Julep, the once quiet little Seattle-based company backed by Andreessen Horowitz* has just announced a less-than-quiet funding round. The nail product and beauty e-commerce startup raised a $30 million Series C round from new investors Azure Capital, Madrona Venture Group, and Altimeter Capital, with participation from existing investors Andreessen Horowitz and Maveron.
Yes, funding rounds are rather boring and not particularly revealing milestones in-and-of-themselves, but it’s a different story when they represent validation of a new market or a warchest game-changer between competitors.
In the case of Julep, the $30 million in new funding is a particularly nostalgic moment that invites category observers to reflective on less successful times. While pitching firms and raising Julep’s first venture round in 2011, founder and CEO Jane Park faced unintentionally sexist responses, she recalls.
“We had people saying, ‘You have a fundable idea and a terrific team but I only do one deal a year and I don’t want it to be beauty,’” Park remembers. One VC in particular leveled with her, explaining that he prefers deals he can feel personally passionate about, and at the very least be able to provide advice and expertise to the company. Without a background in beauty, or a use case as a consumer, he didn’t want to splurge his “one deal” on Julep.
“What you don’t realize when you’re doing fundraising is it’s not about you, a lot of it is about the firm and their prior experiences,” Park says. “Being in a category they’re unfamiliar with from a personal perspective was really challenging.”
Investing based on passion, instead of data, is a hallmark of seed and early stage funding rounds. Usually when firms get into later stage rounds, they’ve done their homework and don’t gamble away money on pet projects.
But if seed and early stage investors consciously or unconsciously choose startups they’re passionate about, ignoring others that might have equally compelling business prospects, where does it leave companies that don’t fit the conventional Silicon Valley mold? Likely scrambling to find someone to back their vision, it would seem. Startups could be strangled before getting a chance to bloom if they don’t have access to entry level capital. Which is why Julep’s rise appears so meaningful.
“I think that’s where this is ultimately a problem that there’s not more female VCs,” Park says. “There’s not a diversity of passion in the VC community.”
Eventually, after a year of pitching her company in Julep’s early days, Park was able to find investors who cared more about her customer growth then the fact that she was in the beauty category. Version One Ventures, Alliance of Angels, and AFSquare invested $5.9 million in a Series A. Less than a year later, Valley heavyweight Andreessen Horowitz signed on for the Series B, bringing further validation by leading a $10.3 million round.
Two years later, with $56 million in funding to date, Julep is seeing impressive traction. with more than just its investors. Revenues from e-commerce tripled in 2013 proving that customers are jumping on the bandwagon as well.
The company is by no means a guaranteed success, of course. Fellow Andreessen Horowitz e-commerce investments Fab and ShoeDazzle faced the biggest difficulties after their frothy Series C and D rounds. Julep has many scaling challenges ahead of it, from maintaining enough product variety to keep customers coming back for more, to moving into international markets.
“The third wave of e-commerce is coming – it’s about the full stack today,” Park says, referring to the fact that Julep produces its own products. “We’re doing something fundamentally different in terms of how we serve the consumer.”
Despite the potential pitfalls, that particular investor might be regretting his decision to pass on the deal now.
(* Andreessen Horowitz partners Marc Andreessen, Jeff Jordan, and Chris Dixon are individual investors in PandoDaily.)
[illustration by Brad Jonas for Pando]