In recent years, a growing trend has emerged in the world of venture capital investments. Companies such as Procter & Gamble, Madison Reed (a hair-dye company), and The Honest Company (baby care and home-cleaning-products retailer) are part of a wave of investment into branded consumer goods that utilize information technology to reduce costs and the Internet to market directly to customers.
Replacing Industry Players
Unlike traditional venture capital investments in tech companies, which often focus on selling tools to established industry players, these new investments aim to replace them altogether. This approach is exemplified by companies such as Gillette’s competitors, Harry’s and Dollar Shave Club, and Uniqlo’s rival, VANCL (a big, online Chinese-branded clothing retailer).
"It used to be that tech went into the vertical and sold to everybody in the vertical," said a venture investor who is backing Warby Parker. "Now companies are saying ‘No. I’m going to directly compete with you.’"
The Eyeglass Retailer: A Pioneer
Warby Parker has set the standard for how startups can try to carve out a market in old-line industries with entrenched competition, according to several investors. The company’s success is due in part to its innovative approach of selling glasses online and providing customers with home try-on options.
"This is a big thing in e-commerce," said the Warby Parker investor. "You can’t compete selling stuff that Amazon has. Where you can compete is when you sell stuff that can’t be on Amazon."
Fab.com’s Acquisition
In April of last year, Fab.com acquired Massivkonzept, a custom furniture shop, in an effort to differentiate itself from competitors and provide unique products that cannot be found on Amazon.
"To be unique in e-commerce means you’ve got to own products, not just sell products," the investor explained.
Growing Number of Investments
According to data from CrunchBase, there were at least 26 investments made into consumer product companies in 2012 and 2013. This is up from 16 in 2011 and 13 in 2010. The number of investments has been steadily increasing over the years, demonstrating a growing interest in this sector.
Largest Rounds
The largest rounds invested in consumer brands include Harry’s ($175M), Fab.com (acquisition), VANCL ($70M), and Bonobos ($100M). These companies have raised in excess of $1.1 billion combined, with Tiger Global Management leading the charge as the most aggressive investor in this sector.
Tiger Global Management: A Leader in Consumer Brands
As a hedge fund investor, Tiger Global Management has taken an aggressive approach to investing in consumer brands, focusing on companies that leverage technology to create new brands or extend markets into places where they haven’t existed before. They first invested in VANCL in China and have since applied this strategy in the US with Warby Parker and Harry’s.
Renata Quintini: Leveraging Technology
According to Renata Quintini, a leading investor in consumer products, "It’s most importantly about leveraging technology to create new brands or extend markets into places where they haven’t existed before." She emphasizes that this approach allows companies to establish relationships with consumers through distribution channels, social media, and other means.
Conclusion
The rise of venture capital investments in branded consumer goods is a significant trend in the tech industry. Companies such as Warby Parker, Harry’s, and VANCL are leading the charge by leveraging technology to create new brands or extend markets into places where they haven’t existed before. As investors continue to pour money into this sector, we can expect to see more innovative approaches to marketing and distribution emerge.
Related Topics
- Venture capital investments in consumer products
- Leveraging technology to create new brands
- Extending markets through social media and distribution channels
Subscribe for More Industry Insights
Stay up-to-date with the latest news and trends in venture capital investments by subscribing to our newsletter.
