Group Commerce Startup Massdrop Raises $40M

Massdrop is announcing that it has raised $40 million in Series B funding.

The company focuses on what it calls “community-driven commerce.” It allows people who are interested in things like high-quality audio, men’s fashion and quilting (yes, those are all actual Massdrop communities) to connect with other enthusiasts, discuss products, make purchases with group discounts and even help design new products.

Massdrop has already created communities in 11 categories. Co-founder and CEO Steve El-Hage (pictured above) said the oldest communities (namely, the ones for audiophiles and for fans of mechanical keyboards) are the most popular, if only because they’ve had a head start. Massdrop says it now has a registered user base of more than 1 million people.

El-Hage plans to launch four new communities before the end of the year, and then add a new community every month in 2016. He’s also hoping to offer more content, such as in-depth reviews or do-it-yourself explainers. To do that, he’ll find people online “who have expert knowledge but no following.”

“There’s a lot of awesome content being written in each category that’s not being surfaced or matched with appropriate viewers,” he said.

Naturally, El-Hage thinks Massdrop is the place where those experts can find the audience they’ve been looking for. As for whether Massdrop’s commerce business will make it hard for those writers to be critical and honest, El-Hage said he’s more focused on building community than on driving sales.

“Our goal isn’t to sell them anything, even though we love it when we do,” he said. He also pointed to Amazon, which has no problem running one-star reviews next to the products it’s selling.

Massdrop raised a $6.5 million Series A about a year ago.The new round was led by August Capital, with additional investment from First Round Capital, Mayfield Fund and Cowboy Ventures. August’s David Hornik is joining Massdrop’s board of directors.

“Many companies have found initial success in e-commerce, but hit a plateau where they can no longer drive growth through paid acquisition alone,” Hornik said in the funding release. “By fostering and engaging the community, rather than buying one, Massdrop has pushed through this plateau and continues to grow its user base.”

To the outside eye, the communities that Massdrop has established so far might seem a bit random — unless you see a connection between quilting and ultralight outdoor gear that I’m missing.

Apparently the categories don’t necessarily reflect all of El-Hage’s personal interests, although he said that when the team decides to move into a new area, he tries to immerse himself in that world. For example, when Massdrop was getting ready to move into ultralight gear, El-Hage said he “hopped on a plane, drove to Canada … and went on a seven-day backpacking trip.”