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March 2024 Box
My take on the fundraising environment, where to find more investors, and highlights of the March box brands
FirstLook
June 30, 2024
Welcome to our 31 new subscribers since our last newsletter. I'll do my best to keep this fun, light, and informative.
Salve! (“Hi/Hello” in Latin)
Welcome back to another consistently inconsistent newsletter. Let’s jump in.
On Tuesday this past week I was fortunately to celebrate my 4 year anniversary of building FirstLook! It’s actually more like 4.5 years as I starting going full time on things in Fall 2019, but shipped my first ever boxes June 25th, 2020. Whatever.
Last newsletter I said I’d unpack learnings from the past 4 years of building. Properly articulating this has turned into a tougher challenge than I thought, so I’m going to hold off on that for now. Will aim to get this in the next one 🤞
What I will cover instead is just how damn brutal it is for founders to raise right now (Am I right, or am I right?), and an alternate strategy to find those who could invest.
I recently had a long call with one of my advisors who’s an angel for 30+ CPG brands. An incredibly smart man who’s been investing long enough to have seen a lot. We talked about the current fundraising environment and all its challenges. Here are some of the highlights from that call, plus my own take on where to find more investors.
Valuations
They are still too high for many brands. For a round to move, a pre-revenue product should not have a valuation above $3-4M. A brand with $2-4M revenue should be priced under $7-10M. Obviously there are circumstances that can allow for a higher val, but for the majority that doesn’t apply.
It is possible to raise at a higher val, but the round won’t move fast. But alas, there is a sucker around every corner.
Growth Expectations
I think founders would be wise to dial in growth expectations right now. This stems from two things:
First, this is a tougher environment to raise in and likely will be for the next 12-24 months. If your growth projections were made under the guise that you’ll raise another (big) round in 12 months to fuel the (big) growth you claimed, investors may be more skeptical now. The last thing they want is to put money in a startup that falls short of their goals and is in a tough spot to raise the next round.
Second, a lot of investors are looking at their struggling portfolios right now and asking themselves, “Did I get burned believing in the dream-the-dream scenario these founders sold me on years ago?” I personally am in the camp that an aggressive growth plan is necessary as we are playing the VC game (where outliers are king). HOWEVER, don’t go overboard. It will turn off those still nursing their burns from Covid/ZIRP era investments.
What (Angel) Investors Are Grappling With
On top of dealing with burns from great storytellers of the past, most investors basically have the majority of their portfolios also asking for $$$ right now. Investors are asking themselves, “Do I further fund my existing investments to keep them alive, or cut them off and put that money in new opportunities?” Tough call! Furthermore, everyone seems to be raising right now so investor inboxes are quite noisy.
In this vein of assessing portfolios, I think investors are also being cautious as they want to see more success from their current investments. Put another way, if a sizeable chunk of an angel’s portfolio is struggling right now, they’re probably not antsy to write another check until they see some improvement with what they’ve got. Just like my Robinhood account right now…
Lastly, the macro environment is so… weird right now. It’s an election year, the FED continues to be coy with their interest rate strategy, the market is oddly ripping despite itself, talks of a recession come and go and come back again. It’s a bizarre time to be VC investing right now for a HNWI. So many distractions.
Putting This All Together
It’s still hazy in early-stage investing. The dust still has a ways to fall before investors settle back in. I’m afraid that may not be anytime soon. Startups are grasping for straws right now, but that won’t be enough for many, and so over the next 6-12 months I expect to see many more “We had a good run” type Linkedin posts… which further sours the watering hole investors frequent.
So What’s A Founder To Do?
So what’s a founder to do where you need money, but the ‘inside bubble’ people are tough to win over right now?
Short answer: find HWNI’s a non-startup events
My intern, Adedeji, is in the early days of building a company that connects car enthusiasts who want window tints beyond the legal limit with doctors who can provide a doctor’s note that allows drivers to obtain tints beyond the legal limit. Basically tele-health, but for window tints. Cool, right?
Funny enough, he’s had success finding investors not only because it’s a banger idea, but instead because he’s meeting HNWI’s who don’t normally write VC-esque checks in places where they aren’t expecting to learn about an investment opportunity.
Example: Adedeji goes to car shows often. He’s a legit motorhead. At a show he walks up to a cool car to check it out… and so does another guy. They both start talking about the engine and the wheels and all that fun stuff. They bond for a moment over the car. After that the conversation switches to….
Random Guy: “So where are you from young man, what do you do? You seem to know a lot about cars.”
Adedeji: “Thanks! I’m in college and have the best internship and boss a guy could ever ask for, and I’m also working on a startup of my own in the car space.”
Random Guy: “No way, tell me more.”
Adedeji: “It’s this company where we connect car enthusiasts wanting dark tints with doctors who can blah blah blah. It’s early, but I’m trying to raise a few dollars right now to get it off the ground. How about you, where are you from? What keeps you busy?”
Random Guy: I’m from the beautiful town of blah blah, been a huge motorhead since a kid. I started a plumbing franchise in my 20’s and now I’m retired. Turns out mixing blue collar and white collar together can be pretty lucrative. But enough about me, tell me more about this ‘Dr. Tint’ idea of yours, I like it a lot and I got cash burning a hole in my pocket right now…”
And BAM! Just like that Adedeji met a HNWI who isn’t an everyday VC investor but is interested in investing. This worked for him because he met someone on common ground at a place where they weren’t expecting to be pitched.
All too often founders go to networking events, expos, etc. because there will be investors there. The problem is, those investors know a ton of founders are running around there looking for money so their guard is wayyy up. Plus they’re everyday investors so they are picky, have optionality, and may have a struggling portfolio.
When you instead go to everyday day events with everyday people, there’s always a chance you meet someone who is wealthy, but isn’t an investor ‘inside the bubble’ (like I talked about in our January newsletter), is genuinely attracted to what you’re building, and if all goes well may pull the trigger on a check.
With all that, I leave you with this: Now is the time to find your car show.
Special Note!: Everyone should still make an effort to reach out to all investors, not just those ‘outside’ the vc bubble. The advice above is simply to expand the scope of where investors can be found.
Fundraising is a numbers game to find people who genuinely believe in YOU, and what you’re building. This takes time, but nothing feels better than having a cap table stacked with true fans who want to see you succeed (and not just print cash for an ROI).
To wrap up, here is Charlie Munger’s favorite VC scoreboard:
Founder Pro Tip of the Month 💡
Go find your car show…
Did a friend forward you this and now you want to join?
March Box Brands 🚀
Investors: 47 → Apply Here | Brands: 7 → Apply Here | Intros: 39
Investors interested in a brand below, please email [email protected]
A Dozen Cousins
Founded by Ibraheem Basir | 📍LA
Shop Here / Instagram / TikTok / Linkedin / Founder Video
How We Met Them: Via my friend Jackie Fast at Sandbox Studio
One Liner ✍️ — We make meals and side dishes inspired by Creole, Caribbean, and Latin American recipes.
What made them stand out: A Dozen Cousins was strong all around. They have top tier distribution including Whole Foods, Sprouts, Publix, Wegman’s, Target, Walmart, and Kroger. They have an authentic and engaging brand, and have launched brand partnerships with Disney, Crocs, and Instant Pot, among others. What really got me excited was they recently moved production to Mexico which significantly boosted gross margins and allows them to achieve profitability by year end. Ibraheem is exceptionally bright (Wharton grad!), and the products are great. I think they’ll continue to shine.
Blume
Founded by Taran Ghatrora + Bunny Ghatrora | 📍Vancouver
How We Met Them: Via David Yi from Good Light (Aug 2023 alum)
One Liner ✍️ — Blume is a clean and uniquely effective acne care brand, formulated specifically for Gen Z, Gen Alpha and beyond, distributed nationwide at Sephora Canada & ULTA Beauty in the US.
What made them stand out: Blume was another all around strong company. First off, they’re profitable with 30% YoY growth. We love that. Their metrics were strong. In Sephora Canada they’ve experienced 200% YoY growth and locked in a recent Endcap Expansion in all top doors, while in Ulta they increased store count from 700 to 1400 in 2023. The brand is beautiful which, coupled with their hard work, as translated to 50m+ views on TikTok and features in over 1000+ press pieces. Overall this is one of those brands that seems to be doing everything right, and their high repeat purchase rate tells me consumers truly do love their product.
Fancy Peasant
Founded by Anastasia Ganias-Gellin | 📍NYC
How We Met Them: Via Jackie Stauffer of Recess (Oct 2020 alum)
One Liner ✍️ — Fancy Peasant is a line of clean, simple and wildly medicinal Greek Pantry Essentials, including Fancy Peasant Liquid Gold: Greek Extra Virgin Olive Oil, that is the foundation of all of Anastasia's longevity recipes that fuel your body and mind.
What made them stand out: This brand is early, but it’s led by a celeb who has deep connections in Hollywood, which as we all know can really help a brand grow. The products are authentic, and I really liked the variety of olive oil they chose which they describe as the “everything oil.” This versatility lends well to consumers as it makes for an easy choice no matter what they are cooking. As they build brand equity their other product lines including “Greek Mountain Oregano Salt” and “Fancy Vinegars become easy add ons to increase cart size/AOV.” With Anastasia leaning hard into content and media, this brand could grow and grab the right celebs to further make it the “it brand” in Hollywood.
Innovative Pet Lab
Founded by Jamie Smith +Dr. Betsy Redmond +Dr. Bob David |📍Duluth, GA
How We Met Them: Via Sarah Meis from The Humble Seed (Jan 2024 alum)
One Liner ✍️ — Innovative Pet Lab is a science-driven pet wellness company empowering the pet community with at- home tests and personalized solutions.
What made them stand out: IPL is imo a great opportunity to invest in. Human diagnostic testing has become a big industry, and now IPL is introducing this science to pets which we all know a space people spend LOTS of money on. They’re doing things the right way too as they built their own lab that does the analysis. It wasn’t cheap or easy, but it really sets them up long term to build a big company. The team brings a ton of experience as well with over 100+ years of combined experience in human diagnostic testing. With IPL being the first to fill a key white space in Pet Health, I think they very well could reach a $1B exit in the future.
Discount: use “FirstLook” for 20% off site wide
Misunderstood Whiskey
Founded by Chris Buglisi + JD Recobs | 📍New Jersey / Kentucky
Shop Here / Instagram / Linkedin / Brand Music Video (must watch!)
How We Met Them: Via my bff Nate Rosen of Express Checkout
One Liner ✍️ — We delicately craft innovative spirits products that push the boundaries of traditional spirit categories.
What made them stand out: I loved this brand for a handful of reasons. First, the founders are a riot. Seriously, didi you watch this video yet? It’s incredible. Second, they are all about pushing the boundaries of innovation in spirits. I find this rare as most brands only lean into an authentic story. MW’s Ginger Whiskey is novel and brings in a lot of female drinkers which most brands fail to capture. Their Oat Nog is novel too, which unlocks a vast population who cannot have dairy/lactose but still want to indulge. This is a big deal, as the product tracked near 100% Nielsen growth in 2023. They are also in the midst of launching another exciting liqueur line this year, Oatrageous. I think this will be a smash hit. All these drinks put together creates an very unique brand portfolio that’s appealing to consumers and retailers.
Noshi
Founded by Tomo Delaney-Lethbridge | 📍NYC
Shop Here / Instagram / Founder Video
How We Met Them: Via my bff Nate Rosen of Express Checkout
One Liner ✍️ — We make organic food products that kids can actually use as well as eat - giving them more control prevents mealtime meltdowns.
What made them stand out: I liked Noshi for two main reasons. First, Tomo is a fierce founder with a passionate story that drives him each day. This is important as it fuels him to get through the tough times. Second, Noshi’s “Why Now” is very interesting. Recent research from the National Library of Medicine found that if you give kids more responsibility prepping their food, they’re more likely to eat it. They stop and think about what went into it (effort, ingredients) and they’re flattered to be trusted. They want to be treated as equals and have more control. This nugget of psychology is interesting, and it’s the basis for Noshi which strives to give kids control during meal time. Tomo is early in his journey, but certainly helps to have Mark Cuban and team on board as an investor!
That's all she wrong folks. April box is next. Keep on building.