Moda Operandi Taps Growing VC Interest in Fashion

(Reuters) – Moda Operandi, a fashion e-commerce site, is raising its second round of venture capital funding as investor interest in online luxury retailers grows.

The company, founded in February during New York Fashion Week, operates designer “trunk shows” online. It lets members pre-order designer clothes straight off the runway rather than have to wait for them to be available in stores.

Chief Executive Officer Aslaug Magusdottir, speaking on Tuesday at the Reuters Luxury and Fashion Summit in New York, declined to say how much she was raising but said she has been approached by several investors.

“The recent successes of Gilt [Groupe], Rue La La and Net-a-Porter being sold has really made this a much more interesting sector for a lot of investors,” Magusdottir said, referring to recent deals.

On Monday, dress rental business Rent the Runway said it had raised $15 million from Kleiner Perkins Caufield & Byers, bringing its total funding to more than $31 million. And earlier this month, Gilt Groupe raised $138 million in a round that valued the shopping site at more than $1 billion.

Last year, Moda Operandi got a first round of funding from Boston-based venture capital firm New Atlantic Ventures.

Magusdottir, a native of Iceland and graduate of Harvard Business School, was vice president at online discount site Gilt Groupe and co-founded TSM Capital, an early investor in fashion brand Rachel Roy, half of which was later sold to Jones Group (NYSE: JNY).

She said her service allows designers to sell garments that might otherwise not get sold.

“We kept hearing from designers that they created these beautiful collections and only a very limited portion of the collections would ever make it to the stores,” Magusdottir said. “They felt that stores weren’t necessarily making the right decisions about which items to buy.”

Magusdottir said she is hoping Moda Operandi’s membership will hit 100,000 by the end of the year, up from 15,000 at launch. Members must apply; some are denied entry.

She expects the company to be profitable by the end of 2012. The company does not disclose its results.

Moda Operandi has done trunk shows for designers such as Alexander Wang and Proenza Schouler. Preorder and trunk shows make up about 10 percent of global sales of designer fashions, she said.

By Phil Wahba, Reuters