Flash Sales Co. Ideeli Raises $41M, Sets Sights On Billion Dollar Business

By Ty McMahan

Dow Jones VentureWire

Ideeli Inc. Chief Executive Paul Hurley says the flash sale company is not just competing with online rivals like Gilt Groupe Inc., it's prepared to compete with any retailer--online, offline, flash sale or full price.

Hurley says his company is at the forefront of the future of retail, which is why the company has armed itself with $41 million in new capital.

The Series C round was led by new investor Next World Capital, with participation from new investor Cue Ball Capital and previous shareholders Constellation Growth Capital, Kodiak Venture Partners and StarVest Partners.

"We're not fooling around," Hurley said. "We're going to put this money to work. I think there's an opportunity to be a billion dollar business. We like our chances."

Ideeli is an online shopping site that curates deals on designer apparel and accessories that are excess inventory or off-season. The "flash" deals last 40 hours and offer savings of up to 80%. "It's authentic value every day," Hurley said. "You're not going to be surprised about going out and realizing you paid too much."

The model has been wildly and rapidly profitable for a few companies including ideeli and Gilt. Hurley said ideeli is on pace for $250 million in revenue this year. It has achieved that scale on $71 million in total capital, including the recent Series C. By contrast, Gilt has raised at least $83 million and is currently raising a new round said to be more than $100 million.

"People are raising a lot of money, but we've been far more capital-efficient," Hurley said. "It's far more important to us to build a profitable business. We're a nine-figure business on the way to ten figures."

The deal space is crowded--even just specific to apparel, not including the group-buying offers for restaurant and spa deals that fill consumers' inboxes daily. RueLaLa and HauteLook have built similar apparel-focused flash sale businesses. Some industry watchers have questioned the sustainability of the flash sale or daily deal model, wondering if consumers will become fatigued by an overwhelming number of offers.

Next World's managing partner and founder, Sebastien Lepinard, said that question was an important part of the diligence involved in making the investment.

"We looked into the metrics and we don't see fatigue," Lepinard said. "The metrics are good. Revenue per member continues to increase. People are engaged. I think this is here to stay in a much larger portion of the market than it is today."

Lepinard will join the board of directors. He declined to provide a valuation for the company, saying only it was a "very reasonable price."