JustFab Team - Goldenberg, Ressler, Simmons

JustFab has closed an $85 million round of funding, the company’s co-founder and co-CEO Adam Goldenberg confirmed to Pando today. The round was led by new investor Passport Special Opportunity Fund, and included participation from existing investors Shining Capital, Matrix Partners, and Technology Crossover Ventures.

The latest funding, which was entirely primary capital, brings the company’s total capitalization to $250 million and, while Goldenberg declined to specify JustFab’s latest valuation, sources close to the company tell Pando that the round carried a $1 billion valuation.

“In terms of why we raised this round, we certainly felt like the valuation was attractive and there was lots of interest in investing,” Goldenberg says. “We are a specialty retailer which means that we design our own product and hold inventory. It’s a capital intensive business. And by strengthening our balance sheet, we’re able to do things like secure better terms with our suppliers, invest in additional inventory to help support our growth, accelerate the timeline for taking Fabletics international – which we did in July – and invest in opening a West Coast distribution center to better serve our customers on this side of the country.”

JustFab is certainly starting to think like a public company, Goldenberg admits, and this round indicates that management and its investors believe there’s an opportunity to build a business worth at least $3 billion to $5 billion. JustFab predicted $400 million in 2014 revenue when announcing its prior round of funding in late 2013, and while Goldenberg declined to disclose many details of company’s current financials, he did say that the company will comfortably hit all the numbers that it has projected previously. That would suggest that the company is also on pace to reach 3 million active subscribers, up from approximately 1.5 million as of year-end 2013.

Goldenberg did reveal that he anticipates JustFab generating north of $500 million in revenue in 2015 across its four brands: JustFab, ShoeDazzle, Fabletics, and FabKids. Also, JustFab’s North American operations have been profitable every month this year, he adds, making the company somewhat of a rarity in the startup ecommerce world.

The company’s one-year-old Fabletics brand, an activewear line which competes with the likes of Lululemon and Gap’s Athleta, is growing faster than JustFab did at this stage, Goldenberg says. This is in part due to the existing JustFab infrastructure, he admits, but also because this category has proven to be an explosive one in general, and because customers feedback and reviews suggest that Fabletics has delivered a product that the market loves at a price point that its competitors can’t match.

An IPO is very much a near-term possibility for JustFab, Goldenberg confirms. And the addition of a hedge fund, in Passport, as its newest lead investor further signals this roadmap. If the post-IPO performance of Zulily in the public markets is any indication, Wall Street should be receptive to the JustFab narrative.

“I think of adding investors as longterm partners, so it’s important that you really like the guys, which was a big part of why we chose Passport,” Goldenberg says. “We weren’t specifically looking for a public market investor, but they share our vision and bring tremendous value with their experience in the ecommerce and retail sectors.”

In terms of the $1 billion valuation, JustFab joins elite company in the ecommerce sector as only a handful of companies have ever reached that plateau – and even fewer have backed it up (see Fab). Lofty valuations can often act as a sort of trap, limiting the number of positive outcomes available to a business and changing the perception both internally and externally. Goldenberg, however, doesn’t seem too concerned with these issues.

“Raising this round won’t change who we are or how we operate,” he says. “Don [Ressler, JustFab’s co-CEO] and I have always felt like the best way to build value is to build a great business, not to build toward a particular outcome. We have built a business with 20 percent EBITDA margins, great free cashflow, and highly defensible categories. We’re out there to build a $3 billion $4 billion $5 billion company. I think we’re very much on track to do that but we have a ton of work to do.”

With additional resources at its disposal, JustFab looks well positioned to continue its assault on the fast fashion category. But keeping true to the recipe that has allowed the company to grow rapidly while still satisfying customers will be of paramount importance. If history is any guide, this team appears to be up to the task.