Canal Partners makes a profitable exit from Hat Club

    Hat Club

    Canal Partners, a Scottsdale-based early-stage venture capital firm for B2B software and Internet technology companies, has successfully sold its interest in the premium Arizona-founded headwear retailer Hat Club after guiding the company to reach record growth. Canal Partners has reported a 20 percent Internal Rate of Return (IRR) on the investment.

    With the hopes of building up the retailer’s e-commerce platform, the firm joined forces with Hat Club back in 2014. Canal Partners was also able to connect Hat Club with their CFO, Robert Lunny, who helped to increase the company’s profit margin immensely. Hat Club, founded by former Phoenix Suns player Danny Ainge, has become very successful over the years, with 26 stores across the country to date.

    Robert Lunny, former CFO of Hat Club and venture partner with Canal Partners, told TechAZ that building Hat Club’s e-commerce platform was no easy task. “When we began building the e-commerce platform for Hat Club, the biggest challenge in we encountered was that we were embarking on new territory,” said Lunny. “An omni-channel solution that could efficiently link an e-commerce platform to a multi-location brick-and-mortar point of sale didn’t exist at that time. There was also some initial resistance to investing in new technology among the leadership team, as all of their success and loyal following to this point had been built from their brick-and-mortar stores. But we knew investing in new technology could take it to the next level by improving the online customer experience while keeping inventory costs under control.

    “Of course, it’s always a challenge vetting and selecting the right vendors and identifying potential integration issues. In the end, we were able to expand online sales at a low customer acquisition cost, proving our loyal base of headwear enthusiasts were craving a way to browse and buy online—it also enabled us to offer a greater selection to them. Today, Hat Club has 26 retail stores and is the second-largest seller of branded and licensed headwear in the country—and I would argue our online presence has only helped sales in our retail stores.”

    Canal Partners managing partner Todd Belfer spoke out in a press release last week regarding their relationship with Hat Club: “We recognized Hat Club had tremendous potential as the second largest player in the space with the leadership of the Stachels, they just needed an injection of capital and coaching to take the business to the next level. They already had something their customers loved, and now they have more channels to deliver the experience.”

    The firm is proud of the fact that they invest in companies that they truly believe will make a difference and result in profit and growth for all who are involved. On top of financial assistance, Canal Partners has been an advisor for Hat Club regarding business strategy and operations.

    The CEO of Hat Club, Paul Stachel, spoke out on their gratitude for Canal Partners. “Our mission has always been to provide our customers with a fun way to express their individuality and style. With Canal Partners’ support and strategic guidance, we’ve been able to fulfill that mission and rise to one of the top retailers of premium headwear.”

    Canal Partners has been of tremendous help to more than a dozen companies, allowing each one to thrive in their industries. As the firm continues to expand their portfolio, they will primarily keep their focus on growth-stage companies with scalable business models that have a proven record of significant success with Internet technology and SaaS companies.


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