Designer Jeans Meet Deep Pockets has a devoted following among urban trendsetters

Back in December, 1999, just as all the Silicon Alley launch parties were going cash bar and venture capital was scarce, Dany Levy started an Internet company. Insane. Levy was a 28-year-old editor on a prototype for a new Condé Nast magazine called Lucky, but the beauty business was not her thing. And she had seen people like financial guru James Cramer win scores of dedicated readers with his daily Wall Street Web site, Surely as many women were addicted to fashion. Why not give them a daily dose of all things trendy via an insidery e-mail newsletter? She would hook them with Marc Jacobs sample sale listings and plugs for the latest $200 jeans, then keep them coming with Sex and the City-esque fashion tips. She'd call it

Today DailyCandy is proof that geeks, albeit stylish ones in Levi's low-rise jeans and drugstore flip-flops, are alive and well in New York's Silicon Alley. More than 1.4 million subscribers gobble up daily dispatches in nine cities across the U.S., plus London. New franchises include a kids' edition, a special deals edition, and one on travel. The site got so hot that it attracted several potential funders and in 2003 accepted an investment from Pilot Group, headed by former AOLer Robert W. Pittman. Last summer, Pilot put DailyCandy on the block for $100 million, and pundits proclaimed the valuation evidence of another bubble. But instead of selling, the site took a second round of funding, which helped push its value to an estimated $130 million. This year's revenues are projected to be nearly $19 million, more than double those of 2005.

Not bad for a startup born just as the NASDAQ flamed out. Says Levy: "I didn't really even know." So focused was she on her idea that she didn't waste energy drumming up venture capital or worrying about Aeron chairs and dot-com swag. Instead, she withdrew the nest egg she had put aside for an MBA. Three days after the New Year, clad in black drawstring pajama bottoms and a white tank, she sat down to work in the kitchen alcove of her West Village one-bedroom. A postcard of Dustin Hoffman from the film Midnight Cowboy that hung above her desk read: "They hustled to get here."

DailyCandy owes its success to its passionate audience. The typical reader is a 29-year-old college-educated woman, usually an early adopter and opinion leader. That translates into value for marketers, who pay thousands of dollars to advertise on DailyCandy e-mails to subscribers.

In the beginning, Levy plugged DailyCandy relentlessly. She collected e-mail addresses of friends, friends of friends, and the occasional stranger. She stood in Penn Station handing out postcards (where she ran into a former classmate from Brown University, who asked: "This is what you're doing now?"). She haggled with publicists she knew from her old life as a New York Magazine staff writer. And she approached friends, saying: "Can I ask you about this idea I have?" Then she would whip out a nondisclosure agreement to keep the chat confidential.

On Mar. 6, 2000, Levy debuted with a heads-up that Zagat Survey was starting a nightlife guide, followed by a plug for a J. Crew bikini you could get a tan through. Soon subscribers doubled. With help from two angel investors, Levy got an office and hired writers. In fall, 2001, DailyCandy became profitable. By mid-2003, Levy realized the site couldn't grow without help.

That's when Pittman's Pilot Group came in. Levy calls it the right deal. "There's money, and there's good money," she says. "If you're going to accept an investment, you want to take it from someone you think is going to add something." So far the investment has allowed Levy to include more cities. Next up: Miami.

By Jessi Hempel

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