Los Angeles-based underwear company MeUndies, known for its bold prints, introduces a new pattern every week.
Unlike so many of today’s direct-to-consumer brands, Jonathan Shokrian has largely resisted the temptation to raise piles of cash to fund hypergrowth at his online underwear company MeUndies. “It sets investors and companies up for a lot of unneeded pressure,” says Shokrian, founder and CEO.
Instead, the Los Angeles-based company has kept its funding to a minimum, raising just $10 million since inception nearly a decade ago and funding growth primarily via its own cash flow and a credit facility. It has been profitable for the last five years and sales are projected to hit nearly $100 million this year, up from about $75 million in 2019.
So he can explain why he’s raising $40 million now: It’s all secondary capital to give his earliest investors their money back, some of which have been waiting patiently since 2011. None of it will be funneled into the business. The capital will be put up by Provenance, a Beverly Hills investment group focused on direct-to-consumer companies, which will come on as a new investor.
It’s a far cry from the direct-to-consumer companies that have raised capital at a breakneck speed, in part to keep up with customer acquisition costs that continue to rise. Building a business that relies heavily on Instagram hasn’t yielded the easy profits many expected, which is why so many have turned to brick and mortar.
Provenance will help MeUndies with just that, focusing on wholesale partnerships with department stores like Nordstrom and other specialty and big-box retailers. It eventually plans to open more of its own stores, too, in addition to the one it operates in Los Angeles.
“We always had plans to expand into retail,” says Shokrian, who adds that the nation’s largest mall owner, Simon Property Group, was one of its largest investors in its last funding round in 2018.
Shokrian started MeUndies in 2011 after inadvertently buying the wrong pair of Calvin Klein underwear at Macy’s before heading on vacation, and complaining about the fit. He realized he always had something of an inferiority complex buying underwear, since he was never going to have a six-pack like the models on the packaging. Shokrian had even been to prison for about seven months — for an asbestos issue related to a building he had managed for his dad at age 23 — where he worked out almost every day and still didn’t get a six pack.
So he started selling underwear with fun, bold prints — Pandas! Platypuses! Harry Potter! — online and offering a discount to those who signed up for a monthly subscription. To keep customers coming back, he introduced one new pattern a week. The average member is between the age of 25 and 35 and has 18 pairs of underwear, while some 40,000 superfans have accumulated over 50 pairs.
That makes for the highest customer loyalty of any company he’s ever come across, says Anthony Choe, founder of Provenance. “They are systematically replacing their entire underwear drawer over time with MeUndies,” he notes.
The company just sold its 16 millionth pair of underwear, nearly a quarter of which were purchased this year. Newer categories have taken off during the work-from-home era, too, like loungewear (up 100%) and bralettes (up 75%).