Mucker Capital

Santa Monica

Everyone loves a wedding. Almost no one loves renting a tuxedo. Investing in a startup that is rethinking that process has so far turned out to be a happy marriage for Santa Monica venture capital shop Mucker Capital.

Mucker is the venture arm of MuckerLab, a seed-stage technology incubator in the heart of Silicon Beach. The tux rental business, an old means of sporting a traditional look, isn’t what many people would consider to be a prime target for innovation. Erik Rannala, a managing partner at Mucker Capital, was no different.

“We hadn’t really thought about the tuxedo industry before,” he said. “We’re Internet and software investors, and while we invest in e-commerce, tuxedos hadn’t exactly been a very common theme.”

Rannala met Patrick Coyne and Andrew Blackmon, co-founders of Santa Monica’s Black Tux, through a mutual acquaintance early last year. As he got to know them and learned more about the world of rented formal wear, he realized their business was tailor made for his firm.

“As we talked to those guys and dug into the industry, we realized it was kind of a perfect fit for us,” said Rannala.

Rannala said that he appreciated the maturity and discipline that the young entrepreneurs brought to their company.

“The founders really impressed us,” he said. “They knew the industry really, really well. They were very thoughtful about the way they were approaching it.”

As Rannala learned more about the business, he became interested in investing. He saw an opportunity to capture a significant part of the tuxedo rental business, which does more than $1 billion per year.

“Not only was it a category that hadn’t been penetrated online, which we like, but we really liked the team as well,” he said. “And there was a large market.”

Rannala brought the business into MuckerLab’s accelerator program and provided a small amount of preseed-stage funding. Black Tux, which ships tuxedos directly to a customer’s door for $95, and sends a replacement right away if the fit isn’t right, went live over the summer. The company soon found itself bursting at the seams and in need of more money to help it grow.

“After only a few weeks, they had several times the demand than they could fulfill with the inventory that they had,” said Rannala. “It was time for them to raise more capital.”

Lerer Ventures in New York led Black Tux’s $2.6 million February seed round and wrote the term sheet that set the valuation, and Mucker Capital agreed on it.

“At that valuation, we thought it was very fair,” said Rannala. “It was a good deal for them and a good deal for the investors.”

Although Black Tux isn’t a stereotypical Mucker portfolio company, Rannala said his investors got on board without concern. He sees the old dividing line between Internet businesses and traditional consumer businesses fading away as software continues to “eat the world,” in the words of Silicon Valley venture capitalist Marc Andreessen.

“We’re getting to a place where we’re living in this increasingly software-enabled world,” Rannala said. “Categories and whole industries that heretofore have not been software enabled are now getting there.”

– Matt Pressberg

For reprint and licensing requests for this article, CLICK HERE.