And we'll put a very participating check into that side follow alongside great venture leads like you guys, and be along for the ride and really helped just make customer introduction.

And when you were thinking about the areas of focus, like you said, health and wellness and home and pet and baby, why did you choose those areas? You know, what makes them attractive to you and why not other ones.

Yeah. I mean something that we discussed a lot and we continue to talk about his margin profile. I'd say that that is our kind of north star. So you know, to build a profitable, longstanding consumer business, which is at the end of the day, not like the tech world where you can be wildly unprofitable for pretty much ever.

Okay.

You need to build something sustainable and profitable here in. We really think about margin profile every step of the way. And that starts with product margin at the very. And so a lot of these categories, when you look at beauty and skincare and haircare, you're starting with product margin sometimes north of 80%, which really lends itself to being able to build a profitable business.

And so, you know, , if you're starting that high and your gross margin can get to north of 50%, and then you can have some costs baked in for marketing and SGNA, you're able to get to profitability. And that's really what we're looking for.

Hm. Let's keep going on the metrics. When you're looking at the margins, you know, are you looking at returns, lifetime value retention? Like, what else is it that makes up that full profile of what you're looking for on the quantitative side?

Yeah, it's really everything. Like when we get involved, we're investing once a brand has launched. So typically we have six to 12 months of data to work off of. So some other things that we look at, of course, our CAC to LTV and you know, if we see a business that's been. 50% of net revenue on marketing. We're not that excited about that, right? That's not such a sustainable model. So it might be that today you're spending in the 30% on marketing, but we want to be able to build the path where you can get to kind of 20%, 20 to 5% of spend on that revenue on marketing.

So it's things like that, that we're looking at. We're definitely diving deep into cohorts and looking at retention and repeat. And you know, when we have a subscription business that we're looking at, that's always great because. We can definitely predict that in a much greater way than other types of businesses.

 Just to dig into a couple of those, it seems like everyone's moving to subscription. Like everyone wants me to subscribe to my, everything, my toothpaste and everything else. give me a little insight on what you think works there and maybe doesn't mean.

Yeah. So we went through a really interesting time in Adidas, the space where subscription was hot. And, you know, if you think back to like ShoeDazzle days when Deb, my partner was doing ShoeDazzle and, you know, everyone had a subscription to everything. I think that kind of faded out the consumer got really tired of that.

Yeah, like you said, they didn't need a subscription for every single thing that they were doing in their life. And now we've entered this new phase where subscription works when it works. And so we're the lead investors in a brand called coterie, which is a diaper company um, personal care baby company, but started with diapers and wipes.

That makes sense on subscription and his cohorts and his retention numbers are out of this world because once you try the diaper and you fall in love with it, you never kind of go away. And so. You know, when it works, it works. And I would say what we can see through when a brand kind of tacks on subscription, but it doesn't really make sense and the consumer doesn't want it.

And we can see that through the numbers.

Do you have certain benchmark type numbers that you look for? I think you mentioned the 80% margins. Are there certain things around, like when you're looking at the cohorts that really stand out for you?

I mean, you know, we're always interested in the cohort just in terms of just, is there repeat at all, right? Because some of these are not subscription businesses. And so we're trying to figure out when is that customer coming back at? What month are you getting that payback period? And it could be.

You know, at month two at month three at month four, whatever it might be. But just looking for that kind of repeat in the data is most important. I mean, you take a brand like coterie, right. And they have almost, , 90% of customers are on the subscription. And so when you've got a brand like that, that's incredible.

Right. When we first looked at that, He didn't have a subscription. And he had north of 70% of customers on their own coming back every single month.

And so does that then mean, like I noticed you didn't mention fashion , and Deb before comes from fashion to some degree, so are there certain categories that you're just like, yeah, were kind of down on them.

Yes. I have a partner at Willow who came from many, many years in the fashion space and that makes her many, many years sour on the fashion space. So takes a lot to get her over the hump. I have to say we've definitely, she is our resident on that cat. I would say, you know, fashion, there's a trend risk that is insanely difficult.

The margin profiles are insanely difficult. You are dealing with having to take photos, having to take videos, having to merchandise, every single skew, and sometimes. North of thousands of skews that are constantly going out of trend going out of fashion. So then you're just dumping them at discount.

So it's a very difficult model to scale. But I would say we, tend to be more interested in basics and things that don't go out of style necessarily. You know, some of our companies are tomboy X Harper Wilde. These are kind of basic everyday staples, bras, and underwear type of categories. Those tend to be more attractive to us if we're going to do anything.

Hmm. got these. Metrics, you're looking for. How are you thinking about sort of multiples as valuation and maybe even as they grow and how you start to project out exits for these companies?

Yeah.

So that's something I think that's really unique to Willow. We're talking about that at the seed stage, I came from the tech world, and oftentimes it was just like, you put your finger in the air and say, okay, this could be a billion dollar company. And I can see the path to getting there.

Let's do it. It doesn't matter Right? This is very different. How we think about this here? So category by category, we know who the strategic buyers are. We know who the private equity funds are that would come and buy these companies.

And we know we go downstream and say, Hey, what Multiples are you guys looking at upon exit and try to really put that into more of a rational thinking on our side for evaluation. So it varies from category to category, but anywhere from , as low as two to three times on top line, as well as see all the way up to five times all the way up to nine times, sometimes in the beverage category, , especially an hour, you can get pretty crazy multiples on exit.

Why is alcohol higher multiples?

Um, A little bit of the sexiness of the category, I would say, I mean, you know, like a lot of these beverage brands have had celebrities attached to them. , the buyers, the acquirers, like if you take a dog over. they could take a brand That's a baby brand, maybe doing 20 million in top line 20 to 30, plug it into their distribution network and just blow the brand up.

 And how do they do that? Like when they plug into their distribution, is that mostly taking them into more physical retail location?

Yeah. specifically in that category, for sure. there's a three tier system and the alcohol space, which I had to get up to speed on very quickly. And so it's really hard to break down these barriers and to work with these distributors. And when you have a huge legacy player like that, they already have pre-existing relationships.

So they can just roll you out to lots and lots of doors very quickly by just having these relationships.

So pre exit, how do you think about coaching your companies or working with them as they think about going into retail themselves and how do they do that? Yeah, this is big topic. if you ask this two or three years ago, we would have said, stay digital for as long as possible. You'll get a higher multiple, , you know, your customer it's better today.

I'd say almost every single one of our brands lives in the offline world in some capacity. So they live at retail in some capacity.

That like doesn't make intuitive sense to me. Cause I would've thought during COVID you would've seen less of them in his skull locations. So why is that?

, I mean, coming out of the COVID world, right? People were still like human beings that kind of crave this in-person experiential, hold the product, touch the product, talk to a store associate. I think that you have to kind of live in this offline world and marry that with the digital world.

And I'd say all of our brands are doing.

And are there. Better strategies than others, like how to enter into retail, certain ways to get that distribution. Anything best practice wise?

Yeah, so this, is tricky, right? It's easy when you launch a brand and you have a splashy launch and all of these buyers are reaching out to you and you get super excited. You could go into every door at was. That's not always a great strategy. So what we recommend is taking your time and really figuring out which retailers are the right partners and why, and that has to do a lot of things,

 they putting marketing dollars behind your launch? And then after launch, are they still putting marketing dollars behind promoting you? what's the margin profile look like? You know, how much can you negotiate that? What are the working capital requirements for inventory? All of these things could make or break a brand, right?

You could go into a retailer, have terrible product placement on shelf, and then, , no one discovers you, no one cares. And then you kind of get pulled out. So an example, one of our companies bubble, she launched in November of 2020, and by July of 21 was in over 3,800 Walmart.

Whoa.

end caps. So that was a really interesting story. Right. She surveyed her customers.

She's targeting gen Z and kind of that younger millennial, they were shopping at Walmart. Walmart was the right partner for her. And Walmart approached her. You know, they're, coming to these early stage brands. They want to work with them. They gave her great terms.

They gave her great marketing dollars behind her, And what does it mean for retailers to market brands or what can a brand expect So that's the problem, right? You can get put in on shelf, you get a buyer that's excited about your brand, but then they don't put marketing dollars behind it. Right. They just kind of put you on shelf and let you do what you're going to do. Now, if you haven't spent years building brand equity and you do that, the customer is not going to find you on shelf necessarily.

So, you have brands like manscape is in our portfolio. A long time, digital ocean, and then decided to go into retail and , the founder tells a story of this. He says, I wanted the customer to walk in and say, I want to find manscape not the other way around.

What channels do the retailers use when they're putting marketing dollars behind a brand?

I mean, they'll do both in store promotion, right? Like I'm talking about end caps. So when you walk down the aisle and there's that

 thing at the end, that looks beautiful and catches your attention. That takes a lot of dollars. And then they're also doing some online paid marketing spend as well, but even just In store. promotion is really, really valuable.

 Is there anyone who's doing it really well on the retailer side, or, you know, do you just have thoughts about how retailers themselves are involved?

 So, you know, someone who's always kind of done it well with Sephora, I would say they've done a really good job working with early stage brands, positioning them in the store, giving them support on the marketing side. If you've ever been inside a Sephora, they do those minis and more at checkout.

So you can kind of sample products as you go.

Amanda. I have never been in a Sephora.

Oh, my God. Okay. We need to catch you into this of Bora that I'm going to get you a gift card, so you have to go. But yeah, they, do a lot of great work And then you have target, you know, who's been doing this with the DTC brands for a couple of years.

And then you have Walmart who was trying to kind of catch up now. And I think they're, getting in tune with what they need to do. So everyone's kind of evolving and figuring out their own ways of working with these early stage brands because they realize they have to go earlier than ever before to stay relevant.

And if I'm a brand, like, is it easy for me to figure out who the buyers are? Is that like, when I introduced my portfolio to series a companies, is that like some of what you're doing, but you're introducing them to buyers or how does that process work?

Yeah.

it's, tricky because buyers change often big corporate places. People move down. Switch teams. So yes and no, at some places the buyers had been there for many, many years, and that's an easy introduction and other places buyers are constantly changing. So that's always kind of an evolving thing and figuring out who the right person that's covering the right category is for you to speak with.

Okay. It sounds like a challenge. So let's say I'm starting a digital only new wetsuit brand. Talk to me about go to market and I'm especially interested in your thoughts around how brands are using influencers nowadays.

I mean, that's become a really super efficient channel for a lot of our brands. Some of them more than others. I mean, think about how many people you have on social media, talking about the different products they're using every single day, right? And the more micro you go on these influencers, the more power they seem to have an influence they seem to have over their following.

So if you can find the right partners to partner with at this early stage for just talking about the brand, talking about the product. It will move the needle for you. And so, you know, one of our brands Lolo in the baby space, they do baby physical products around their home. So think about highchairs Playroom bath. They have, mommy influencers who are using their products, they're saying these are the best products. I love the brand. I love everything they represent and people will believe everything. Those people saying go and buy, and it just becomes not a question in their mind, right. That it Lolo is there.

They go and buy all the products from Lalo. You know, some brands work better than others in this space, but I'd say for the most part, every single one of our brands are working with influencers in some way.

Do the influencers disclose that they're doing this? Like, what's the fine line there between just knowing that someone is sort of telling you to do something. Cause they're paid to that.

Yeah, this changed over the past couple of years, Instagram kind of cracked down on this and Facebook and used to be able to just promote things and not say anything about it. And nowadays you have to say if, the brand is paying you to be. You have to say hashtag sponsored hashtag ads, something to that effect so that the end consumer knows You were paid to do that post oftentimes though what works the best for our brands is just truly organic. You know, they'll send someone a free product and then they post about it. That's organic. Right? So they don't have to tag, okay. I was paid to do that.

They were not paid to do this. So let's say that I wanted to start a wetsuit company, but I'm not big on social media. You know, does every brand now need to understand social media? Does everyone hire for someone in-house? Do they work with brokers? I find these micro-influencers. How does that process work?

It's interesting. It's across the map. There are a lot of tech companies that have actually pitched me, which I'm sure you've seen as well, that are trying to bridge this kind of create or content world. an influencer world with the brands and put software behind it. We have yet to make an investment in that space.

I'd say it's very, very hard to do. Right. So not to say that we will, but we have not yet figured out what the solution is there. A lot of it is still you're right. Just hiring someone on the team that really understands the ethos that knows who the players. That reaches out to these people and says, Hey, I'm going to send you free product or Hey, you know, what do you think about doing this cool collaboration together?

And that stuff works. And so oftentimes it's, more manual than you think, but that oftentimes works better than sometimes just like plugging in a piece of software to make it work?

And what about social tokens, NFTs and brands that are really using those to bring the community even closer to them.

So I have to be totally honest here. We're first getting our feet wet in the consumer world on this. And especially in the consumer products world, it has not come up as much yet as it has in Europe. We just spent two days at the upfront summit and Deb and I were both like, we need to get smarter on this.

 It's coming, it's coming to us. But so far we have not yet seen our brands incorporate much of it to date. So I think it's coming. I agree with you. had just, hasn't kind of hit it yet.

I appreciate that answer because sometimes the hype outpaces, like what actually like people on the ground are doing.

 What about like, just when you just said all of that list, how do you compete with like a Procter and gamble machine around creating consumer brands. Right? Yeah. So they're great acquirers down the line. I think, you know, often times they will try to sometimes build things in house to resonate with younger demographics. And sometimes works and oftentimes it doesn't quite honestly because the consumer is smarter than ever before, so they can see through.

When something's not authentic , if they don't have these kinds of things at their core, that the consumer really cares about like sustainability and non-toxic formulations and ethical labor standards. And, the consumer wants the brand to stand for something they want to be emotionally attached to.

And a lot of these purchase decisions are driven on emotion. And so I think it's harder for a legacy player, like a P and G to just spin up a brand and really resonate with gen Z. Right. It's very difficult. They know that too. That's not news to them. So that's why they spend a lot of dollars and power kind of acquiring younger brands.

And again, back to the beverage example, right? Same sort of thing. P and G has tons of distribution and tons of efficiencies.

And so they can really get a business. If it's not yet profitable or breakeven, they can really get it to be a profitable business just by rolling it up underneath.

What do you think someone like P and G is looking for exit wise, like, is it a brand that gets to, you know, 20 million in revenue? Like where do they start to have those conversations?

it differs in every category. But I would say once you're in kind of the 20 to 50 million top line mark that's when you start being on their radar you could build a brand all the way up to a hundred million. And then they'll acquire you even then. I mean, that'll be a monster exit for them and we've seen that over and over again.

But for sure, like if you're them, if you're a P and G you want to scoop up that brand when they're at 30 million versus a hundred billion, because you'll pay less, that's just common sense. But oftentimes the brand won't sell at that point, they see kind of the wind behind their back and they know they can get to a hundred million and get to a larger outcome.

And so they'll keep building. Sounds totally reasonable. yet I'd say that consumer investing is fairly out of Vogue with the venture community. What have you seen with regards to venture interest in this space

Yeah. I mean, that was part of my impetus for starting this fund with debt was I came from your world, right. I came from the generalist tech world and of course I focused on consumer and e-commerce,But. Definitely inventory holding consumer brands had a moment and kind of C and traditional tech venture, everyone was kind of piling money into it and it wasn't necessarily the right move.

Right. Because what happened was we would treat those companies as software companies and we would put them on the same fundraising path. They would raise tons of capital at crazy high evaluations because that's what everyone else. And it was one's fault necessarily. It was just kind of how things were done in the venture space.

And that really didn't lead to successful outcomes for those brands, because to your point, P and G , you know, they have a threshold of what they can acquire these brands for. And a lot of these brands are great, kind of 250 to $500 million outcomes. And so part of what I was seeing, just being in that world was these brands would want private equity money. They'd want strategics to come in and buy them. But when we set them up in the venture world, with raising crazy high evaluations that, you know, crazy numbers it took them out of play for some of those things.

 And so that's why we want it to be kind of the first institutional money in to really help them scale and grow and take money from the right types of players along the way. So that you're setting yourself up for optionality.

So, the goal isn't that you sell for a hundred million and that's it, but you want that option, right? You want to be able to say, if I sell for 150 or 200 million, everyone around the table is going to make a ton of. that's kind of the game that we're playing at Willow. Andthat's why we call ourselves growth more than venture. And it was a very deliberate thing to do that because at the end of the day, the next investor for our companies is usually a strategic or a private equity down the line and not necessarily kind of this path to IPO or.

Yeah. So I think sometimes if I call a venture capitalist, I say, oh, you're kind of acting like a PE firm. Some people take that as a compliment, some less. So I feel like for you guys, it really is. You have some of that DNA.

Oh, yeah, for sure. we have this Venn diagram in our deck, right? That's like venture capital and private equity. And we kind of sit somewhere in the middle. So we think like private equity, but we're coming down at a much earlier stage than private equity funds were ever able to do. it's just not in their DNA to invest in a brand one to 5 million.

Right. It's still super risky. They don't understand the early stage. they understand brands when they're doing 20 million plus we've started to see some funds roll out some great co-investors of ours, like prelude, capital and silence capital. Those folks will come down when the brands are doing done at eight to 10 in top line, There was no one doing kind of one to five. And so that's why we wanted to get into that space because. We have the DNA.

to know the early stage world really well. And there was a wide open gap of Who's helping these brands kind of get to eight to 10 and line like no one was there doing that.

So that's why we created Willow.

and how do you evaluate these early brands?

When there may be less to go on and it's more of a bet on an emotional consumer appeal. a lot of that is gut. I'd have to say and just realizing when something is taking off. And, and what's great about the consumer world, right? Is we have real consumers that are using these real products that give us real reviews. Right. And they talk online loudly about these brands. So if you just sit and read the review of the brand and what people are saying and they like about the product, but they don't you read through their Instagram comments and it's sometimes it's as simple as that and you're just seeing kind of this movement.

And I know that you come from amplify and sort of more traditional tech, how are the teams and the interactions of the same or different.

Yeah, they're much smaller, , when we invest in the tech world, first thing you're doing is hiring a bunch of engineers and a big team and product folks and sales teams. And there's just lots of overhead that happens in the consumer brand world. You could get to a hundred million dollar business with 20.

Wow.

 you know, in the tech world, you're building companies, you'll go from zero to a hundred employees almost overnight, sometimes with how much capital is being raised these days.

In this world, don't need to do that.

So let's talk about Willow. This is Willow fund. One was raising a first time consumer fund, you know, how was that?

Yeah, raising a first time fund is not for the faint of heart.

We sent out subscription docs, which are documents that you signed to say, I want to invest in your. March 8th, 2020. And if you remember the world shut down, I think March 13th, So we were like, we looked at each other, we were like, what are we doing? We're two women going after this.

Like you just mentioned, right. the sectors consumer is, comes in and out of fashion for a lot of LPs. And we were like, what are we doing? We're in over our head. But we decided to power through, we were like, no.

we're doing this, this needs to exist. We had so much conviction around that. And we ended up setting a target for 25 million and we raised 25 million plus more.

We were oversubscribed. So almost 30 in total in just under 12 months all on zoom. we have not met, I think over 75% of our LPs in person it really was just kind of a Testament to what we were doing.

And people really understood the whole, we were filling in the market

Do you have any advice coming out of that for people who might be in a similar position and just sort of how you managed to get that? Um, I mean, there was a lot of advice we got in the early stage that was, you know, sometimes when you're raising a first-time fund, people will say, get an anchor, right. get to a certain number you know, 50% or more of what your target is, and then go raise the rest. And then there's the other school of thought.

That's like, , just do it close on the money and keep going and show what you can do. Given all the uncertainty, we really felt that was the right path for us. So we did small subsequent closes throughout the year. we did what we said we were going to do. We did a first close small amount, 6 million, and

we led the deal in coterie with that amount great decision. We had something to kind of put on paper and say, this is what we're doing, right. This is the prime example of exactly the companies that we're investing in. This is how we're sitting on the board and helping. So I would say, my advice was, do smaller closes do what you say you're going to do, be in business and be a going concern. And that really was helpful for us. the other big takeaway for us was just over communicate.

 We sent out so many updates, we sent out market opinions of what was going on in the market how we kind of saw the retail landscape shifting through this kind of crazy time.

that really worked for us. And it helped people that, , we met early in the journey. They didn't come in until the final close, but they had spent a year kind of hearing from us and what we were doing and what was going.

 Uh, it's good advice. So let's go back. I'm curious about your perspective now, having seen multiple different VC funds and lessons you've learned and taken with you to Willow

Yeah.

So this is a unique perspective because oftentime adventure, maybe you see two funds, I feel like I've kind of grown up in the industry now and it's been.. A blessing to be able to see multiple different funds, because especially as a junior person at a venture fund, you tend to be trained how your GP thinks,

You're there to support the GP and find deals that make sense for your investment thesis, which the GP has set. And so you're kind of trained to think in a certain way. So having multiple different funds, I thought was a very unique experience. Uh, Primary was , when I joined it was a $60 million fine.

And we were focused only on New York and an on e-commerce and SAS. I had a really unique experience there because I had just built a company coming out of Techstars for four years called. And I was just straight off of the operating path. So was super passionate about, after you write the check, what happens, So that was what I built at primary was kind of this hundred person plus operating network that was VP director level folks in New York city that could come into our companies and really help turn the dials for them.

 Were there certain things that made that effective? Like if you were, you know, say at 1,010 sort of firm looking to build out our advisor network, what advice would you have of what works? What didn't work? What did you learn in the process?

When we were doing this, we saw that, you know, some of the larger funds would tap C level folks to say, Hey, let's, get this CEO or COO to be sitting on the board and you know, do more kind of structured advisory.

So. What we saw at primary was like, Hey, all these VP director level talent, no, one's asking them to give advice. And by the way, you know, Facebook, for instance, they're the ones in Facebook ad manager, turning the dials every single day and figuring out what the hacks are on a weekly basis to make things work.

We would pull those people in to a room like six to 8:00 PM after work and say, Hey, four of you, , growth marketing managers sit with the growth person at our portfolio company and let's go through what's going on real kind of tactical advice. And that worked really, really well. And oftentimes the greatest thing was those advisors would then end up joining some of our companies full time.

So it ended up also becoming a bit of a recruiting hack. But it was a great, great, great, great thing that we built. . Yeah. And I just, wasn't sure you have a perspective. I've haven't done that at primary. And I think, you know, amplify also had a really strong mentor network. I'm very curious as you went. Primary to amplify. What surprised you about how it operates differently or, you know, what were the big learnings changing?

Yeah, it was, great because primary was focused on New York and amplify was focused on LA. So I got to see two different cities,

But my role at amplify evolved, Paul Berko is a solo GP.

He needed the help. He'll be the first to admit it. He's running a million miles an hour. And so what was great about that was he really just got to give me an inside look at How everything works. And so that really set me up for success. I'd say.And you don't always get that as a junior person joining a team. in venture, sometimes there's like things that you just never see, How about just seeing the differences in how the processes worked and how Paul ran his shop? He is the most founder first person I've probably ever met in the business. , every single entrepreneur in the community, he goes to bat for them in a way that really trained me to really see kind of what a good investor looks like.

And how do you describe your personal style? Who are you, you know, at home, like, you know, your, your non venture friends, how do they describe

vendor friends. I am superwoman because I am about to have a baby in seven days and have a three-year-old that takes over my life at home. So I'd say juggling a lot of hats all the time is probably constantly what's going on in my life. And just, I mean, I Can kind of be a chameleon and a lot of different scenarios can kind of be that mom and go to the school volunteer thing and then put on my venture capital hat and go to work and do all of it at once somehow and make it try to seem seamless, even though I'm exhausted at the end of the day.

Yeah. I don't even try on the school front. Um, I mean, Do you have any advice on that balance?

don't know, I don't think anyone that is in this position has any sort of magical answer to that or a silver bullet, but I just take it on a day by day approach. Try to say, okay, today I did. Okay. Give myself a B plus today and That's okay. It has to be enough. And so just, knowing that , you can't be an, a plus plus and everything all the time and that's, a lesson I've had to learn probably the harder.

That's a good one. Is there anything else I missed on things you want to talk?

 I would just say any, brand that's building sort of a powerful, emotional values led brand in any of those categories. We'd love to chat with you. We really love meeting people super early in their journey. So, you know, even if you're not at that kind of one to 5 million revenue, mark, we love meeting people earlier than that.

And just kind of keeping up to speed with what's going on and then hopefully doing the deal later on and working with them.

That's great. And I am so happy for you, so impressed.

Thank you. I know I'm so excited. I saw you in real life and I hope to see you more in real life. After I'm having this baby, I will be back out and.

Well, good luck with your baby and thank you so much for taking the time today.

Awesome, great, to see you.