- Venture capitalists have poured roughly $4 billion into direct-to-consumer companies they think are cashing in on relevant trends with unique perspectives and could appeal to large swaths of audiences.
- Investors such as Greycroft’s Alan Patricof, Science’s Peter Pham, and former Google and Oath exec Tim Armstrong are backing DTC startups like Dirty Lemon and Liquid Death.
- Business Insider asked 15 investors which DTC startups they think will blow up this year and why (most picked companies they’ve invested in). Beverages and healthcare are popular categories.
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Many consumer products categories face attacks from direct-to-consumer upstarts that have upended everything from how we sleep (Casper) to how we buy glasses (Warby Parker).
Fueling this disruption are not just these DTC brands, with their data and direct consumer connections, but venture capitalist funding that would have typically been reserved for tech startups.
Estimates vary, but consumer brands have raised more than $3 billion since 2012, with about half of that being raised in 2018 alone, according to CB Insights data cited by Digiday; and DTC brands have raised roughly $4 billion in VC funding, according to Randy Yang, senior director and head of corporate development of digital consumer brands at Walmart eCommerce.
Investors are backing companies they think are cashing in on big trends with unique perspectives and the ability to appeal to big audiences. Take the beverage category, where companies like Bev, Dirty Lemon, and Haus are creating healthy alternatives to sugary drinks. Some are betting on companies that are trying to tackle new categories, as Modern Fertility is doing with women’s health.
Business Insider asked 15 investors which DTC startups they think will blow up this year and why (most picked companies they’ve invested in).
Here are their picks, in alphabetical order:
Company: Andie Swim
Recommended by: Soraya Darabi, general partner, Trail Mix Ventures
What it does: A female-founded and led company that makes quality swimsuits for all sizes at approachable prices.
Why it’s hot: "When Victoria’s Secret stopped selling swimwear, it left a nascent $1 million opportunity that Andie Swim has seized," said Darabi. "It addresses something that women have struggled with for a long time — finding inclusive swimwear at an affordable price. It has seen a double-digit run rate a year into its launch, and never have I seen a DTC brand grow as fast in my life."
Recommended by: Tim Armstrong, founder and CEO, DTX Company
Relationship: No investor relationship
What it does: A mission-oriented beauty, skincare and cosmetics company that uses clean ingredients while campaigning against 1,500 harmful ones.
Why it’s hot: "The CEO Gregg Renfrew is a force and has been an incredible champion of clean beauty in the US, which is now a huge growth market. Beautycounter is really at the center of that," said Armstrong. "It is the perfect combination of people-powered and purpose-driven. They advocate and lobby for stricter guidelines and regulations in the personal-care industry; they are environmentally-conscious with their products, packaging and footprint; and on top of that, they’ve created a community of consultants and ambassadors, who in turn build financially rewarding businesses for themselves while making a significant social impact for future generations."
Courtesy of Bev
Recommended by: Ryan Morris, principal at Plus Capital
What it does: Sells canned rosé wine in six-, 12- and 24-packs.
Why it’s hot: "I am bearish on beer sales, and believe that people are looking for alternatives that are more refreshing, lower in calories and sugar, and don’t make them feel bloated," said Morris. "It’s a female-led business that is changing convention and delivering something that is unlike anything else in the category — alcohol marketing has until now been mostly about using scantily-dressed women market to men. Bev is mission-driven, digital-first, and community-centric."
- NBCUniversal raked in nearly $1 billion in ad sales from digitally native brands during its 2019 Upfronts — showing how quickly these brands are turning to TV to scale
- Snap is secretly testing dynamic product ads that retarget consumers as it races to compete with Facebook and Pinterest for e-commerce dollars
- Amazon’s ad business is still expanding, but its growth has steadily slowed down