Gazoontite Raises $26M Private Round

In an effort to both support its online retail service and roll out brick-and-mortar vendors in three additional markets, Gazoontite.com recently raised $26.5 million in its second institutional round of venture financing.

San Francisco-based Gazoontite.com operates a Web site that provides community and consumer information to individuals who suffer from asthma, allergies and various respiratory ailments. Through its Web site and flagship store in San Francisco, the company sells products including air purifiers, hypoallergenic bedding and bath-and-beauty devises. Proceeds from the Series C round, which closed in December, will be used to build stores in New York, Chicago and Los Angeles.

Gazoontite.com is one of the first venture-backed companies to simultaneously launch an e-commerce site, retail chain and catalog. Chief Executive Soon-Chart Yu, an allergy sufferer, disputed the notion that the company’s valuation in the capital markets is diminished because it operates “traditional” retail outlets.

“There are two groups of investors,” he said. “Stupid ones, and the smart ones that get it. People that understand the market realize that the profits generated from the retail stores serve to build the brand, and we are as aggressive as any Internet pure-play in doing so.”

Investors comprising Yu’s honor roll include Hummer Winblad Venture Partners and Oak Investment Partners, first-time investors that led the round. Existing investors Doll Capital Management and Baccharis Capital Inc. also contributed to the round. In addition to market expansion, proceeds from the offering will be invested in infrastructure costs and sales and marketing.

Yu said that in addition to turning a tidy profit, the retail stores serve to lower customer acquisition costs.

“Six months on a billboard in a major market costs the same as opening a store,” he said. “The stores lowered [customer] acquisition costs by one-fifth.”

Although the Series C round is likely Gazoontite.com’s last endeavor in the private market, Lu said he is in no rush to take the company public.

“We have been approached by several investment bankers, who you know can’t be trusted,” he said. “There is a big trade off in going public and at this point I don’t want to be limited to what the investment market thinks is kosher.”

Nonetheless, Lu said it is possible the company will file later this year.