Lexington-based online retailer Lolly Wolly Doodle announced Thursday that it has raised $20 million in venture capital funding from a group led by Revolution Growth, an investment firm run by three former top AOL executives.
The money is expected to allow Lolly Wolly, which employs 160 people in Lexington, to add up to 100 jobs during the next year as it expands its online presence and moves into a new facility.
“Now we’re going to have the funds and support to move to a larger facility, so we can really expand out the factory and warehouse part of the business,” founder and CEO Brandi Temple said.
Lolly Wolly launched in 2010 when Temple posted a picture of 25 dresses on Facebook and they sold out immediately. The company’s customers mainly make purchases by visiting Lolly Wolly’s Facebook page and commenting on a photo of what they want to buy, including their email address and preferred size. The company automatically sends an invoice to the provided email address, and the customer has 72 hours to pay it.
About 60 percent of the company’s sales come directly through Facebook, Temple said.
Steve Case, a co-founder of AOL and one of Revolution Growth’s leaders, described the startup’s shopping model as “revolutionary” on a conference call with reporters Thursday.
Washington-based Revolution Growth focuses on technology-driven businesses that are looking to scale up operations. Case said the Lolly Wolly investment was part of the firm’s effort to invest the majority of its capital outside of traditional venture capital centers such as Silicon Valley, New York and Boston.
Two existing Lolly Wolly investors, FirstMark Capital and High Line Venture Partners, also participated in the financing round, along with new investor Novel TMT Ventures. Lolly Wolly had earlier raised an undisclosed amount from investors.
Lolly Wolly’s heavy reliance on Facebook to drive sales is unusual, said Clark Fredricksen, vice president of digital media market researcher eMarketer. He said in an email that small and medium retailers have scaled back on plans to use Facebook as a direct sales tool.
“Today, the bulk of companies, large and small, use Facebook primarily for other important marketing activities, such as building awareness, developing loyalty and advertising deals and product updates,” Fredricksen said.
Though social media is used as an engagement tool rather than a direct sales tool today, it’s possible that will change in the next couple of years, said Arun Sundararajan, a professor at New York University’s Stern School of Business and an expert on digital marketing and social media.
“We’re only just scratching the surface on the marketing and sales potential in social media,” he said. “Over the next five years, it’s probably going to grow tenfold, so certainly direct sales are going to be a part of it.”
Businesses will have to explore different strategies to market and sell their products on Facebook, Sundararajan said, which may be difficult due to the site’s more personal nature.
“The business will have to strike that balance right in a way that’s different from striking an offer on Google,” he said.
Temple said the new employees will allow the company to expand its online presence on other social networks such as Pinterest, Twitter and Instagram. Part of what has worked for her company thus far, she said, is going against what is considered a conventional approach to business.
“We didn’t mean to create a business,” said Temple, who was a stay-at-home mom with four kids when she founded Lolly Wolly Doodle. “It all happened by just taking the traditional model and throwing it out the window, and sort of listening from a mom’s point of view.”
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