:format(webp)/cdn.vox-cdn.com/uploads/chorus_image/image/63700541/175901412.0.1462687206.0.jpg)
In January, Harry’s, an online seller of razors with fancy handles that was just 10 months old, bought a German factory with $100 million of a $122 million investment round. That was rare.
Today, it is announcing that it has raised another $75 million, in large part to expand its manufacturing capacity and buy new equipment for a new production hall and new machinery to help it test and create new products. This is rare, too.
The investment values the company, which is still less than two years old, at around $350 million, according to a source. Existing investors, including Tiger Global and Thrive Capital, contributed all of the money.
If you want to scratch your head, I won’t stop you. At a time when capital is easy to come by for buzzy startups and valuations are frothy, some will view this news as another signal that the tech bubble is real.
The opposing view — one that Harry’s unsurprisingly espouses — is that the investments allow the company to take the popular e-commerce trend of creating a vertically-integrated brand to the extreme. Startups like eyewear company Warby Parker and online clothing seller Bonobos are working directly with manufacturers to create their goods, which they then turn around and sell directly online. (Warby Parker co-founder Jeff Raider is a co-founder and co-CEO of Harry’s.) The end-to-end business model is supposed to allow for more control over product quality; quicker introduction of new products; and better prices and profit margins because the process cuts out wholesalers and third-party retailers that would take a cut of sales.
Harry’s wants even more control over the manufacturing experience and believes that by buying a factory and adjacent production facility, it can be assured that product quality will remain high for the long haul and it’ll be able to get new products into customer hands faster than competitors. Harry’s sells the vast majority of its razor kits on its own website. But it also sells some in a barbershop it runs in New York City, and in some J.Crew stores and Standard hotels.
“This category is somewhat unique in that it is so difficult to manufacture the product and supply is so scarce that owning the manufacturing capability is really strategic and pretty key to creating long term value,” Harry’s co-founder Andy Katz-Mayfield said in an interview. “When we launched Harry’s, this factory was literally the only factory in the world that we thought was good enough to make our product.”
It doesn’t hurt, Katz-Mayfield said, that the factory’s previous business of making products for other retail companies is very profitable. The Harry’s portion of the business is not profitable, as the company invests in growing its customer base and the infrastructure to support it. The factory, now under Harry’s control, has no plans to stop producing blades for other companies, however, he said.
Katz-Mayfield said the manufacturing facility expansion is being conducted now to support future growth projections that outpaced initial estimates. He said revenue over the last three months was five times greater than revenue for the same period last year. He declined to provide revenue numbers.
Harry’s will spend some of the new money on marketing campaigns, which will likely include TV commercials, he said. Dollar Shave Club, another shaving startup, recently raised $50 million and is making a splash with TV commercials of its own. Bevel, another razor brand created by entrepreneur Tristan Walker, sells razor kit subscriptions geared toward men of color who experience painful razor burn.
All are competing against the two industry giants, Schick and Gillette. If Harry’s can find a sizable niche customer base for its razors and accompanying shaving products, the warehouse purchase and expansion will look prescient, if not brilliant. Otherwise, it will be looked at someday as merely a sign of the times.
This article originally appeared on Recode.net.
