LOS ANGELES _ Dollar Shave Club, one of the most recognizable brands to emerge from Los Angeles' startup scene, set out to overhaul the razor blade business five years ago with an online subscription service for affordable blades.
Now the company is joining forces with the kind of corporate giant it aimed to undermine.
Unilever, the London-based consumer goods and food behemoth, is paying $1 billion to acquire Dollar Shave Club Inc.
Neither Dollar Shave Club nor Unilever disclosed terms of the deal, but two sources familiar with the matter, who were not authorized to discuss it publicly, said the privately held startup's shareholders will divvy up the sum in cash.
Born out of a holiday party conversation in 2010, Dollar Shave Club was launched two years later by founder Mike Dubin. Since then, it has amassed 3.2 million subscribers and expanded with a line of men's hair and skin products as well as wet wipes.
Its purchase price, first reported by Fortune, is apparently the largest acquisition of a venture-backed Los Angeles startup since Walt Disney Co. acquired online video company Maker Studios for as much as $950 million in 2014.
Dollar Shave Club had been valued at about $630 million prior to the sale.
Dubin, who is to remain at Dollar Shave Club as chief executive, said the two sides had been talking for months about an investment. Those talks evolved into discussions about an acquisition after Dubin acknowledged how Unilever could help Dollar Shave Club grow into a global brand, beyond its current operations in U.S., Canada and Australia.
"It was a flight we didn't want to miss," Dubin said.
Dollar Shave Club will remain largely independent to build its brand, which was made famous by a series of tongue-in-cheek viral videos starring Dubin. The company also will get to retain all 190 of its employees, Dubin said.
Though Dollar Shave Club has yet to turn a profit, the company had revenue of $152 million last year and was on track to exceed $200 million this year. It invests heavily in marketing, including paying for a commercial during the Super Bowl this year.
The company remains enmeshed in a lawsuit with rival Gillette, which started its own online subscription service in 2014. Gillette, which is owned by Procter & Gamble, alleges Dollar Shave Club stole one of its patents to reduce wear and tear on its razor blades.
Dubin declined to comment on the lawsuit and whether it had an effect on the sale to Unilever. Investors in Dollar Shave Club said the sale would help in the fight with Procter & Gamble.
Unilever had nearly $60 billion in sales last year in 190 countries. Among its best known stable of brands are Dove, Axe, Lipton and Ben & Jerry's.
"Dollar Shave Club is an innovative and disruptive male grooming brand with incredibly deep connections to its diverse and highly engaged consumers," Kees Kruythoff, president of Unilever North America, said in a statement. "We plan to leverage the global strength of Unilever to support Dollar Shave Club in achieving its full potential in terms of offering and reach."
The massive deal helps bolster Southern California's reputation as a rising hub for venture-backed companies, with Silicon Beach home to hundreds of startups.
"It's a bit of a wake-up call for what's happening in LA," said Jim Mills, a Deloitte partner who leads the consumer business practice in Los Angeles. "Silicon Valley obviously gets a lot of attention, but this highlights the fact that LA can hold its own."
Although tech firms such as Snapchat get most of the buzz, analysts said there is huge potential in firms such as Dollar Shave Club, which have stripped much of the hassle _ and a chunk of the costs _ by selling consumer products online. Among the best-known companies are Warby Parker with eyeglasses and Bonobos with clothing.
Los Angeles has carved out a niche for companies injecting technology into shopping, said Greg Bettinelli, a partner at Upfront Ventures, which has invested in local e-commerce companies such as Loot Crate, trading in collectibles, and Combatant Gentlemen, selling menswear.
"LA is arguably at the center of retail innovation," Bettinelli said. The region "has built out unique skill sets in marketing, technology and product design for next-generation commerce."
Dollar Shave Club is one of the most prominent subscription-based startups, in which members receive a box of products every month. Hundreds have popped up in recent years, but many are now struggling amid a downturn in venture capital investment. Makeup service Birchbox has gone through two rounds of layoffs this year.
But Dollar Shave Club has thrived by solving an especially bothersome shopping experience. Traditional grooming brands like Gillette operate by giving away razor handles, sometimes for free, but charging high markups for the blades themselves. At many drug and grocery stores, razor blades are kept under lock and key.
By mailing razors directly to consumers at a lower cost, Dollar Shave Club managed to capture more than 10 percent of the razor market in just a short time, said Sucharita Mulpuru, a retail analyst at Forrester.
"When you sell directly to consumers, you get much better margins," she said. "It's appealing but hard to do."
That's why traditional consumer-products companies and retailers are hungry to get into this arena. Acquiring a company that already has proved successful, Mulpuru said, allows a company like Unilever, which has no major razor brand, to skip over years of product development and marketing costs.
"It would take a billion dollars for them to get to a 10 percent share anyway," she said. "They are essentially buying it."
Dubin started his business after complaining about the hassles of shaving with eventual co-founder Mark Levine, the father of a friend's fiancee, at a holiday party. The two later partnered with LA-area startup accelerator Science Inc.
During those early days, Dubin would staff the printers at Science, printing postage labels and affixing them to boxes filled with blades.
"He's humble and just gets it done," Peter Pham, co-founder of Science, said of Dubin. "He had a vision, he executed it and he won. ... It shows LA can compete and build great companies."
