EISFELD, Germany -Â For more than 93 years, the Feintechnik factory in this small German town an hour north of Nuremberg has produced billions of razors, its machinery transforming steel by the ton into the mathematically precise blades that end up in low-end safety blades and the hardest-to-manufacture five-blade razors.
But as of Monday, the sprawling factory now belongs to Harry’s, an Internet shaving start-up that was not even open for business 10 months ago.
Few companies contemplate striking $100 million deals before their first birthday. But Harry’s is wagering that owning its own factory will help it better compete against Gillette and Schick, the titans that together control nearly 85 percent of the market.
“For a nine-month-old company to buy a 93-year-old one is a lot to bite off,†Andy Katz-Mayfield, 31, one of the start-up’s co-founders, said with a laugh in an interview at Feintechnik’s offices here.
Harry’s is but the latest start-up to reimagine a prosaic product and give it a panache that helps it stand out from the crowd. But virtually all other e-commerce ventures of recent years â€" from Warby Parker, the red-hot eyewear brand, to the clothiers Everlane and Bonobos â€" have relied on using the same factories that bigger and more entrenched players use, and then selling their wares for less.
Harry’s and its backers, including the investment firm Tiger Global, are betting that buying Feintechnik will give Harry’s a huge advantage. By running everything from the manufacturing of the razors to selling them online directly, they believe, the start-up will control its entire customer experience, while allowing the company to change its products quickly.
(Harry’s also recently opened a two-chair barbershop in the SoHo neighborhood of Manhattan. It provides haircuts and shaves and, of course, sells the company’s products.)
“In one fell swoop, we’ve become the only really vertically integrated shaving brand,†said Jeffrey Raider, the start-up’s other co-founder. (Mr. Raider, 33, helped found Warby Parker with three classmates at the Wharton School of the University of Pennsylvania and he still sits on the eyewear maker’s board.)
The deal also has the benefit of instantly making the company profitable since Feintechnik is profitable, though Harry’s is not (the co-founders said that is because they are reinvesting the profits back in the business). The deal also gives Harry’s a tidy side business of making razors for an array of other customers. It will also swell Harry’s employee roster more than tenfold, to more than 400.
To analysts, the men’s shaving business has long been ripe for disruption. The business has posted tepid growth since the financial crisis â€" sales grew just 2.25 percent last year, to $2.4 billion, according to the research firm Euromonitor â€" as customers have shown weariness at paying for traditional razors.
That has left room for new entrants. Among the splashiest is the Dollar Shave Club, which sells razor blades bought largely from the Dorco factory in South Korea to subscribers at a considerable discount.
And Gillette has made a play for the upscale market with its Art of Shaving brand, whose creams and Mach 3 razor handles are priced at luxury levels.
Harry’s is trying a different approach. The company calls itself value-oriented, with a shaving set of razor, two replacement blades and a tube of cream for $15, compared with roughly $12 for a Gillette Fusion razor with two blade heads. Its five-blade razor, in fact, is similar to the Gillette Fusion, though the head and blades are angled slightly differently. The handles, made in China, are also different â€" more ergonomic than the Fusion’s.
The start-up also promotes itself as technologically advanced, emailing customers when it is time to buy more blades.
Tim Barrett, an analyst at Euromonitor, said Harry’s may have found a profitable niche, pointing out that upscale beauty and grooming products tend to grow much faster than mass-market brands, especially after the recession. And it seizes on a growing interest in shaving differently.
“Given their positioning and increasing product profile offerings, I think it will be doing decently well among people with a bit more money to spend,†Mr. Barrett said.
The approach is drawn from the playbook of Warby Parker, which has become a darling of the start-up world by offering trendy eyeglass frames for far less than Luxottica, the behemoth of the industry.
The deal to buy the Feintechnik factory had long been on the minds of the Harry’s co-founders, childhood friends who had worked together at Bain & Company. The two had discussed building or buying their own factory back in late 2011, when the company was the germ of an idea discussed in late-night phone calls.
They began months of research, reading several online shaving forums and conducting a battery of product tests. The pair discovered that only a handful of factories around the world made the five-blade razors they wanted, with many belonging to Gillette or Schick.
But Harry’s founders soon set their eyes on Feintechnik because of the quality of its blades and the positive reviews in Internet forums. Mr. Raider called the German company to see if it would take on two entrepreneurs who did not yet even have a business.
Their first visit to the plant convinced them that building their own factory was all but impossible. The machines alone, which Feintechnik had extensively customized, cost millions of dollars each. Mr. Katz-Mayfield began flying regularly to Eisfeld, hoping to persuade Feintechnik to make blades for his nascent start-up. Over the course of several visits, including a five-hour dinner at a Russian restaurant in a nearby town, the American formed a bond with the factory’s manager, Heinz Dieter Becker.
“Here we had people with ideas, who needed help but also wanted to have input,†said Mr. Becker, who is about 6-foot-8 and whose giant hands dwarf the plastic Harry’s Truman razor handle. “We have lots of ideas, but since we didn’t have a strong brand, it was hard to bring new ideas to market.â€
Even then, the two entrepreneurs were pondering a bid for their new German partner. Lee Fixel, a top executive at Tiger Global and a board member of Warby Parker, told Mr. Raider that he would help finance a deal â€" after they had built a business.
Last March, Harry’s began selling its first razor kits, promoting them as designed in America and engineered in Germany. Sales of the brand took off, through word of mouth at first and then augmented by Facebook advertising. Mr. Katz-Mayfield said that the company had sold thousands of razor kits and millions of blades, though he declined to elaborate.
In July, Harry’s two co-founders called Mr. Becker and told him of their plans. Through the fall, Harry’s pulled together the necessary funds: about $100 million in equity and debt financing to pay for the factory, and an additional $22.5 million to invest in the company’s further growth. With the capital coming together, Mr. Raider and Mr. Katz-Mayfield approached Feintechnik’s current owners, a pair of private equity firms.
Harry’s already sells razor kits through J. Crew and recently struck an agreement to sell products at the Standard line of boutique hotels. Mr. Katz-Mayfield and Mr. Raider hinted that other partnerships would be forthcoming, as well as possibly bigger advertising campaigns in which its German partner could be highlighted.
“There’s still a massive opportunity to tell the world what Harry’s is,†Mr. Katz-Mayfield said.
