How This Company Is Profiting Giving Perks to Military Members and First-Responders GovX's small customer base helped it cash in with investors.
This story appears in the March 2016 issue of Entrepreneur. Subscribe »
The average citizen shops online at Amazon. But folks in the military and government first-responders (such as police and firefighters) have a deeply discounted online marketplace just for them: It's called GovX, and it carries nearly 100,000 products from about 500 brands, including Ray-Ban, Garmin, prAna, Woolrich and 5.11 Tactical, at discounts of 25 to 40 percent.
It's a good deal for shoppers, but how did GovX make this niche, low-price site sound like a good deal to investors? Last summer, it announced it closed a Series B round of preferred stock financing that brought its total investments to $11.5 million.
The answer: GovX knows how to make the most of its rarefied assets. San Francisco VC firm Rothenberg Ventures, which contributed to the Series A round, was attracted to the platform's proprietary verification technology -- the software GovX developed to make sure every shopper is actually in the military or government. It also loves the huge market potential: about $75 billion in annual e-commerce sales. "If you can be the de facto market leader in selling to a subset of the American population that's empowered and growing, that's big business," says Mike Rothenberg, founder and CEO.
Seth Hamot sees a very different benefit. He's chairman of the Carlsbad, Calif., sunglasses maker SPY Optic, which partners with GovX, and the relationship has given him intel on which military and first responders buy his products. "We skew very high with firefighters but not with policemen," he says. "Now when I'm allocating resources to marketing, I tend to allocate them higher for firefighters than I do for police." How happy is Hamot to have this information? He personally invested more than $1 million in GovX.
And the e-retailer has a plan for its $11.5 million: Improve software, and draw in more customers. Because those customers mean data. Which means happy investors. Which means more customers.
