Diamonds are for Rabbis: Ice.com and Its Founders Heat Up with $47 Million From Polaris and Ignition
I rounded the wrong way when I got Shmuel Gniwisch on the phone, referring to the $46.6 million financing round his online jewelry retail company—Ice.com—had just closed as $46 million. “It’s $47 million,” the Ice CEO corrected. Then there was a pause. “That’s 47 parties.”
He was joking, of course—breaking the ice, you might say. And why not? He was one happy rabbi (more on that in a bit). The Series B funding, formally announced today, was led by Waltham, MA-based Polaris Venture Partners and included return investor Ignition Partners of Bellevue, WA. It marked only the second time Ice had taken in funding (well, third if you count Bill Gross—more on that, too). And I think you can view it as a vindication. It has been a long haul to get to this big-money inflection point—from four rabbis in Montreal to four rabbis in Gross’s Idealab Internet incubator in Pasadena to four rabbis buying back their troubled business, returning to Montreal and turning it into the kind of operation that could attract big money from big VCs. “We’re very profitable and having a great time,” says Gniwisch, who describes his high adventures as movie-like—“part of the new Nicholas Cage series.”
This is the way the script reads. Gniwisch grew up in a family jewelry business that manufactured affordable jewelry for big retailers. Then, in 1999, the new generation—Shmuel, his two brothers, Mayer and Pinny, along with brother-in-law Moshe Krasnanski (all are ordained rabbis)—got the retail bug. “We decided that we would like to take this to this new thing called the Internet,” Gniwisch says. It was the dot com heyday, he explains. Retail sites like Priceline, Amazon, and Buy.com all seemed to be going gangbusters. “Why shouldn’t we be able to tap into this inventory that’s sitting there anyhow and give it to the consumer and make a little for being the matchmaker?”
The inventory he’s speaking of was his parent’s, and the new business was called Buyjewel.com. The idea behind it (and now Ice) was to bring affordable, stylish jewelry—such as diamond rings, bracelets, and earrings, mostly in the $100-$500 range—to more mainstream consumers. “We are great merchandisers. We’re trend setters, we’re tastemakers,” Gniwisch says.
Not long after their September 1999 launch, Bill Gross invited them to join Idealab, which churned out dozens of companies in this period, including eToys and Goto.com (later named Overture), a pioneer in contextual advertising for search engines. Gross and his team had a lot of experience in e-commerce and online retail. Gniwisch says it seemed like “a match made in heaven.” So they accepted Gross’s offer of $7 million for roughly 60 percent of Buyjewel, which was already taking in some $30,000 a month in revenue—and in early 2000 moved down to Pasadena. “Four rabbis with big beards,” he says. “It was a funny sight.” (For more on the Pasadena days and Ice’s history, check out this 2002 Fortune article.)
A few months later, the business was renamed Ice.com. And a few months after that, the whole thing came apart. Gross’s idea, says Gniwisch, was to roll up Ice and some of his other e-tail ventures (including eToys and CarsDirect) into a mega-Web retailing site called Big.com and take on Amazon head on. But not long into the venture—in October 2000—Gross pulled the plug. Ice was sitting on about $600,000 in debt. The brothers (and brother-in-law) negotiated to buy back the business for the amount owed and, says Gniwisch, “started building from scratch.”
After all, he says, they had a great URL and a dedicated team, and it wasn’t long before they moved into the black. “We were profitable. Not highly profitable, but we were profitable,” says Gniwisch. Two years ago, back on solid ground, the new Ice took on its first new funding—$12.5 million from Ignition.
Since then, the company has grown its sales and bought up Diamond.com, another online jewelry retailer that was winding down before Ice snatched it up. This business, which focuses on slightly higher-end jewelry than Ice–chiefly in the $300-$1000 range—now represents perhaps a third of Ice’s business. “We’ve been building that brand back to life. We did phenomenal with that brand this [past] year,” says Gniwisch.
Which brings us back to the new funding round, which will give Polaris managing general partner Alan Spoon a seat on Ice’s board. This kind of large investment in what by today’s standards is a pretty standard retail operation might seem a bit unusual for a cutting edge, high-tech, and life sciences-oriented firm like Polaris. But Ice is an Internet-based business, and its profitability and well-established brand makes it far less of a risk for investors than most startups, justifying the big bucks investment. In fact, Polaris has a long line of such later-stage, “growth equity” investments in more established Internet retail or e-commerce brands, which include Art.com, e-Rewards, LegalZoom, UltraShape, and TechTarget (which went public last year).
“The idea of raising the $47 million was to take the business to the next level,” says Gniwisch (who definitely likes to round up). All told, the company’s 2007 revenues were around $83.4 million, according to press materials. And Gniwisch says his plan is to drive revenues past $100 million, by moving the same products to more customers. That will mean opening other marketing venues and potentially expanding to other geographic areas (almost all the firm’s sales are in the U.S. right now, with only a few percent in its home base of Canada). “The market is so ripe to be taken,” says Gniwisch, who points out that Zales, the largest offline jewelry retailer, outsources its e-commerce operations. “We’re not even scratching the surface.”
Scratching surfaces? Diamonds? Surely, the rabbis have more to mine before this script is finished.