fulfilled out of a warehouse in Downey, Calif.
FabFitFun, which has 35 workers, will double its workforce across all departments in the next six to 12 months.
The company said it expects to close this year with a $20 million run rate in sales and counts more than 1 million members across all of its platforms, which includes not only subscriptions but editorial and social media.
Some of the funding will also go toward improvements on the editorial side. The print magazine is expected to become more robust in content, rather than having it serve as mainly a marketing vehicle for the products included in each FabFitFun box.
“We think about the box itself as a magazine come to life where it’s a way to describe the world, and we think about the products as a catalyst to action,” said Michael Broukhim, cofounder and co-ceo.
The company has a third cofounder in Katie Rosen Kitchens, who serves as editor in chief of the editorial content.
Even companies whose products may not have a fit in the assortment of items in each box have an opportunity to gain exposure to FabFitFun’s membership group via campaigns, Michael pointed out. Crest did a campaign for its teeth-whitening system that appeared in the current fall box. Vaseline launched a spray moisturizer during the summer.
The company is also looking at how to leverage all of the data it’s amassing to provide more personalized options to subscribers. It’s a feature Daniel said FabFitFun is currently working on and will eventually roll out in the longer term.
The company thinks it can continue to gain traction because of its approach to the box’s merchandising.
“Philosophically, I think a lot of the other boxes, the trend started with these beauty sample products and [the companies] looked at it as a means to an end,” Michael said. “People could try a sample and then buy the full-sized product, which leaves people a bit unfulfilled when they receive their boxes….We really do think the box itself doesn’t mean you have to go buy other things.”