How Does Vintage Clothing Retailer Raise $25 Million?

How does an online retailer selling vintage clothing raise millions of dollars in venture capital funding? By opening the site to independent designers from around the world and adding community features that engage shoppers and would-be designers.

ModCloth has closed a $25 million round of funding led by Norwest Venture Partners (NVP). High school sweethearts Eric Koger and Susan Gregg Koger founded the site the summer before attending Carnegie Mellon University in 2002. After graduating from college in 2006, the pair expanded their site selection from strictly one-of-a-kind vintage items to a vintage-inspired aesthetic with items from independent designers from all over the world.

ModCloth built a social commerce platform that brings products to market via customer feedback and validation. "Be the Buyer" allows customers to vote for items from emerging designers - winning items make it into production.

Its new "Make the Cut Contest" is a crowdsourced design competition that gives aspiring designers the opportunity to submit design sketches based on a themed inspiration board. Select designs are voted on by the ModCloth community, and winning designs are produced and sold on ModCloth.com featuring tags bearing the designer's name.

According to the announcement, the funding will allow ModCloth "to continue building a site experience that empowers its community and makes for a fun and unique social shopping experience, as well as expand its popular Be the Buyer program."

The company will also use the new funding to hire more employees at its San Francisco headquarters as well as its Pittsburgh and Los Angeles locations. ModCloth currently has almost 300 employees across the three locations. Last year, ModCloth consolidated its fulfillment center and office in Pittsburgh to a 146,000 square foot space in Crafton, Pennsylvania.

NVP's Josh Goldman NVP will join the board, which consists of Theresia Gouw Ranzetta of Accel, Josh Kopelman of First Round Capital, Ann Miura-Ko of Floodgate, and the Kogers.

Goldman said ModCloth integrates data and input from the community into virtually every area of its operations, from supply chain planning, to merchandizing, to customer support. "This distinctive vision gives ModCloth the opportunity to change what's happening in both fashion and online retailing, and in the process, create one of the next great global brands in those industries."

ModCloth's existing investors (Accel Partners, First Round Capital, Floodgate, Harrison Metal, StubHub founder Jeff Fluhr) also participated in the round.