For five years, Thrillist CEO Ben Lerer has made the case that his media and e-commerce businesses should be housed under the same corporate roof. You won’t hear him make it again.
Thrillist and JackThreads Raise $54 Million, Split Into Separate Companies
“At a certain point, these businesses have each become living, breathing creatures, and to share a source of food is not the most productive,” Ben Lerer said.
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Jason Del Rey has been a business journalist for 15 years and has covered Amazon, Walmart, and the e-commerce industry for the last decade. He was a senior correspondent at Vox.
In an interview with Re/code on Tuesday, Lerer revealed that Thrillist, his lifestyle media business for dudes, and JackThreads, his e-commerce site for young guys, are splitting into separate entities, with a new CEO taking over at JackThreads. Lerer positioned the arrangement as a way for the businesses to focus solely on what they do best and allocate investment dollars as they see fit.
“At a certain point, these businesses have each become living, breathing creatures, and to share a source of food is not the most productive,” he said.
As part of the separation, the two companies are raising a combined $54 million in new funding. Axel Springer, the German publisher that just acquired Business Insider after failing in a bid to buy the Financial Times, is buying a minority stake in Thrillist. Oak Investment Partners, a previous investor in the combined entity, is leading a new round in JackThreads along with SBNY, a New York-focused fund that previously did business under the SoftBank Capital name.
Lerer declined to provide the breakdown of how much of the funding is going toward each company and would only say the combined valuations is higher than what it received when it raised $13 million in 2013. Sources previously told Re/code that investment valued the company at $150 million.
Lerer will remain CEO of the Thrillist media unit and serve as chairman of JackThreads’ board of directors. Mark Walker, who joined Thrillist Media Group as head of commerce in December, will become CEO of JackThreads.
“Mark is more capable of running that business than I am,” Lerer said. “He has been president of that business for the last nine months and was the missing piece as someone with his experience who is a true merchant.”
“Also, I’m too much of a lunatic to run a commerce business where, every single day, you start over again from a numbers perspective,” Lerer added. “The way that I’m wired, I drove people too hard.”
The moves cap off a nearly year-long process in which Lerer sought to either raise a big investment or sell his company, talking to a wide range of prospective investors and buyers, including Viacom, along the way. Some of the pressure to sell or raise came from Bob Pittman, according to sources, a board member whose investment firm Pilot Group was Thrillist’s first investor in 2005 and who wanted a return. Pilot Group is pocketing an undisclosed portion of the $54 million in exchange for a chunk of its stake, Lerer said.
In conversations with investors and potential acquirers, Lerer said it became clear he wasn’t going to be able to secure a premium on valuation that he thought a fast-growing media business with a big commerce wing deserved. Early on, the idea was that apparel from JackThreads would be sold directly on Thrillist sites. But that never really happened in a big way and, over time, one of the main tangible ways the sites partnered was marketing to each other’s users.
“We’re ahead of our time, or at least for people who write big checks,” Lerer said. “Where I was hopeful it would be a situation where one plus one would equal three, investors were just looking at what the two were worth separately and adding them up.”
An Axel Springer rep and Lerer’s father, Ken Lerer, will join Thrillist’s board. The elder Lerer just took a seat on Business Insider’s board and also serves as chairman of BuzzFeed. He was previously a co-founder of the Huffington Post. Walker, SBNY’s Jordy Levy and Oak’s Fred Harman will join the younger Lerer on JackThreads’ board. The companies will continue to work out of the same Manhattan office and will ink agreements to partner on data-sharing, marketing and ad-sales efforts.
Lerer said the new funds would allow the Thrillist media unit to invest in neglected areas, such as video programming, while expanding into more cities and putting on more events. Thrillist.com attracted 11.5 million visitors in July, according to comScore, a 59 percent jump over the prior year.
Thrillist launched in 2006 as an email newsletter that told young guys about new places to eat, get buzzed and shop in their cities. While that business has grown to more than 35 cities, the combined company has focused a lot of money and energy in recent years on building out its JackThreads site, which it acquired in 2010. The shopping site grew quickly by selling men’s streetwear in limited-time sales known as flash sales and accounted for around three-quarters of the $92 million in revenue the combined company registered in 2014.
But JackThreads is now losing money and growing slowly, according to sources. Lerer attributes its current financial situation to making the transition from a flash sales site to one that will mostly sell full-priced goods, including a whole line of apparel branded with the JackThreads name.
“Watch JackThreads over the next few weeks,” Lerer said. “I am so fucking bullish about it I can’t even express it. You will not go shopping anywhere else, and I won’t go shopping anywhere else.”
Additional reporting by Peter Kafka.
This article originally appeared on Recode.net.
