Avelle raises cash as new rival Bonanza expands into handbags

There's been some interesting developments in Seattle's online handbag retailing sector. Yep, that's right. For whatever reason, Seattle has several upstarts trying to make it easier for women to buy, rent or sell handbags. The latest entrant is Bonanza, which today announced a specialty store with more than 20,000 handbags from top brands such as Chanel, Marc Jacobs and Balenciaga. The news comes as Avelle -- formerly known as Bag Borrow or Steal and one of the early entrants in the online handbag retailing space -- raised new cash. According to a SEC filing, Avelle raised $1 million debt financing from existing investors. Avelle CEO Mike Smith confirmed the new funding, adding that the company is "focused on evaluating our strategic options." That could include raising another round, seeking a buyer or growing the business organically, Smith said. The company raised a $15 million round in 2007 from Madrona Venture Group, Steelpoint Capital, Kuwait Holding Co., Hilltop Investments and others. That brought total funding at the time to $27 million. Bonanza -- which changed its name from Bonanzle and purchased Seattle startup 1000 Markets last month-- appears to be taking direct aim at its crosstown rival. Dubbed Bags Bonanza, the new site is the company's attempt to pocket some of the $5 billion worldwide handbag market. Bonanza CEO Bill Harding said that no clear leader has emerged in the category, with some sites offering few choices and others lacking top-notch customer service. "We intend to build Bags Bonanza into a destination that combines the greatest breadth of handbags online, with the attention to detail that handbag buyers crave," Harding said. Bonanza raised $1 million in April from Matrix Partners, Ignition Partners, Voyager Capital, Founder's Co-op, Curious Office Partners and prominent Seattle angels such as Ben Elowitz of Wetpaint and Andy Liu of BuddyTV. Avelle's Smith said he was aware of Bags Bonanza, noting that the company is starting out with a lot of inventory. However, he said one of the challenges operating a marketplace for designer handbags is making sure that the bags are authentic. "There are so many fakes and knock-offs out there," said Smith, adding that he wasn't sure whether the Bonanza concept would appeal to high-end shoppers. He added that Avelle rejects a percentage of handbags because they can't authenticate whether they are real. That sort of quality control can be costly, but it strengthens the company's connections with the high-end designers, Smith said. In addition to offering handbag rentals, Avelle also launched a new business of buying and selling authentic designer goods. That business has taken off which has led to internal discussions about Avelle's next steps, Smith said.