Subscription Startup Citrus Lane Wins Over New Moms—and Investors

Founders take aim at $40B baby goods industry

The subscription e-commerce model is getting yet another vote of confidence. Citrus Lane, a startup that sends age-appropriate care packages of baby goods to moms, announced today that it had raised $5.1 million in Series A funding from GGV Capital and Greylock Partners. The new round builds on a previous investment from Greylock Partners, bringing its total funding to $6.6 million.

Launched last year by Mauria Finley and Claire Hough, the company charges subscribers $25 a month for a box of mom-recommended baby goods, which range from bath toys to skincare products to clothing to books and more. While the company declined to share subscriber numbers, Finley claimed that Citrus Lane has members in all 50 states, has doubled revenue since December and is on track to double revenue again by June.

That traction, Hough said, is primarily driven by word-of-mouth referrals and social media. Facebook—which contributes 20 percent of Citrus Lane's subscribers every month—is the largest source, Finley said, but the number of customers coming in from Pinterest is doubling every month.

With the new funding, Citrus Lane plans to go after the $40 billion baby products market by expanding its business and hiring more staff in engineering, design, product management, marketing and brand support. To date, the company has scaled its business by tapping into two key insights, per Finley: Moms need to do a ton of research to find the best age-appropriate products, and that traditional advertising falls short for a lot of brands.

"They're spending a fortune on TV or magazine ads, but they're losing in terms of being discovered," said Finley. Being featured by Citrus Lane theoretically provides brands with an opportunity to get in front of new customers at a time when they most need relevant recommendations and in the uplifting context of a delivered care package.

However, Citrus Lane is not a "pay to play" model, she emphasized, but instead is "totally editorial." Just like a magazine curates products to feature in its pages, Citrus Lane says it chooses quality goods to feature in its box, and advertisers can't buy their way in.

The big picture? "A place moms can trust for product recommendations for their small ones," Finley said.

Citrus Lane is the latest startup to try and tap into a growing trending: subscription-based shopping services. In the past year or so, companies Birchbox and ShoeDazzle, have gained in popularity. A few others, including Kiwi Crate and Whittlebee, are also using the model to target parents.

Jeff Richards, a partner with GGV Capital and a new member of Citrus Lane's board, said the surge in subscription commerce companies stems from their ability to engage with customers and create ongoing relationships with them in ways that companies couldn't before. Social media enables word-of-mouth referrals that lower the cost of acquiring customers and builds loyalty among them. The subscription model also relies on curation, another major Web trend, he said.

As Citrus Lane scales up, Richards said its biggest challenge will be to preserve loyalty among subscribers by continuing to select top-quality products and encouraging engagement. But, he added, Finley's past experience as an eBay executive has primed her for building a business based on community.

"They've got this trusted brand with customers, and they've got to keep it going," he said.