Welcome to the Executive Focus Group, a Glossy+ member-exclusive series driven by monthly focus groups with subject matter experts. The bi-weekly series offers actionable takeaways for business leaders navigating the rapidly evolving beauty and fashion industries.
This month, Glossy brought together a group of investors in the consumer brand space. The investors have a stake in a variety of brands spanning fashion, beauty, skin care, wellness, tech, food and grocery. They spoke about the fundraising landscape, including why brands are struggling to secure investments and what currently constitutes good growth for brands.
Below is a recap of the segments of the discussion related to what investors want to see from brands, what founders they want to invest in and what turns them off from getting involved with a brand.
Focus group members:
Mollye Santulli, senior associate with the vc firm Springdale Ventures. Springdale traditionally invests in food and beverage brands but has recently expanded into beauty and wellness, backing early-stage skin-care brands like Tone and hair-care brands like Jupiter.
Pano Anthos, founder of the vc firm XRC Ventures. XRC invests in a variety of brands across fashion, like Caraa and Recurate, and beauty, like Naked Sundays and Solawave. It also invests in tech companies.
Glossy: What do you look for in a brand? What are some ‘green flags’ that make you want to invest?
Anthos: “We often look at the habit-forming nature of a product. Is it something that can be purchased daily, weekly, monthly? We ask if it’s a vitamin or an Aspirin – something you need to have or you just want to have? Beauty is becoming more of a need to have. Fashion is more of a want to have. So we’re investing more in beauty right now.
Santulli: “And is it at a price point where someone can or will buy it every week? Is it something we can imagine someone putting in their shopping cart every time they go to the store? Can it show up in the places where people want it? We have a few brands that are DTC, but most of the brands we’re interested in are omnichannel. Showing up in retail is really important.
We also look at the exit landscape. Is this a brand we can see selling for multiples down the road? Are there multiple potential acquirers? What is the appetite for acquisition? And, of course, are we getting it at a low enough multiple that it makes sense to invest? In food and beverage, brands tend to get acquired around the $150 million or $200 million revenue mark. Beauty can be a little different.”
Glossy: What about for the founders themselves? What is something you like to see from a founder?
Anthos: “For founders, their ability to build community organically and not resort to a lot of ad spend to get that community fired up [is important]. The companies that do that best have a rabid following. They have solved a problem, and people really appreciate it. They are engaging that community constantly. They’re speaking with their customers on Reddit. Around 50% of your business should be coming from repeat traffic and not just new customers. That’s a really good sign that a brand has a shot at making it.”
Santulli: “We think a lot about community-building. Are customers proud to shop this brand? We invest in [the mac-and-cheese brand] Goodles, and I have a Goodles sticker on my phone. People ask me about the brand. My niece loves the brand. That kind of fandom is really valuable. Another thing is that founders need to be able to hire and continue to fundraise. Because they will have to do both of those things for a long time.”
Glossy: What about some red flags? What turns you off of a founder or brand?
Anthos: “Arrogance is the easiest one — when a founder comes in and thinks they’re the smartest person in the room or that their idea has never been done before. Everything is derivative of something, and it’s important to understand that. If you have this opinion that your brand has no competition and it’s totally original, it’s not good. You’re born with two ears and one mouth, and you should use them in that ratio. You do need confidence and conviction to succeed, but arrogance is not something we’re interested in.”
Santulli: “A founder who doesn’t understand community and who their customer is. If they can’t explain who is buying their product, or if they say it’s for everyone, that’s not a good sign. I’d rather them have a Discord full of a smaller but loyal fanbase than try to be a brand for everyone.”
Anthos: “Positioning is everything in retail. We have a problem with convergent brands. One of our brands, Naked Sundays, has taken off like a rocket. They make skin care combined with SPF, or sun care. They’re not the first. Supergoop kind of architected that idea. They do it well. But retailers are often trying to decide where to put it: skin care or sun care? Retailers won’t create a new category for you. They want to see it in a bucket they recognize. We work with a great company that makes a GLP-1 aftercare product. It’s got protein, it’s got hydration. It’s doing really well, but it’s got six different shelves it could go on in the store.”
Santulli: “How hard is it to educate the consumer about your product? It’s very rare to see something totally new, as Pano said. And we don’t want to be investing in something completely new that no one’s ever seen before, because it’s hard to sell. You have to think about how you’re going to communicate your idea on social media, in marketing, to retailers. Who is this for? If it’s totally new, never seen before, that can be a turn off.”
