By Playing Nice With the Guys, Bonobos Gets a Pile of Investment Dough
Men's online apparel firm Bonobos snapped up a cool $18.5 million in a third round of venture capital financing. How does a three-year old e-commerce business instill that much confidence in investors? Company management chalks it up to a combination of being lucky and good. It's definitely more of the latter.
After all, Lightspeed Venture Partners and Accel Partners both have extensive portfolios loaded with impressive tech companies. Most recently, Lightspeed invested in Living Social and Shoedazzle, sites that "make shopping fun."
Despite their self-deprecating humor, the team at Bonobos started smart (in a dorm room at Stanford) and grew even smarter. In just over two years, they took a site that only sold proprietary custom-deisgned trousers and turned it into a $5 million e-tailer of a well-edited, yet diverse, assortment that outfits the whole man.
Starting with only pants might seem strange in an age of Amazon-like marketplaces. Yet doing it this way satisfied two things: the immediate need for slacks that fit as well as some premium denim and the lack of start-up capital. You see, once the founders moved their enterprise from hand-selling in person to online, funding wasn't exactly raining down.
Undaunted, co-founder Andy Dunn appealed to the angels -- investors, that is -- to get the growing business to the next level. Dunn and team perfected fabric sourcing as well as manufacturing and selling processes. The latter Bonobos achieved virally through its dedicated hipster following.
Word of mouth among metrosexuals would prove to be powerful marketing ju-ju. Bonobos sold about $1.3 million in pants this Novemberâ€" more than 3,300 pairs just on Cyber Monday. And Bonobos has extended its offerings according to demand, recently adding a side line called simply "Stuff," sourced from other manufacturers. The shoes, wallets, ties, bags and scarves all come from quality designers such as Jack Spade (as in Mr. Kate Spade â€" she's the missus of classic, covet-worthy handbags).
Yet while there are plenty of retailers who've turned these processes into hard science with huge ROI, Jeremy Liew a managing director of Lightspeed points out that Bonobos mastered another critical piece of the selling puzzle. In his blog, Liew says Bonobos really took off as it began to understand and optimize customer acquisition costs.
Bonobos nailed this by tapping a vein that many men's wear retailers seem to forget: guys (even hipsters) don't like to shop. When they do have to buy something new, they want it quick and they want quality. Bonobos does the virtual shop experience very well, priding itself on personalized customer service to go along with those perfectly tailored pants.
Once the guys are sold, they often develop loyalty to the brand that serves up style without hassle (or hustle) -- a much more valuable prospect than the fickle female shopper.
And that's what the investors are banking on. Oh, and it doesn't hurt that Ad Age dubbed Bonobos one of America's hottest brands along with Gilt Groupe and The Snuggie. Something tells me Bonobos has more staying power than the blanket with sleeves.
Image via Bonobos
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