Where We Are Investing Now: Consumer Goods

Photo by  Artem Bali  on  Unsplash

Photo by Artem Bali on Unsplash

Each year, we shift our areas of investment focus based on a top to bottom analysis of economic, investment and human behavioral changes related to the overarching themes of our two fund families.

Our older fund, Social Starts, has been tracking where social/mobile technology will have its next great breakthrough since 2012. Today, Social Starts increasingly centers on the powerful combo of health and happiness. How can science and tech help individuals on their own or in communities to move along the arc toward greater health, confidence, calm, absence of pain or anxiety?

Joyance, our more recent fund, tracks the concept of Delightful Moments – those bits of time that take us out of our daily humdrum and let us have a momentary respite from the struggles, stresses and cares of life. These moments of separation can come through our minds, our bodies, what we eat, what we experience, or from our interaction with devices both inside us and out.

Humans buy products to be healthy. They also buy products to be happy. At core, delight and joy are the drivers behind most consumer purchases. Since emotion stands at the center of the health/happiness continuum and is the root source for delight, we focus only on products with the greatest potential to generate or interact with human emotion. Thus, the one area of investment focus that fully spans both our funds is consumer goods.

We think these are the categories of products with the greatest emotional power in 2019:

  • Cosmetics/Anti-Aging products - people want to look good and live long, hopefully both.

  •  Food, with special focus on DNA and biome-based nutrition, as well as lab grown foods.

  • High consumption beverages, most prominently, water, with another strong focus on innovation in coffee and tea.

  • Supplements/Vitamins derived from deep science and where personalization is front and center.

  • Sexual Wellness/Contraception - a natural arena where the brain and body combine to provide joy.

  • Baby Care, including both innovative services and physical goods.

  • Pet Products, with special emphasis on next-generation pet nutrition.

Across these categories we seek solutions that deliver a generational opportunity to invest in a massive shift in global consumption habits. The Internet has disintermediated everything about consumer goods, from access to raw materials to direct communication with consumers. This has allowed a radically different new generation of product creators to emerge. They aren’t tied to traditional manufacturing or retail and they can find their initial customers with a directness, a collegiality, and a fast path to profitability never seen before.

The solutions/products we seek:

  • Have science, tech or materials differentiation.

  • Are sold online primarily; however, we recognize omni-channel distribution as a positive inflection point as these companies pass their early stages.

  • Can be micro-manufactured and ship well; preferably, but not always, using new tech materials.

  • Have the capacity for a type of product design or economics not feasible in traditional channels.

  • Have high customer lifetime value.

  • Have high gross margins.

  • Have a strong propensity to be shared via social media or garner earned media.

  • Have product timelessness; they’re not subject to fast or seasonal product shifts.

In addition to the products/services themselves, we’ll actively seek Community, Manufacturing and Distribution Services for next generation consumer goods this year. How do any of these science-based, personalized products get to their market? How are the customer relationships reinforced?

We’ve made dozens of investments in consumer goods over the last two years. Companies like Naadam, Wolf & Shepard, and Burrow have become significant successes. Younger companies like Andie Swimwear, Unbound, and Smilo are off to outstanding starts.

We plan to remain active in this area this year in both of our funds. If you have a new product that can enhance health, deliver delight, or help people stumble toward happiness, please reach out. We’d love to hear what you’re up to.

By Managing Partner Mike Edelhart