While word on the street is that investors are growing leery of e-commerce and fashion startups, that hasn’t stopped fashion e-tailer Stitch Fix from raising a $12 million Series B—just eight months after bagging its Series A.
It makes sense. Since raising $4.75 million in its Series A back in February, the company’s client base has grown by more than 500%, with 95% of that growth coming from word of mouth and referrals from existing clients.
A company spokesperson said that Benchmark general partner Bill Gurley (an early investor in eBay, Twitter, and Nordstrom.com) reached out to Stitch Fix after hearing about the company through colleagues, which ultimately led to the Series B. The round also saw participation from Baseline Capital and Western Technology Investments.
Stitch Fix is one of a handful of box-o-stuff e-tailers that uses customers’ personal style preferences to come up with five hand-picked items that are then shipped to the customer for a home try-on. Any unwanted items can be shipped back and the customer is charged for the items she keeps.
Other companies have tried the same model. CakeStyle did the same thing, but failed to raise a Series A and shut down in August. Trunk Club, on the other hand, offers a similar service for men’s apparel and has seen its run rate revenue grow 10x since raising its Series A in August 2011 and CEO Brian Spaly says the company is getting close to profitability.
“We are traditionally cautious about investing in fashion or e-commerce businesses, but Stitch Fix has created an exceptional model set to rival traditional retail,” said Benchmark’s Bill Gurley, in a statement. “Using client data and algorithms, Katrina and her team have grown a powerhouse retail business that delivers the right merchandise at the right time - it’s the kind of organic growth and margin efficiency that we’ve seen before in companies like Yelp, Zillow, and eBay.”
Along with the funding, Stitch Fix also announced several new key hires, including former Nike GM Lisa Bougie, who will now be Stitch Fix’s new chief merchandising officer; former Stella & Dot senior director Meredith Dunn, who will now act as VP of styling; and former Crate and Barrel chief marketing officer Jennifer Olsen, who will fill the role of Stitch Fix’s new chief marketing officer.
The company has also added three new board members, including Bill Gurley, former president of North America for the Gap and Banana Republic Marka Hansen, and former CEO of Walmart.com and EVP and chief merchandising officer for Walmart John Fleming.
Stitch Fix plans to use the new capital from this round to scale to meet increasing demand.