July 13, 2010, 1:02 PM

Daily deal e-retailer raises $12 million in second funding round

Beyond the Rack now has raised a total of $16.5 million in venture capital.

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Selling brand-name items for a limited time at deep discounts is one of the hot areas of online retailing. Further evidence came this week when flash sale site Beyond the Rack raised $12 million in new funding from venture capital firms Highland Capital Partners LLC and BDC Venture Capital Inc.

The Montreal-based e-retailer says it has attracted 1.5 million members to its invitation-only online sales club since its launch 18 months ago. The company previously raised $4.5 million in funding, and says it will use the new capital infusion to grow.

“This important investment will allow us to continue to expand our presence in both Canada and the United States,” says Yona Shtern, CEO of Beyond the Rack. “We are absolutely delighted to add such distinguished and sophisticated investors to our team.”

Beyond the Rack, which offers up to eight deals a day, says it sets itself apart from other daily deal sites by targeting a broader demographic with a diverse selection of merchandise including men’s and women’s apparel and accessories, children’s clothing and toys, beauty, housewares and home décor. Some other flash sale sites, such as Gilt Group and Haute Couture, focus on higher-end fashion apparel.

“Beyond the Rack’s early growth has been impressive and a testament to strong consumer demand and the company’s business model,” says Dan Nova, a general partner with Highland Capital Partners. “We are extremely pleased to be joining the team and look forward to playing a pivotal role in their continued success as a market leader in North America.” Highland Capital has also invested in such retailers as Vistaprint Ltd., No. 36 in the Internet Retailer Top 500 Guide and LuLuLemon Athletic Inc., No. 38.

“We have been watching Beyond the Rack transform from a start-up into a market leader in just over 18 months and consider them one of the most exciting companies to emerge on the North American technology scene in years,” says Steve Abrams, a director at BDC Venture Capital, a Canadian company.

Beyond the Rack’s initial $4.5 million in funding came from European Internet investors Oleg Tscheltzoff and Oliver Jung, venture fund Montreal Start Up and angel investor David Chamandy.

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