LA the place to be for Direct-to-Consumer Brands
FaB Los Angeles second meeting. Why LA is the place to be for Direct-to-Consumer Founders.
The second Fashion and BeautyTech meeting took place in Los Angeles Sept 17th, hosted by the iconic Upfront ventures, on their awesome rooftop. 80 founders and investors sharing their learnings in an insightful conversation. (Side note: the 80 lucky ones had signed up early, and this meeting was sold out in a few days, so don’t forget to subscribe to the newsletter to know more about next events!).
For those of you who missed the meeting, this post is highlighting the take away. The content was dense, so we’ll try our best! I, Odile Roujol, am writing this Medium post with Camille Cabale, as we both believe LA is the place to be in the years to come.
We have both lived in San Francisco, the city of tech, close to Stanford and Berkeley, growing leaders in data science and AI, with most tech companies and social networks being here. For sure, the Silicon Valley has a bright future as supported by a huge concentration of Venture capitalists.
LA is the city of multicultural leaders, close to Asia and Latin America. The city of creative minds, change makers, bold entrepreneurs coming from different culture and backgrounds (tech but also entertainment, urban fashion, streetwear, lifestyle entrepreneurs, …) and a fast moving ecosystem supporting them (suppliers, content creators, designers, growth hackers, fashion and beauty influencers, celebrities, investors…).
Let’s focus on Direct-to-Consumer Brands. Guest Speakers have founded new retail concepts in clean beauty, wellness or fashion platforms. They began by building communities, have a deep knowledge of their customers, and are fast growing companies: Tradesy (fashion), Ritual (daily supplements), Skylar (scents), The Detox market (beauty/wellness), Goop (beauty/wellness/fashion).
Cumulating their funding, they have raised more than $300M.
RAISING MONEY. DO’s and DON’Ts.
Zack Parker is our charismatic chapter leader in LA. He’s the founder of LÜK network (a platform for models and brands) and has just closed his new round. He had at the same time his second baby (Congrats!). He introduces the meeting saying he heard a lot of things about raising money when he founded his first company before this one. And he would have loved to listen to other founders at that time to have a clearer view about what investors expect from founders, how to choose the relevant ones for the company and build a trust relationship with them as long term partners.
A panel moderated by Sarah Peluso, VP Silicon Valley Bank, helping to lead consumer team in Santa Monica.
Yes, everybody says it. You need the Metrics.
“CAC, churn and retention rate, life time value of the customer, cohort analysis”. Definitely the metrics, measuring your growth and potential revenues, says Erica Moore CFO Goop.
But metrics change at every stage of the company. That’s where you have the feeling being an entrepreneur is learning something every day. Great testimonial by Deborah Benton, now an investor (Kaktus capital early stage, consumer companies and consumer tech) and ex President of Nasty Gal and COO of ShoeDazzle,
Vision First.
A Venture Capitalist will first choose you for what you stand for. And the role of the founder is to “maintain confidence, have the best story-telling, inspire people” says Tracy Dinnunzio founder of Tradesy.
Tracy bootstrapped the company in its early days by renting out her bedroom on Airbnb and sleeping on the couch. She claims to be an artist-turned-entrepreneurs.
She shares the story of a Xmas break where no VC sent her back the term sheet she wanted to sign. “It’s family break” they said. It was a wake-up call for her, as a tiny team and running out of cash. When she came back in January to pitch investors, she had an entirely new way to tell her story and share her vision for the company, and she finally chose different partners for scaling her business model, which enable her to be where she is now: a leading online peer-to-peer resale marketplace for buying and selling women’s luxury and designer contemporary fashion. Today with 7 Million customers, Tradesy has attracted $100 million in funding from top-tier investors like Kleiner Perkins and Richard Branson.
Based in Santa Monica, she’s one of the key players with the Real Real, and Poshmark (also Californian!).
Katerina Schneider is the Founder and CEO of Ritual, daily supplements. She had the idea to create her company when she was pregnant. She was struggling to find the right vitamins and that time and thought there was a need of something new on the market, adapted to women’s needs.
“I wanted to do things differently in an industry that desperately needed change”, thus starting her vitamin business.
Founding her company based on her personal needs helped her to be at the top when pitching investors. She was assertive about her solution and products (assembling a scientific team), and sharing women’s insights in a convincing way, feeling confident by the research she had led.
It’s interesting to notice that prior founding Ritual, she was a venture partner, managing a portfolio of over 70 tech investments (2014 Forbes 30 under 30 List for Venture Capital).
We love the idea as believing in bridges between investors and founders.
Take care of your Board dynamic.
Each founder on stage said it: it takes a lot of time and energy to raise money. And when you have finished you grow, and you’d better be ready for the next round.
Board members are like part of the team. You need to take care of each of them between two Board meetings. Making sure you share your vision and priorities, says Deborah.
Talent. Business strategy. Partnerships. Priorities to scale.
Guidance to the founder for execution. You need the Board as much as your executive team in your circle of trust.
Zack chose the second panel echoing a lot of conversations that he had with friends asking him: what does really mean “Clean Beauty”.
In an era where people care about expressing who they are, but also about the impact on the planet and on what you put on your face, body and hair, exactly as people are aware of what they eat and drink makes what they are, let’s talk about the “new natural” made in California.
CLEAN BEAUTY
A panel moderated by Amanda Groves Plus capital, an LA venture advisor firm.
There are so many brands when you look at the hashtag “clean beauty”’ “natural beauty”, “non toxic”, “vegan”, “cruelty free”, “green”, “organic”, that the customer could be lost in the choice and claims.
Even more in the US market where the FDA doesn’t forbid as many ingredients as in Europe in beauty (11 versus 1000 chemicals in personal care products are banned), not mentioning they barely control the huge number of startups claiming to be clean.
It’s a little like organic food in the US, compared to the bio criteria in Europe, with a rigorous and certified process. Can you trust the “all natural” labels? What does clean beauty even mean?
For sure, there is more customer awareness: checking the ingredients, looking for “simplified formulas with less ingredients and preservatives”, trying to understand the process of manufacturing.
Educating the customer. Transparency
You need the research, making sure your language is simple and relevant, asserts Elise Loehnen Chief Content Officer Goop, the highly successful lifestyle platform founded by Gwyneth Paltrow dedicated to keeping its readership informed and inspired.
“Clean means that a beauty product should have considered human and environmental health. Much like eating clean rejects the idea of processed foods.”
The organic certification is expensive, so many small brands with independently label ingredients that are organic on packaging, despite not carrying an official seal.
“People are asking a ton of questions” says Cat Chen founder of Skylar scents (and ex executive at clean living powerhouse The Honest company).
Cat found out she was pregnant with her daughter, when safe ingredients went from a professional responsibility to a personal necessity. As a self-proclaimed no make-up person, Cat’s signature was and still is perfume. Skylar is about ‘fresh, refined scents we love with ingredients that love us back”. She works with true artisans in Los Angeles, a local perfume house to craft artisanal formulas.
The new natural is hypoallergenic fragrances, for us, safe for consumers. How the ingredients were sourced matters: ethically, proven to be safe for the environment.
It’s also imperative to look at the processing of the ingredients.
Natural doesn’t always mean better.
Essential oils are extremely potent plant compounds and not regulated by the FDA. This can be extremely problematic when it comes to skin care (who has tried a brand with hemp oil and a massive concentration of pepper mint -as an essential oil drop- without having an allergy or even having breakouts?)
All founders and leaders on stage are eager to be transparent, by the content on social media, making sure to help the customer to navigate the now fragmented market.
“no parabens, phthalates, and sulfates” is the new normal. But who will explain to a customer that “no artificial” “no chemical” fragrances is a stretch in fragrances and could be misleading as most scents are? Fragrances are a trade secret and do not have to be disclosed.
Romain Gaillard saw a demand for answers in the complicated word of greenwashing: he created a toxic-free space combining the Green of California with the flair of Parisian Chic. A place that people could trust to find products that were safe and effective. The Detox Market was founded in 2010 (Abbot Kiney pop-up store in Venice), now with 9 locations and 2 sites as also open in Canada.
Does the future belong to Direct-to-Consumer Brands?
Romain Gaillard reminds all of us that in the past the customers came to department stores, then to multi-brand players online with internet. Now, Brands want to sell directly to their customers on their site and on social media. Thus knowing a lot about their preferences, collecting data to improve their products and services.
However, to have an immersive experience of the brand, they rediscover — after a few pop-up stores- the value of having a store or corner where people can touch the product, benefit from the human touch. And it also helps them to be sold by multi-brands players driving traffic.
Multi channels could be the future for a sustainable growth, as building a digital community has a cost for startups. Influence and paid media could reach a tipping point if not in synergy with other channels boosting revenues and growth.
Conclusion
Definitely San Francisco and Los Angeles are the cities where most platforms were born. And also successful Direct-to-Consumer brands now expanding globally (I personally was happy to see All Birds store in Shanghai, with Leonardo Di Caprio as a spokesperson in the window!)
It will be interesting to see what will happen in the next years to come in LA. We bet on a fast growing ecosystem: inspiring founders and leaders on stage are just showing to us they are growing new talent, and soon the new generation will be ready to found their own companies.
Exactly like in San Francisco, Tech companies, Google, Facebook have helped the new Stripes, Slack and Lyft to emerge.
Upfront Ventures hosting us is one of the emblematic VCs in LA. There are already a lot of celebrities choosing to be business angels and active investors. Let’s be some Direct-to-consumer brands and especially beauty, wellness, new luxury for home and fashion will be a focus. After all, we all seek our place in the world, and connecting with people, feeling confident and at the best, expressing ourselves is vital. Beauty and Fashion industries are not the “cherry on the cake”, but huge market in revenues, high margins, but first and foremost are part of helping us to live our lives at the best.
Fab Fashion and BeautyTech.
Next meetings: Miami Sept 24, Philippines Oct 5, SF Oct 9, Paris Nov 19th, London Nov 4, Fab Africa Launch in Paris Nov 7, Berlin Nov 14
Odile Roujol Twitter @Odile_Roujol Fab Co-Creation Studio
Camille Cabale Twitter Camille Çabale, Connecting Dots
