Jet.com has closed $350 million in new funding, and says it has verbal agreements for another $150 million. The shopping startup, run by the entrepreneur who created Diapers.com, says a large portion of the money will be spent on marketing, hiring and customer support as it tries to attract a big customer base to compete against mass retailers like Amazon, Walmart and Target.
“It was definitely a challenging financing environment, no question about that,” CEO Marc Lore said in an interview. “And the fact we were able to get as much demand as we did at the valuation we had is just a testament to our performance to date and the size of the overall opportunity and the team we assembled.”
Re/code previously reported that Jet was in talks to raise up to $500 million total at a $1 billion pre-money valuation, and that the lead investor in the round was mutual fund giant Fidelity. The company confirmed those facts today and said that previous investors, which Re/code has reported include Alibaba, Bain Capital Ventures and Google Ventures, also contributed in this round. The total could climb a bit higher than $500 million if it takes on more strategic investors and potentially some debt, according to Lore.
Jet.com has now raised $570 million, which will balloon to $720 million once it closes on the additional funding. The large amount of capital has raised eyebrows in the tech industry because the company only launched widely in July and it’s looking like it’s trying to compete head to head with Amazon.
Jet’s founder Lore believes his company offers something different: A unique discounting structure that rewards shoppers when they put more items in their checkout basket. Orders that contain multiple items, ideally located in warehouses close to their delivery address, are more efficient and cost less to process. That allows Jet to pass along those savings to the customer.
The company has built a catalog of millions of products, ranging from toilet paper to TVs to cereal. It sells some stuff directly from its own warehouses, but partners with other merchants and retailers to sell the rest out of their fulfillment centers.
The company originally planned to offer additional discounts on each product, but scrapped those plans when it decided to do away with a $50 annual membership fee that was part of its initial model.
E-commerce industry insiders have expressed skepticism that Jet can train millions of shoppers to shop in a new way. That is, to order multiple products at a time to earn discounts when the customer may have come to the site intending to buy just a single item. Lore said in an interview he’s confident the model works.
“The No. 1 reason is we are already seeing people doing it,” he said. “We already have one million shoppers on the site. It’s working.”
Jet shoppers bought more than $33 million in goods through Jet in October, up from around $10 million in August. The company is spending heavily on advertising — from TV commercials to huge billboard campaigns in New York and San Francisco — to get the word out. The company’s marketing head, Liza Landsman, said the company will spend, on average, $20 million to $25 million in marketing each month, but will mostly rely on digital ads during the holidays and ramp up TV advertising again in the New Year.
Lore defended the company’s aggressive advertising spending, saying the market opportunity is too huge to ignore. The e-commerce market is about $300 billion in the U.S., but it still only accounts for somewhere around 10 percent of all retail transactions, depending upon how you measure it.
This article originally appeared on Recode.net.