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2 Months : From Sep 2019 to Nov 2019
By Benjamin Mullin
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 30, 2019).
Food52, a digital bazaar that sells upscale home goods, said it sold a majority stake to venture firm TCG for $83 million, a deal that gives TCG an entree into the world of fine dining and home accessories.
The companies said the stake sale values Food52 at more than $100 million, declining to be more specific. Food52 says it generated about $30 million in revenue last year but isn't profitable.
Food52 previously raised $13 million from investors including Lerer Hippeau Ventures, Bertelsmann Digital Media Investments Inc. and Scripps Networks Interactive, which was acquired by Discovery Inc. last year.
Founded in 2009 by Amanda Hesser and Merrill Stubbs, veteran food journalists who worked for the New York Times, Food52 offers recipes and home-improvement tips as well as selling its own products to online shoppers. Two of its top sellers are an apron with built-in potholders ($45) and a double-sided cutting board with an extra-deep juice-trough ($59).
Food52 incorporates guidance from its audience while developing its products, Ms. Hesser said. The popular apron and cutting board were informed by suggestions from Food52 readers, who responded to a survey on the company's website.
"In retail, there's almost no interaction between the consumers and producers," Ms. Hesser said. "We wanted to break down those walls."
Food52 is among a crop of media companies that make much of their revenue from e-commerce -- both by selling their own products online and by referring their readers to online retailers like Amazon.com Inc. to buy other products. If a reader buys a product from Amazon, Food52 gets a cut of the sale.
Sales of products from the company's own line, dubbed "Five Two," are much more common and more profitable than affiliate sales on Amazon. Food52 gets a tiny fraction of its revenue from affiliate sales, a company spokesman said.
Ms. Hesser, Food52's chief executive, and Ms. Stubbs, the company's president, said in an interview that they decided to sell a stake in the company after a diligence and negotiation process that began last year with an email from an employee at TCG. The company's line of custom home goods was selling briskly, and the co-founders decided to take on additional investment to grow that business.
"We realized that there was huge potential to really blow this out," said Ms. Stubbs.
TCG was founded in 2018 by Peter Chernin, the former chief operating officer of News Corp., the parent company of Wall Street Journal publisher Dow Jones & Co., alongside Mike Kerns and Jesse Jacobs. TCG owns a controlling stake in MeatEater Inc., a digital media company aimed at hunters, fishermen and home cooks, and has also invested in Action Network, a sports-betting analytics startup.
Ms. Hesser said Food52 is using some of the new money to develop a bricks-and-mortar store that will sell its line of home goods. The company also plans to hire staffers for computer engineering and product development.
"We're planning to open our first store over the next year, as well as pop-up [stores]," Ms. Hesser said.
Some of TCG's investment is being used to buy out existing shareholders.
Mr. Kerns of TCG said Food52's product line and affiliate revenue made it attractive among media operators.
"With respect to verticalized digital media companies, we think it's important for those businesses not to be advertising-based," Mr. Kerns said. "We look for diversified business models."
Write to Benjamin Mullin at Benjamin.Mullin@wsj.com
Corrections & Amplifications An earlier version of this article misspelled the last name of TCG partner Mike Kerns as Kearns in one instance. (Sept. 29, 2019)
(END) Dow Jones Newswires
September 30, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.