Ideeli’s Paul Hurley Talks About Winning Over Investors and Making His Mark in Online Fashion

9/7/11Follow @jpruth

The dynamics of shopping, especially for fashion, may never be the same again with growth of websites such as New York’s ideeli, which offers limited time “flash sales.” The five-year-old company carries the clout of venture backing that lets it strut through the industry with the confidence of a runway model. “Flash sales are part of a major disruption happening in retail,” says Paul Hurley, CEO and co-founder of ideeli.

Much like photographers maneuvering for position along the runway, investors have stepped up to capture pieces of ideeli. Founded in 2006, ideeli offers daily flash sales to its members for luxury apparel, accessories and other wares and competes with the likes of Gilt Groupe. Ideeli has gained momentum with investors as it has grown. The company raised $3.8 million in 2007 in a round with Kodiak Venture Partners and angel investors and then another $20 million in 2009 with investors that included StarVest Partners, Constellation Growth Capital, and Kodiak. And in April it raised $41 million in a round led by Next World Capital with participation from Cue Ball Capital and prior investors.

The early financial backing, Hurley says, ran counter to perceptions during the mid-2000s when few saw room for new players in the e-tailing space. “In 2006 and into 2007, when we started to talk to investors at that point there had been virtually no investment in e-commerce,” he says. “It was felt that Amazon had won the war.

Hurley says though investors were initially skeptical of the concept, the positive response from consumers and product makers led to rapid growth for early players in flash sales such as ideeli. “Smart investors paid attention to that as opposed to the conventional wisdom,” he says.

Skeptics changed their tune as consumers embraced flash sales. For example, New York’s Gilt Groupe, another major player in luxury products flash sales, raised $138 million in May. “Tons of investment is trying to find a home right now in this,” Hurley says.

Now ideeli—with a staff of some 200 and $77.7 million in revenue in 2010, according to the company—plans to capture more market share. Hurley says there is $1 billion-worth of business for ideeli to build based on the product categories it currently sells. “On a run-rate basis, we think we’ll be a $250 million business by the end of this year,” he says. The company declined to discuss profitability.

Ideeli has some 4 million members who seek deals that are available for just 40 hours at a time. Ideeli is weighing new categories to pursue. “[Ideeli is] an effective tool for any market category where people are passionate about the products,” Hurley says.

Hurley says ideeli effectively creates a new store every day with fresh sets of deals offered only to its members. Would-be rival websites might offer one or two sale events per day, Hurley says, but having the capacity to post 20 or more new sales events the way ideeli operates is a task that few have emulated thus far. “While there is an enormous greenfield opportunity; many companies will have difficulty on execution,” he says.

Paul Hurley, CEO of ideeli, says his company's operations may be difficult for others to replicate.

Hurley says the attention garnered by the flash sales sector may attract new rivals, but he cautions that making such an operation successful is a steep challenge. “What people underestimate is how difficult this business is to run at scale,” he says.

Hurley describes ideeli as a tightly built company with personnel and procedures that must move fluidly for the whole operation to function. That means employees at every level of the company must take responsibility for the end product, he says. “Things move so fast; senior management can’t be party to every single decision,” Hurley says.

Ideeli is Hurley’s fourth startup in 24 years. He co-founded ideeli with Mark Uhrmacher, now its chief technology officer. Hurley weathered booms and busts at his prior endeavors, which included Aveo, a computer tech-support service that alerted users to potential problems in advance. Aveo’s assets were acquired by Cyberfast Systems.

Hurley says he expects ideeli to continue its exponential growth in terms of revenue, staff, and operations and fundamentally become a different company. “As big as we are, we are very small relative to where we will be in twelve months,” Hurley says.

João-Pierre S. Ruth is the editor of Xconomy New York. He can be reached at jpruth@xconomy.com and followed on Twitter @jpruth. Follow @jpruth

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