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Atlas Venture bets that craftsmanship is coming back, with $18 million round for CustomMade

Posted by Scott Kirsner  June 11, 2013 08:00 AM

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Atlas Venture is making its first investment out of a new $265 million investment fund that it raised earlier this year. And there are at least three things that are notable about the deal:
• It's a bet on old-school, Yankee-style craftsmanship.

• It's in a startup, CustomMade, that is located not quite two blocks from Atlas' office in East Cambridge.

• While Atlas usually makes early seed or first-round investments in companies, this is a second round of funding for CustomMade. (The company had raised $8 million previously, from investors including Google Ventures, NextView Ventures, Launch Capital, and First Round Capital.)

CustomMade is a marketplace site somewhat similar to Etsy, but focused entirely on products that are made to order. The site helps customers communicate with a number of "makers" around the country, find one they like, and manage the design process. The two most popular items that customers want made, according to CEO Mike Salguero: tables and necklaces. (I profiled the company and some of the challenges it faced in generating enough work for makers, in 2011.)

custommadefounders.jpegSalguero says that CustomMade has 40 employees, and that "the majority of this money will be used for hiring," primarily in engineering and marketing. Over 12,000 makers bid on jobs through the site, and CustomMade pockets 10 percent of every successful transaction (with a cap of $1000 on the company's fee.)

"Our next challenge," says Salguero, "is getting average customers to experience custom for the first time — making it easier, more predictable, and more delightful. And that obviously is something that involves everyone here, from marketing to service to user experience and engineering." (In the photo, Salguero is on the right, with president Seth Rosen on the left.)

In a blog post about the deal, Atlas Venture partner Fred Destin predicts that "custom is the new frontier in luxury and 'affordable luxury.' There is a huge pull away from mindless consumption towards more meaningful, one-off purchases."

The company brought on a new SVP of engineering last December, Jim Haughwout, and a new VP of product starts next month. Maggie McCanner joins CustomMade after working at Amazon.com and AllRecipes.com in Seattle. "We're now importing people to Boston from other places," says Salguero.

Destin at Atlas says via e-mail that he is "eating humble pie for passing on the seed and the Series A... I should have gone in earlier. Rapid growth in metrics in recent months is impressive and the reason why I relented and invested." As for why Atlas is leading a B round as the first deal out of its new fund, he explains that "every rule is made to be broken when you feel strongly about a team."

I asked Destin whether he'd ordered any products through the site, and he said that he has had some jewelry made through his wife's account. "I have tested the product and the conversion funnels extensively since we first meet the team 3 years ago," Destin writes. "It's a complex workflow to crack."

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Scott Kirsner was part of the team that launched Boston.com in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.

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