As big-box stores languish and established clothing brands such as Abercrombie & Fitch are forced to reformulate their strategies, a group of investors is banking big on a scrappy menswear startup out of Montreal.

Frank & Oak, a membership-based online retailer that caters to young men with affordable staples and trendy accessories, is announcing on September 4 a fresh infusion of $15 million in venture-capital funding from a slate of firms, including Silicon Valley-based Goodwater Capital. The two-year old startup is also adding Howard Starr, the former CEO of Tommy Hilfiger Canada, to its board.

That brings the total backing behind this young company to about $21 million. With the new funding, founders Ethan Song, 30, and Hicham Ratnani, 29--Montreal natives who have worked on startups together since high school before consulting at Deloitte--say they will expand the company's operations to the United States, and invest in new product categories and the technologies that make Frank & Oak operate very differently than, say, J.Crew or Men's Warehouse.

While Frank & Oak's business model is simply to create and sell its own designs of men's clothing to 25-to-35-year-olds, it's not abiding by an existing rulebook to do so. Instead of a brick-and-mortar clothier, it considers itself a technology company. When seen from certain angles, it's also a media company.

"I realized a lot of the innovation in consumer retail was how do you go about creating a fully integrated experience in online and mobile--and no one seemed to be doing it well," Song tells Inc. So he and Ratnani set out to simultaneously design and find suppliers for their clothing line and build a mobile app--in addition to a website--on which to sell their collections.

To purchase clothing from Frank & Oak, one must first log into the site or app and become a "member," much like one must do so to buy from a flash-sales site such as Gilt. Frank & Oak has 1.5 million members, and its app has been downloaded a quarter-of-a-million times on iOS and Android devices. Thirty percent of the company's sales come through its mobile app.

"They made a commitment really early on to create a mobile product," said Chi-Hua Chien, co-founder and managing partner at Goodwater Capital, which led the new funding round, noting that when he receives a mobile-phone alert about a new Frank & Oak collection launching, he finds it irresistible to check it out on his iPhone, and buy a few pieces. (Should you wonder whether a Frank & Oak investor gets their wares for free, Chien says they don't.) "They finally made it fun for men to shop for clothes again."

Each month when a new collection launches, customers receive notice through their mobile app, and also gain access to a slate of editorial-feeling content explaining the items in the collection, and the design ethos behind them. In addition, periodic updates explain, say, what is the fabric called "tweed" actually made of, and when is it appropriate to wear.

"We have the product, which is what we sell, but how do we not just become a provider, but also an advisor in our customers' eyes," Song says. "That's our product and brand philosophy. We've created an immersive experience."

Frank & Oak also publishes a print edition of their magazine. It all looks very bespoke.

Song, a designer also trained in computer engineering, describes the menswear sold by Frank & Oak as "modern and creative versions of menswear classics." The company's theory is that young creatives are no longer forced into stuffy accounting offices--they work for startups, design firms, or gaming companies. And these are all potential customers.

While 30 percent of the company's customers are in Canada, about 70 percent are in the United States, and over the next few years, it will be expanding physical locations to the south.

Recently, it opened a small corporate office on New York City's Lafayette Street, which also includes a showroom. It has a physical retail location in Montreal--and you can bet there will be more in coming years.

Despite that the era of the massive department store with the massive parking lot feels like it may be waning, Frank & Oak is not staying out of the business of storefront retail.

"It's about building a store that's focused on the customer experience and brand immersion," Chien says. " The big brands are going to struggle in this transition. And our theory is that startups are going to win, and they're going to use stores and that mobile first platform."

Published on: Sep 4, 2014