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August 01, 2011

Acquisitions/Mergers

Maveron Invests in Gigi Hill

by Teresa Day

Private Equity Continues to Reach Out to Direct Selling Industry

Gabrielle DeSantis-Cummings, Co-Founder, Gigi Hill

Gabrielle DeSantis-Cummings, Co-Founder, Gigi Hill

Monica Hillman,  Co-Founder, Gigi Hill

Monica Hillman, Co-Founder, Gigi Hill

With strong consumer brands such as eBay®, Cranium®, Potbelly® and Shutterfly® already in their portfolio, executives at Maveron—a venture capital firm co-founded in 1998 by Howard Schultz, CEO of Starbucks—decided to enter direct selling, believing the model offered a stellar opportunity for creating an iconic brand. After identifying several potential companies, the people at Maveron went knocking on the doors of Gigi Hill, a company that designs, manufactures and sells a unique line of handbags and totes primarily through in-home parties. They were convinced the great products and strong culture were a match for their money.

“We looked at female discretionary spending and saw a giant $9 billion market in handbags,” said Jason Stoffer, Principal of Maveron and lead on the Gigi Hill investment. The market size confirmed the product for Stoffer, and the social component in both selling and purchasing the product confirmed the distribution channel. “The personal nature of the direct sales model has advantages over other retail channels in introducing consumers to and building real passion around a brand,” said Stoffer.

He added that Maveron, true to the heritage brought by Schultz from Starbucks, looks for companies with strong cultures and great consumer-facing brands in big markets that can also scale to create equity value for investors. Gigi Hill scored high on all aspects.

Gabrielle DeSantis-Cummings and Monica Hillman, the women behind the Gigi Hill brand, weren’t looking for outside investment when Maveron came knocking. “We were excited about the interest, but we weren’t seeking it,” said DeSantis-Cummings. “We were executing the strategic plan we’d built over the last few years, doubling our profits each year.”

From the beginning, the two women have combined their expertise to incorporate extensive financial analysis and forecasting. They launched Gigi Hill nationwide in 2009, after three years of testing the concept, holding parties, getting to know the habits of their field and listening to their customers. “We had $1 million in sales in our first year, by design,” said Hillman. “We planned and intended for that.”

In 2010, the company more than doubled sales—again, by design. “We’ve been very strategic and very numbers-driven from the beginning,” said Hillman, whose 17 years in finance, banking and human resources helped set up Gigi Hill for success from the start. This numbers-driven plan is also one of the aspects of Gigi Hill that thrilled Maveron. “In an incredibly boot-strapped way, they’ve gotten people to get onboard—employees love working there, stylists and their customers love the products. That is so important to us,” said Stoffer.

He adds that Maveron looks for the brightest entrepreneurs who are in the early to middle stages of developing strong and highly differentiated brands. Other major aspects important to the firm include sound operations, good financial results, and of course, great products.

The culture match was also key for both parties. DeSantis-Cummings, who has a background in entrepreneurship and brand promotion said, “We understood Maveron’s language and how they were so committed to culture and the customer experience.”

For their initial $3 million investment, Maveron has now become a minority shareholder in Gigi Hill. Stoffer thinks this initial funding is just the beginning of a long and beautiful partnership. “We invest in founders we believe in,” he said.

According to DeSantis-Cummings and Hillman, Gigi Hill will use the funds to round out the executive team, upgrade the infrastructure software and technology and increase their marketing efforts—and continue the foundation they’ve built. Hillman said, “We are blessed because with these resources we can take our vision and grow.”

Private equity investors are continuing to gain confidence in the direct selling business model, ideas that were explored in depth by Direct Selling News in the recent 40-page supplement to the June 24 edition of The Wall Street Journal. The industry anticipates much more to come.