Investors Consume Some ROXY.com

The news of the b-to-c market’s death may have been greatly exaggerated.

At least that’s the message implied by last week’s news that consumer electronics e-tailer ROXY.com Inc. recently raised $25 million in a mezzanine round of venture capital funding.

Atlantic Coastal Partners led the transaction and was joined by fellow institutional investors Paul Capital Partners, AXA Investment Management and Triad Media Ventures. Atlantic Coastal received a board seat as part of the deal and an additional board member will soon be chosen from among the remaining institutional investors.

NBC Interactive also received an equity stake in ROXY.com in exchange for online distribution and promotion while other strategic participants included home shopping television network ValueVision International and existing investor Federated Department Stores, which participated through subsidiary Fingerhut Companies.

This deal represents the fifth time that Fingerhut has provided capital to Roxy.com, bringing its total investment to over $20 million.

“There was a lot of cringing out [in the VC market] because of the b-to-c attitude, but we’ve got an actual product, real revenues and a strong, and growing, gross profit,” said Mike Jeans, president and chief executive with Roxy.com. “We were also helped by the fact that we’ve diversified into a multi-channel operation because, in addition to the online channel, we have call centers, two different catalogs, face-to-face selling and a newly opened channel via a weekly one hour Roxy electronics show on ValueVision.”

He added that the company had originally contemplated bypassing the private equity market in favor of an initial public offering, but changed its mind after extensive consultation from placement agent Lehman Brothers. In exchange for its services, Lehman received an agent fee, small equity stake and, indeed, may have positioned itself as the leading candidate to underwrite Roxy.com’s imminent IPO.

“We’ve made no final decision [on an underwriter] but we’ve gotten to know Lehman Brothers very well and really think that they understand what we do,” Jeans said.