CustomMade is quietly building a custom commerce empire out of Boston -- now it has $18 million to expand

By Erin Griffith , written on June 11, 2013

From The News Desk

CustomMade has been around since 1996, which might make it one of the oldest startups to ever raise a Series B round of funding. The company today announced an $18 million Series B led by Atlas Venture and Google Ventures, with participation from Schooner Capital, Next View Ventures, First Round Capital (a PandoDaily investor) and Launch Capital. Previously CustomMade raised a $4 million Series A. Google Ventures' Rich Miner and Atlas Venture's Fred Destin will join the board. Destin has invested in marketplace companies such as Zoopla, the online real estate site, and Seatwave, an online ticketing marketplace.

Even though it has been operating as a domain since the beginning of the internet, CustomMade only recently became a web marketplace. Co-founders Mike Salguero and Seth Rosen acquired the domain in 2009 and operated it as a matchmaking service to connect shoppers with makers who could fulfill their custom requests.

They'd grown the site to 3500 makers, all of which paid a yearly subscription to be listed in CustomMade's directory. But Salguero noticed users wanted more tools to facilitate communication between the makers and buyers, so in 2011, the company killed the subscription model and pivoted to its current iteration as a marketplace, where the entire transaction happens online. CustomMade takes a 10 percent cut of each transaction.

That was when Salguero realized how much potential the business really had. CustomMade now has 12,000 makers on its platform and the site gets half a million unique visitors a month and eight to ten million per year. Regarding revenue, company would only say in a press release that revenue had doubled in the last six months, although that isn't terribly helpful without knowing the base number that did the doubling.

Custom commerce, Salguero says, is "the large market that nobody knows is large." Sizing up the market is difficult since much of the work is done offline and by small, independant makers. CustomMade estimates that custom furniture is a $26 billion industry. Custom jewelry is also large; with 40,000 independent jewelers in the country, Salguero estimates in the $40 billion range. Those are CustomMade's largest two categories, with leather, clothing and ceramics trailing.

The common knock against a business like custom commerce is obvious -- it can't scale. With its large round of funding, CustomMade has proven that, at the very least, a group of prominent investors believe it can. If the company's market size estimates are correct, there is likely room for several large players in this category. Earlier this month, an earlier stage company called Makeably raised a seed round of funding for a comparable idea. Makeably has launched with a strong focus on "remixing," or giving its shoppers many options for customization up-front, rather than expecting them to arrive at the site knowing exactly what they want to create out of thin air. That has reduced the number of back-and-forth messages and the number of days between customer and maker before closing a transaction to an average of one message from the customer and a confirmation with price from the maker.

CustomMade is also working to ease the negotiation process between buyer and seller; right now the number of messages is around six back-and-forths between the two parties. "What we're moving towards with this round is more of an experience of helping you describe what you want through style preferences and what you like and don't like," Salguero says.

But CustomMade biggest focus going forward with this new round will be marketing and brand awareness. The company has not done much of that to date, relying instead on its word-of-mouth recommendations for growth.

CustomMade is one of Boston's few large commerce startups, alongside Rue La La, the flash sale site spun out of GSI Commerce when it sold to eBay, and Gemvara a custom jewelry site backed by $45 million, and Gazelle, the secondhand electronics retailer backed by $46.4 million. With its latest round, CustomMade has elevated itself to the big leagues of ecommerce, too.

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