RedEnvelope Secures 3rd Round Financing from Camelot Ventures, Sequoia, Weston Presidio, Madison Dearborn and Gruppo Levey

Multi-channel retailer differentiates itself with rapid growth and a clear path to profitability

(San Francisco, CA-August 21, 2000) - RedEnvelope (www.RedEnvelope.com), a leading multi-channel retailer of stylish gifts, today announced that it has secured its third venture round of financing for $33 million. RedEnvelope continues to outperform its business plan having achieved more than 400 %+ sales growth and 40%+ gross margins, establishing itself as one of the leading multi-channel business models born on the Internet.

Leading the round of financing is Direct Equity Partners, a venture between Madison Dearborn Partners and Gruppo, Levey & Co., which invests in direct marketing and e-commerce companies. Other new investors are Atrium Capital, Camelot Ventures, Comdisco Ventures and Crown Technology Partners. Previous financial partners also participating in this funding are Sequoia Capital, Weston Presidio Capital, Sippl MacDonald Ventures, Silicon Valley Angel Fund, and Philips-Smith Specialty Retail Group.

"RedEnvelope's management team brings many years of direct marketing experience honed at category leaders such as Williams-Sonoma and Pottery Barn," says Patricia G. Campbell, President and Managing Director of Direct Equity Partners. "By applying that discipline to the Internet, RedEnvelope has achieved remarkable success in meeting consumers' gift-purchasing needs. Our $15 million investment, coupled with those of the other investors, will fuel this rapidly growing, multi-channel direct marketing enterprise."

With this last round of financing, RedEnvelope is uniquely demonstrating that specialty, non-commodity, retail can thrive on-line. The powerful combination of proprietary products, merchandising strength, high customer retention rates and a clear path to profitability, has attracted some very strong and savvy partners to invest in the 10-month-old company. The capital investment will be used to extend RedEnvelope's existing online and off-line marketing effort, build technology, increase brand awareness and acquire new customers. They will also use it to ramp up inventory for the holiday season, expand the fulfillment and customer service centers and for general operational expenses.

In conjunction with the financing, RedEnvelope also announced that Claire Gruppo, Managing Director for Direct Equity Partners, has been named to RedEnvelope's Board of Directors, bringing the number of board members to 8.

"Direct Equity Partners invests in multi-channel retailers who understand that great brands cannot survive in one channel alone," says Martin McClanan, Chief Executive Officer for RedEnvelope. "While the Internet will remain our main channel, our catalog and other means to engage our customer represent a huge opportunity for consumers to learn about the creative and exciting gift ideas at RedEnvelope. Direct Equity is the perfect partner to help us maximize the potential for efficiency and growth of all of our channels."

About RedEnvelope Gifts Online
Based in San Francisco, RedEnvelope's refined selection of stylish merchandise and simple, elegant design makes the process of finding, selecting and purchasing a gift online effortless. The name comes from a tradition in many Asian countries - which lives on today - of presenting special gifts in a red envelope. In the spirit of this tradition, gifts purchased from RedEnvelope are accompanied by a personalized message in a red envelope. Several unique features help guide customers to the gift they want including: GiftSearch, GiftReminder, 911Gifts (guaranteed overnight delivery), online customer service, multiple addressing and an inventory system that tracks in real-time to ensure that every item featured on the site is available.

About Camelot Ventures
Camelot Ventures is a Michigan-based private investment group comprised of entrepreneurs and executives who enjoy unparalleled success in their respective businesses, adding unique value to the companies they invest in. Since many of our principals are accomplished Presidents and CEOs including David Katzman, former President of Home Depot S.O.C., and Dan Gilbert, CEO of Quicken Loans, Camelot tends to invest in companies that realize the value of its involvement. Camelot's goal is to assist in building upon the vision and help strengthen the position within the marketplace of the companies in which it invests. Camelot Ventures focuses on early and middle stage (pre IPO) Internet companies.

About Madison Dearborn & Gruppo Levey (Direct Equity Partners)
Direct Equity Partners (www.directequitypartners.com) was launched in1999 by the parent company of Gruppo, Levey & Co., an investment banking firm, and Madison Dearborn Capital Partners III LP, a leading private equity investment fund, in response to the growing convergence between the direct marketing and e-commerce industries. Direct Equity Partners began with $100 million in capital. Portfolio companies include Atelier America, Inc., the leading manufacturer and direct marketer of textured, framed decorative artwork reproduction, and Mascot Network, the leading provider of campus intranet communities.

Gruppo, Levey & Co. (www.glconline.com) is a boutique investment banking firm serving all segments of the direct marketing and e-commerce industries. The firm provides merger and acquisition, financial and strategic advisory services to public and private companies and private equity groups, and has gained widespread recognition for translating its direct marketing experience to the rapidly expanding channel of e-commerce.

Madison Dearborn Partners (MDP) (www.mdcp.com), headquartered in Chicago, is a leading private equity investment firm with more than $7 billion of capital under management. MDP invests in market-leading and growth-oriented business in several sectors: consumer/ecommerce, communications, basic industries, healthcare and financial services.

About Sequoia
Steve Jobs and Steve Wozniak (Apple Computer), Larry Ellison (Oracle), Sandy Lerner and Len Bozack (Cisco Systems), Jerry Yang and David Filo (Yahoo!), Michael Robertson (MP3), Louis Borders (Webvan), Wilf Corrigan (LSI Logic), Bob Swanson (Linear Technology), Eric Greenberg and Bob Howe (Scient), are just a few of the people who have chosen Sequoia Capital to provide their original start-up venture capital financing and more importantly, help turn their ideas into companies.

The people backed and supported by Sequoia Capital since 1972 have built companies that now have a combined market value approaching one trillion dollars ($800B). Sequoia Capital's Internet portfolio includes: eToys, eGroups, PlanetRx, Chipshot, LinkExchange (acquired by Microsoft), AtWeb (acquired by Netscape), BillPoint (acquired by eBay) and Global Center (acquired by Frontier). For more information visit the Sequoia Capital website - www.sequoiacap.com.

About Weston Presidio Capital
Weston Presidio Capital is an investment partnership, which invests equity capital into privately-held growth companies. With offices in San Francisco and Boston, the company's professionals have more than 130 years of private equity investment experience, having worked with over 200 companies to achieve their business objectives. With $2 billion under management, Weston Presidio's strategy is to originate investment opportunities in a diverse set of industries and companies operated by management teams with proven records of success. The firm focuses its investment activities primarily on growth companies, recapitalizations and buyouts. Weston Presidio makes investments in all types of private enterprises including ones that are closely-held, family-controlled, or initially financed by institutional investors. Representative prior investments include Wild Oats Markets, Restoration Hardware, Guitar Centers, Tweeter Home Entertainment Group, and other specialty retailers.