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- 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.
- Click here for more BI Prime stories.
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:
Andie Swim
Company: Andie Swim
Recommended by: Soraya Darabi, general partner, Trail Mix Ventures
Relationship: Investor
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 multi-billion dollar 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 10x run rate on an eight-figure revenue one year out of the gate, and never have I seen a DTC brand grow as fast in my life.”
Beautycounter
Company: Beautycounter
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.”
Bev
Company: Bev
Recommended by: Ryan Morris, principal at Plus Capital
Relationship: Investor
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.”
bioClarity
Company: bioClarity (part of Adigica Health)
Recommended by: Rob Rosenberg, partner at Prolog Ventures
Relationship: Investor
What it does: Skincare brand that uses Floralux, a derivative of chlorophyll, and caters to millennials and Gen Z.
Why it’s hot: “BioClarity is growing quickly because it is on trend with a clean and (literally) green skincare line,” said Rosenberg. “But what sets bioClarity clearly apart from the crowd of trendy clean label skincare brands is that it combines great brand positioning with true science. A young skincare company with a patented and clinically validated active ingredient is very rare and valuable, but it was no accident. The company is founded and led by a team that combines great marketing experience from well-known DTC consumer brands and bona fide leaders in the biotechnology world.”
Cove
Company: Cove (part of Thirty Madison)
Recommended by: Hayley Barna, partner at Firstround Ventures
Relationship: Investor
What it does: Provides personalized migraine treatment and tracking.
Why it’s hot: “Part of the broader trend of direct-to-consumer healthcare, it is a personalized and affordable partner for chronic migraine sufferers to find the right treatment plan and track results over time,” said Barna. “It removes the friction of doctors visits and is accessible 24/7.”
Ettitude
Company: Ettitide
Recommended by: Angela Lee, 37Angels
Relationship: Investor
What it does: Makes sustainable bedding and sleepwear out of bamboo fabric.
Why it’s hot: “It is tapping into a growing trend for sustainable products that are as functional or better than conventional, and has been growing 15-20% month-over-month over the past 18 months,” said Lee. “Ettitude’s patented CleanBamboo fabric not only feels as soft as silk, it is also naturally cooling and antimicrobial, uses no harmful chemicals and recycles water 200x, so each bedsheet set saves over 3,000 gallons of water versus cotton.”
Haus
Company: Haus
Recommended by: Nik Sharma, independent investor
Relationship: Investor
What it does: It’s an apéritif made out of California grapes, elderflower and other natural ingredients that is lower in alcohol content than standard hard liquors, and has less sugar than other apéritifs.
Why it’s hot: “Consumers are now leaning toward less hard alcohol consumption across the category, and as a bi-product, looking for a new options to turn to,” said Sharma. “In addition, Haus is a vertically integrated operation from start to finish, and unlike most DTC brands, it plans to expand through earned and owned media channels, not by spending enormous media budgets on paid media channels.”
The Inside
Company: The Inside
Recommended by: Caitlin Strandberg, principal at Lerer Hippeau Ventures
Relationship: Investor
What it does: Offers custom, affordable furniture that is delivered in under three weeks. Co-founded by CEO Christiane Lemieux, who built Dwell Studio (which was acquired by Wayfair) and COO Britt Bunn, previously of Hamlet and One Kings Lane.
Why it’s hot: “With weekly pattern drops, designer collaborations and a revolutionary zero-inventory model, The Inside is the first to offer on-demand personalization in the lagging furniture market,” said Strandberg. “Next-generation consumer companies must offer choice and guarantee convenience. The Inside answers that call with over 100 prints, patterns and fabrics as well as an integrated supply chain to get furniture to customer doors in record time.”
Iris Nova
Company: Dirty Lemon (part of Iris Nova)
Recommended by: Alan Patricof, founder and managing director at Greycroft
Relationship: Investor
What it does: A beverage company that produces functional drinks with ingredients like collagen, charcoal, and retinol that are low in sugar and calories, and can be ordered via text messages.
Why it’s hot: “Dirty Lemon is in a great position to take advantage of consumer trends today, with people’s tastes being more refined than just Coke, Ginger Ale and root beer,” said Patricof. “With ingredients like collagen, charcoal, and retinol, its beverages can provide benefits to skin and hair, and the packaging is distinctive, marketing is effective and it has a great assortment of flavors.”
Liquid Death
Company: Liquid Death
Recommended by: Peter Pham, co-founder and partner at Science
Relationship: Investor
What it does: Sells mountain spring water in “tall-boy” cans rather than plastic bottles.
Why it’s hot: “People are drinking less and feel more social holding this ice cold can at social gatherings, rather than a plastic water bottle that is polluting the planet. Aluminum is infinitely better for recycling,” said Pham. “The water tastes great and is healthier than corn syrup soda or energy drinks.”
Magic Spoon
Company: Magic Spoon
Recommended by: Sophie Bakalar, partner at Collaborative Fund
Relationship: Investor
What it does: Healthy cereal brand
Why it’s hot: “Consumers are increasingly focused on their nutritional health, and cereal is one category that has seriously lagged behind,” said Bakalar. “With Magic Spoon — cereal that’s high-protein and low-carb, and still super delicious — you get the nostalgia and the convenience of cereal, without the guilt.”
Modern Fertility
Company: Modern Fertility
Recommended by: Kirsten Green, Forerunner Ventures
Relationship: Investor
What it does: Sells take-at-home blood-test kits that measure eight hormones associated with women’s fertility to help them with family planning.
Why it’s hot: “The effort to address women’s health is a hot topic, and we believe that Modern Fertility is setting itself apart from the pack by offering a comprehensive fertility hormone test and digital read of the results,” said Green. “Consumer engagement around the offering is very high as women experience the empowerment of education around their own bodies and fertility. Interest is high too, with several third parties looking to sell, promote, and collaborate with the company.”
Recess
Company: Recess
Recommended by: Jonathan Keidan, founder and managing partner, Torch Capital
Relationship: Investor
What it does: CBD-infused seltzer water.
Why it’s hot: “CBD is a super hot category, and anything related to hemp extract is in the public consciousness right now,” said Keidan. “Recess has beautiful packaging and incredible branding, and is the opposite of energy drinks — instead of external stimulation, it encourages internal stimulation and calls for calmness and being present and taking a break from your busy day.”
Sunday
Company: Sunday
Recommended by: Michael Duda, managing partner, Bullish
Relationship: Investor
What it does: Produces lawn and gardening products made out of natural ingredients.
Why it’s hot: “There needed to be a company to be the antidote to those little yellow flags warning people about cancer-causing pesticides,” said Duda. “Sunday brings a far friendlier approach via category experts, and the best customer service mindset to help consumers take care of their lawns without fear.”
Udemy
Company: Udemy
Recommended by: Ken Fox, founder and partner at Stripes Group
Relationship: Investor
What it does: A global marketplace for learning and instruction.
Why it’s hot: “Keeping up with the rapidly evolving world is challenging. Whether it’s learning new technologies or bridging skill gaps, there is an option for everyone on Udemy,” Fox said. “Each month the site’s content specialists add new courses addressing emerging topics and remove outdated courses, ensuring the freshest, highest quality content on the market. If a skill is trending in any given industry, Udemy will have it first.”
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