One of our most active areas of investment over the past year has been Digitally Native Vertical Brands. These are consumer product companies that:
· Are sold online.
· Have products that can be micro-manufactured and ship well.
· Allow for a type of product design or economics not feasible in traditional channels, such as personalized products or co-creation with the customer.
· Have high customer lifetime values.
· Have high margins on the product, generally double traditional consumer products.
· Show a propensity toward sharing via social media or toward garnering earned media.
· Have a timelessness of product so that designs can last in the market for years.
· Are great storytellers.
We’ve found that this combination of factors produces companies that gather customers quickly, retain them, build revenue aggressively, grow steadily, achieve profit swiftly when they chose to, and can dramatically challenge staid incumbents, even early in their lifespans.
For all these reasons, DNVBs have become among the most successful companies in our portfolios. Naadam, which makes cashmere clothing—entirely under their control from the goatherds in Mongolia, through manufacture in Italy to their online store—have more than $40M in revenue and just did a big Series A round. Hush Cosmetics passed $100M in value within 18 months of launch, and that was a single digit multiple of its current revenue. We see many more companies with this kind of asset value power coming along behind them.
One particular area of DNVB has emerged in recent months as a new frontier, a reflection of the expanding power of women supporting women. We saw this trend emerging even before the #metoo movement leapt to prominence. The rising generation of women—and increasingly their mothers and grandmothers—have decided that they have a desire and obligation to support one another directly in every area that matters. No reason to wait around for the men to get it.
This phenomenon drove the meteoric rise in user base that drove our investment in Vina, where women support one another when they move to or visit new communities. These women are inspired to be there for one another and are ready to commit their time and knowledge to the task.
In terms of DNVB, we have seen women take ownership of their personal pleasure. Our first investment in this space, Unbound, an online shop for “rebellious women,” proudly hoists into the light a host of products for female sexuality once only shown in shame. Now, the female founder of this company, Polly Rodriguez, and her customers are serving their interests out loud and proud.
But we didn’t invest in Unbound because we thought it had sizzle. We invested because the numbers are great. The female-to-female passion we are seeing translates into strong customer acquisition, high loyalty, vigorous sharing, positive virality, and strong margins. In other words, all the financial clout that makes an experienced investor’s heart go pitty-pat.
We are seeing similar companies around birth control, birth itself, motherhood, returning to the job market after motherhood, menopause and every other aspect of life where women feel a need to express their perspective.
I’m sure we’ll have many other DNVB investments in the female empowerment zone. When half the world’s population decides to change the way it buys, we hope we’re listening.
By Managing Partner Mike Edelhart