Cakestyle lands $1M in funding from Sandbox

By Steve Hendershot

Cakestyle, a Chicago startup that delivers stylist-selected fashions to professional women’s doorsteps, announced Monday it raised $1 million from Sandbox Industries Sandbox Advantage Fund.

Cakestyle launched last year, and while the ten-employee company would not disclose its revenue or number of customers, it says that it has added thousands of customers this year and is currently shipping six times as many packages as it was at the beginning of 2012. The average package costs $2,800 to $3,000. (The model is very similar to another Chicago business, Trunk Club — the subject of a story in this week’s Crain’s here and a Q&A in this week’s “Silicon City” column here — except that Trunk Club targets men and Cakestyle’s customers are women.)

Co-founders Cecelia Myers, Cakestyle’s CEO, and Millie Tadewaldt, its chairwoman and a Sandbox Industries managing director, tell Crain’s more about the raise, and about Cakestyle’s plans to expand.

Crain’s: How did your investors respond to your pitch and model?Millie Tadewaldt: They are excited to be getting into a space where it seems like there is so much opportunity. Some of the (limited partners in the Sandbox Advantage Fund) had had experience in retail. Some were wary of an inventory-based businesses, but were reassured that we have the technology in place to be really thoughtful about how we manage inventory and plan for buying. It’s nice to have smart people on board who are thinking about that with us.

Crain’s: That makes sense, considering lots of investors are drawn to tech because overhead is so low. How do you convince them that your hybrid business is a smart bet?

MT: One of the main advantages to a tech business is that the margins can be super high. But the disadvantage is that you have to invent a product that people willing to pay for. We’re selling women’s fashion via e-commerce, and we already know women want to buy clothes. We also have already established in the marketplace what these brands go for, so there’s no (pricing) argument. That makes an e-commerce business more of an execution play than an innovation play, and we’ve already proven we’re good at execution in the retail space, Then, we’ll use technology and innovation to optimize the process and minimize the risk.

Crain’s: What will you do with the money?Cecelia Myers: Our big focuses are going to be, first, making sure women know about Cakestyle in new cities — we’ll be hitting that hard in terms of marketing. Second, we’re also building out our technology platform. We’re really fortunate in that we have great relationships with our customers and know a lot about them, and we want to use that information to help stylists become even smarter abut the choices they make for women by tracking that data.

MT: We’ve tried to hit the Chicago customer base hard so far. We’ve hosted events with graduated schools and professional groups, and done local advertising. Now we’re expanding that focused approach to multiple cities. Our business seems to really thrive when customers tell their friends about us and get their friends involved, so we think that attacking on a city-by-city basis makes the most sense.

Crain’s: What cities are next? CM: Right now, in terms of the markets that look most interesting and salient for us, first is San Francisco. We’ve seen a lot of interest there and we could hit that harder. Then there are places like Washington, D.C., and Boston.

Potentially we could look at smaller markets as well, places where the shopping isn’t quite as good. We could look to find cities without a very good Nordstrom and hit those hard. (When scouting markets) we’ll also look at the number of educated women and the number women who make more than a certain amount of money, so we know where our customer is.

MT: It’s still an open question what kind of cities where this [model] is most attractive to our customer base. Some cities already have great access to the kinds of designers we carry, and there, our customer base is just trying to keep up. Then there are cities where our customers don’t have that same access, and we’re providing it for them.

Crain’s contributor Steve Hendershot writes “Silicon City,” a weekly post on local tech news and newsmakers. Follow him on Twitter: @stevehendershot.

Related posts:

1. Fippex, maker of ‘client enablement’ software, snares $1.4M in funding