Stitch Fix Raises $12M for Personal Styling Via Mail
The personal styling service Stitch Fix has raised $12 million in a Series B funding round led by Benchmark Capital. It’s an opportunistic round that we reported was in the works earlier this year, and was led by Benchmark’s Bill Gurley, as we had said was likely.
As AllThingsD’s Lauren Goode described it in a recent positive review, “Stitch Fix is both an at-home try-on service for clothes and an optional subscription service. The clothes kits, called ‘fixes,’ often contain staples, like a good pair of black pants, but will also include a couple of wild cards and accessories. You’ll pay a $20 ‘styling’ fee for every fix you get.”
Stitch Fix has shipped out more than 100,000 fixes, and currently has a wait of more than a month to receive a new shipment. It said it has grown 500 percent since raising its Series A round earlier this year.
The San Francisco-based company uses a combination of data analysis and human touch to pick which items to buy for the service as a whole, and which items to send to each user. The trick is, Stitch Fix is making that process more and more efficient. In part because it has a short three-day window for returns, the company sells 86 percent of its merchandise at full price, within season. It turns its entire inventory at a rate of seven times per year.
Another talent of Stitch Fix founder and CEO Katrina Lake has been hiring. We noted in previous stories that she had attracted Netflix’s former VP of data science and engineering, Eric Colson, and Walmart.com’s former COO, Mike Smith. Now, Lisa Bougie, the former general manager of emerging markets for Nike, has joined as chief merchandising officer; Meredith Dunn, former senior director of customer and stylist delight at Stella & Dot, is VP of styling; and Jennifer Olsen, former chief marketing officer at Crate & Barrel, is CMO.
In addition to investors and Sephora CMO Julie Bornstein, the Stitch Fix board now includes former Gap and Banana Republic president Marka Hansen and former Walmart.com CEO John Fleming.
In an interview yesterday, Gurley noted that he sourced the deal from his longtime assistant, Amie Fineberg, and other women in the Benchmark office who were using Stitch Fix (it’s an interesting dynamic, because Benchmark’s investing team is all men, and Stitch Fix is currently a service only for women).
Gurley noted that despite Benchmark’s history of investing in e-commerce companies like eBay and Nordstrom.com, the VC firm had shied away from recent e-commerce startups, thinking them derivative. But it was hard to ignore Stitch Fix’s “hypergrowth without marketing — my favorite thing to find,” Gurley said.
“And, as I dug deeper, the model [Katrina Lake] put in place for hyper-personalization has the ability to dramatically change the business model for women’s fashion,” Gurley added. “Most companies end up writing off a lot of inventory, but Stitch Fix has an ability to forecast the future. It’s a real revolutionary step, rather than small feature benefit.”
Asked to provide a parallel for Stitch Fix, Gurley went back — all the way back — to Dell in the 1990s. As an investment analyst, “I covered Dell on Wall Street during the glory days,” Gurley said, “and the thing they were doing different versus HP and Compaq was assembling every product after it was ordered. By building that way, they ended up with remarkable advantage.”