Blue Nile Closes $7 Million Funding Round; Funding Earmarked for Post-Profitability Growth; Profitability Forecasts Accelerated to Early Q4.

Business Editors

SEATTLE--(BUSINESS WIRE)--July 24, 2001

Blue Nile, Inc., the leading online retailer of diamonds and fine jewelry, announced today that it has closed a $7 million round of venture funding. The company also announced that significant sales growth and the achievement of key financial and operational metrics will enable it to reach profitability earlier in the fourth quarter than originally expected.

"This funding round reflects the belief our investors have in the future of our business," said Mark Vadon, Chief Executive Officer. "Blue Nile is on track to build a profitable retail company that will re-define the way consumers buy jewelry for years to come."

Despite the economic slowdown and an 80 percent reduction in the company's marketing spend, Blue Nile's sales exceeded expectations by growing at 20 percent year-over-year during the first half of 2001, Vadon said.

Six of the nation's top venture capital firms participated in the funding round, including Bessemer Venture Partners; Trinity Ventures; Kleiner Perkins Caufield & Byers; Lightspeed Venture Partners (formerly Weiss, Peck & Greer Venture Partners); Integral Capital Partners; and Vulcan Ventures Inc. All had previously invested in Blue Nile. Including this funding round, the company has secured a total of $57 million in equity financing, along with a $15 million inventory credit line from GE Capital.

"Blue Nile has built a strong leadership position in the online diamond and jewelry category," said Tod Francis of Trinity Ventures. "Its product offerings and superior customer service have resonated with consumers, enabling the company to consistently exceed its revenue and profitability projections. We are confident that Blue Nile has the necessary ingredients in place to build a highly successful business as a leading specialty retailer."

"Our business is poised to reach profitability in the fourth quarter and is well capitalized and well positioned for the future as a result of this funding," said Diane Irvine, Chief Financial Officer. "We anticipate continuing significant growth for the remainder of the year and years ahead. This funding will enable Blue Nile to adapt our business operations to meet that growth."

The $40 billion U.S. retail jewelry category is unique in that it continues to be highly fragmented, consisting mainly of small independent retailers. Key to the company's success has been its ability to maximize on the inherent advantages of the diamond and jewelry category online -- high-ticket, high-margin items that require minimal shipping and storage costs due to the products' small size.

As evidence of its success, in the less than two years since the company's founding, Blue Nile has quickly captured a 1 percent dollar market share of the total U.S. engagement ring market.

"From the beginning, we recognized that a significant consumer need existed in the retail jewelry category. We have worked to answer that need by executing with excellence throughout our operations, as well as providing high-quality diamonds and fine jewelry at prices 20 to 40 percent below traditional retailers," said Vadon. "Our success in providing a new way for consumers to buy diamonds and fine jewelry is demonstrated by the fact that nearly half of our revenues come from repeat and referral sales."

About Blue Nile

Blue Nile, the online leader in the diamond and fine jewelry category, located on the Web at www.bluenile.com, offers consumers a better way to buy diamonds and fine jewelry. Twice named Forbes Favorite online jeweler, the publication's top honor of the best Internet sites, Blue Nile provides an exceptional collection of classically styled jewelry selected according to high standards of quality, beauty and value. Cleanly designed and easy to navigate, the site offers the in-depth education necessary to make informed purchases with confidence. All Blue Nile jewelry is delivered free of charge, guaranteed and returnable within 30 days and transactions are covered through SSL technology - which ensures an online purchase experience that's risk-free. Based in Seattle, Blue Nile is privately held with investments from Bessemer Venture Partners; Trinity Ventures; Kleiner Perkins Caufield & Byers; Lightspeed Venture Partners (formerly Weiss, Peck and Greer Venture Partners); Integral Capital Partners; Vulcan Ventures Inc., and Comdisco Ventures. The company can be reached by phone at 800/242-2728.

SOURCE: Blue Nile