How Bonobos got venture capitalists panting for menswear

When I last checked in with Andy Dunn, the CEO of online menswear retailer Bonobos, he was in the middle of raising $2 million from angel investors.

Make that $18.5 million instead, in a venture-capital round led by two of Silicon Valley’s top venture-capital firms, Lightspeed Venture Partners and Accel Partners. That’s a huge vote of confidence for a business that Dunn told me was on track to do $10 million a year in sales, based on September figures. It’s growing fast, though: Dunn says sales have tripled in the past six months and jumped from $830,000 a month in September to $1.3 million in November.

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Bonobos, which launched in 2007 and is based in New York City, starting out making pants that Dunn and cofounder Brian Spaly felt fit better. (A disclosure is in order here: I have two pairs of amazingly well-fitting Bonobos shorts in my dresser and an unopened Bonobos box under the tree in my living room.) It has since expanded into shirts and jackets and sells third-party menswear brands as well to round out its selection.

Lightspeed and Accel seem like similarly good fits for Bonobos: Lightspeed managing director Jeremy Liew, who is joining the board, recently wrote for VentureBeat about the reinvention of e-commerce as a top trend for 2011 — specifically, the need to make online shopping fun versus merely efficient.

While Bonobos isn’t as whimsical as, say, the ultra-quirky San Francisco clothier Betabrand, its online store, its company blog, and the solicitous emails from its customer-service reps, whom Dunn has dubbed “ninjas,” collectively ooze a cheeky wit.

Accel, whose partner Sameer Gandhi is also joining Bonobos’s board, has invested in Etsy, ModCloth, and Groupon — three startups also reinventing the online-retail experience. Gandhi’s also on the board of Quidsi, the parent of Diapers.com, which Amazon.com recently agreed to buy for $540 million.

Dunn told me not all Silicon Valley venture capitalists were as easy to win over as Liew, who wore a pair of Bonobos turquoise corduroys to their first meeting. Some remain highly averse to retail businesses like Bonobos, which take on inventory.

“Saying inventory is toxic to a business is kind of like saying all people are bad because some people are bad,” said Dunn. “It’s a question of cash and how fast you turn that inventory. Enormous value has been created by companies like Amazon.com, Overstock.com, and Blue Nile, because they turn inventory rapidly.”

Fashion, too, was a tough sell for some American investors. European investors like Index Ventures, he said, were way ahead of Sand Hill Road in backing fashion startups. Index’s Net-a-porter sold for $553 million earlier this year.

“That’s why I’m so excited about Bonobos,” said Dunn. “We’re going to create enormous value because guys like that don’t get it.”

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[Photo: Bonobos Blog]