Flash-sales site Zulily raises $85 million

Thu Nov 15, 2012 6:29pm EST

* Investment values Zulily at $1 billion

* VC firm Andreessen Horowitz leads the funding round

* Cash will allow business to "stay aggressive"

SAN FRANCISCO, Nov 15 (Reuters) - Flash-sales site Zulily raised $85 million in a funding round that values the company at $1 billion, showing that investors still have cash for some styles of e-commerce.

The cash infusion comes as shares in the daily-deals site Groupon, once viewed as a company that could transform the way consumers buy bargains online, continue to implode. Groupon is trading around $3, compared to its initial public offering price of $20 a year ago.

Seattle-based Zulily's valuation is on par with the $1 billion valuation investors assigned Gilt Groupe, another flash sales site, in May last year. The funding round comes a little more than a year after Zulily last raised cash, $43 million at around a $750 million valuation.

"The capital allows us to continue to stay aggressive with the business," said Chief Executive Darrell Cavens. "We want to continue to grow and add people to the team who can think big."

Zulily's list of potential customers who receive its daily emails recently topped 10 million members, he said, double the number a year ago. Monthly visitors to its site number 3.2 million, according to comScore, compared to 1.2 million at Gilt and 825,000 for One Kings Lane, another flash-sales company.

Flash-sales websites offer steeply discounted products for a limited time. Gilt, which started in 2007, was the first flash sales business to launch in the United States. Others include Rue La La, HauteLook, owned by Nordstrom Inc (JWN.N) and Ideeli. Amazon.com Inc has its own flash-sales site called MYHABIT.

These businesses grew rapidly in the wake of the 2008 recession as more shoppers looked for discounts and a slew of unsold inventory became available from luxury apparel brands. Growth has slowed since then, partly because brands cut back on production, reducing excess inventory. That forced some flash sales sites to evolve their business models and expand into other categories in search of growth.

Gilt Groupe is trying to prepare itself for a possible initial public offering in 2013 and has shut some businesses and put others up for sale. [ID: nL1E8KKLZE

Zulily, which launched two years ago, focuses on mothers and sells everything from baby products to home-decor merchandise. It expanded to Britain last year.

Its latest funding round was led by venture-capital firm Andreessen Horowitz, which invests in e-commerce sites Fab and ShoeDazzle.

In a blog post, Andreessen partner Jeff Jordan wrote that he was impressed by Zulily's rapid growth, ambition and strategy.

"One reality in e-commerce today is that you want to avoid trying to compete directly with Amazon," Jordan wrote in a blog post. "Like Fab, Zulily does this by aggregating a long tail of talented designers who typically lack extensive national distribution."

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