JustFab sews up $40M to become a global fast-fashion empire

JustFab CEOs Adam Goldenberg and Don Ressler are trying to build an international, multibillion-dollar fashion empire.

The fashion startup announced today that it has closed $40 million in its third round of funding to accelerate its already-fast international growth and enter new product categories. It is now adding 1 million to 1.5 million new members a month.

“We are creating the next generation of fast fashion. We believe we are building the next H&M or Zara,” Goldenberg told VentureBeat. “JustFab has been able to successfully expand internationally, where other companies haven’t, and we will continue our expansion plans to continue building a global fashion brand.”

JustFab creates new and updated fashion at a furious rate. Its products are selected and designed by fashion celebrities and stylists. Every month, it sends you fresh, personalized “lookbooks” with an assortment of shoes and handbags it thinks you will like. Each item costs $39.95. There is no obligation to purchase, but Goldenberg said most customers do. If you don’t want to buy anything that month, you can choose to skip without being charged.

The company owns its own fashion label and designs products in-house, which helps it maintain the rapid pace.

JustFab has 35 million members, recently bolstered by its acquisition of ShoeDazzle, which has 18 million. Goldenberg said the combined company is predicted to generate over $400 million in sales in 2014 and he anticipates reaching profitability.

A significant amount of JustFab’s growth is happening in Europe. It extended its presence into Germany, the U.K., France, and Spain over the past year, and is adding 400,000 users a month in Europe alone.

Shining Capital Management led this round, a Chinese investment firm that will support JustFab’s expansion into Asia.

In addition to global expansion, JustFab is also adding in new product categories such as denim and children’s apparel, with more to be announced soon, and it has opened a physical retail boutique in Southern California.

Subscription-based services were the “hot new thing” a few years ago, and we saw subscription services emerging for everything — things like women’s beauty products and paleo diet-friendly snack food. Entrepreneurs and investors appreciate the consistent revenue that subscription services provide, but others worry that this is an e-commerce trend that will fade, leaving these companies high and dry.

Direct-to-consumer brands are another e-commerce trends du jour. Brands can produce clothes faster and cheaper when they don’t operate through a brick-and-mortar retailer. This gives JustFab a competitive edge over other fast fashion brands, like H&M, Zara, and Forever 21.

However it is still a tough market with low margins and difficult supply chain logistics, and requires large amounts of money to scale, as Fab.com made clear with its recent $150 million round.

JustFab has pulled in a hefty amount of venture capital. This $40 million round brings its total capital raised to $149 million. Existing investors Matrix Partners, Rho Ventures, Technology Crossover Ventures, and Intelligent Beauty participated in the round. JustFab’s second round of $76 million closed in July 2012.