June 13 (Bloomberg) -- Revolution LLC, run by America Online Inc. co-founder Steve Case, is investing in an e-commerce kids’ clothing startup that does the majority of its sales through Facebook Inc.
Lolly Wolly Doodle Inc., based in Lexington, North Carolina, generates 60 percent of revenue through the world’s largest social network -- a method that allows personal interaction with buyers, who order products through postings and messages.
Revolution’s investment is the majority of a $20 million funding round that includes existing holders Firstmark Capital and High Line Venture Partners. The financing will help Lolly Wolly Doodle hire 100 people in the next few years, taking its total number of workers to about 200, according to a statement today by the clothing company and Revolution.
Case is buying into the company through his firm’s $450 million Revolution Growth fund, which he runs with former AOL executives Ted Leonsis and Donn Davis. Case, who helped start AOL in 1985, typically looks for promising small businesses on the East Coast that may not make their way onto the radars of most Silicon Valley-based venture capital firms. Revolution, based in Washington, has also invested in car-sharing service Zipcar Inc. and LivingSocial Inc., the daily deal coupon site.
“Lolly Wolly Doodle is a perfect example of our core belief at Revolution that great entrepreneurs and innovative companies can be found all across the country, not just in Silicon Valley,” Case said in the statement. “Lolly Wolly Doodle proves affordable manufacturing can thrive in America.”
Bonnie Rothman Morris, a spokeswoman for Lolly Wolly Doodle, said Case’s firm is putting up most of the funds in the investment round.
Selling through Facebook lets Chief Executive Officer Brandi Temple take immediate feedback from customers into account -- a suggestion that she make a certain dress in zebra print, for instance. She can also use Facebook users’ reactions to gauge demand and predict production, a leg up that transformed her living-room hobby of sewing dresses for her niece into a business that ships 30,000 kids’ garments a month.
Lolly Wolly Doodle has a loyal fan base, with more than 580,000 followers on Facebook. Startups such as Combatant Gentlemen LLC and Southern Tots have also won sales by engaging customers through the direct link provided by social media.
Incorporating consumers’ suggestions into the design process is more effective than creating a line of clothing and hoping the patterns and fabrics are popular, Temple said in an interview earlier this year.
To place an order on Lolly Wolly Doodle, users “like” the retailer’s page and comment on an item, expressing an intent to buy. The company then e-mails an invoice and ships the product. Temple has said she was originally selling on EBay Inc.’s site and switched when two weeks of sales via Facebook brought in as much revenue as two months on EBay.
Customers can also purchase merchandise from Lolly Wolly Doodle’s website.
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