Recently, the CPG industry came together in Philadelphia, PA for Natural Products Expo East, the East Coast’s leading marketplace for emerging natural and organic brands. The demand for natural and organic food and beverages is higher than ever, and Expo East reinforced that categories such as non-alcoholic beverages and women-focused products for menopause, fertility, are just a few in the consumer space that are attracting the attention of retailers, consumers, and investors.
Though when most people consider investments, they usually think of real estate, stocks, bonds, or even gold for their portfolios. They may be missing an exciting, recession-proof, growing asset class: early-stage consumer investments. Here are five reasons why investors should take a closer look:
The consumer market constitutes a substantial 70% of the U.S. GDP
In the United States, almost 40% of private equity capital goes to software companies, leaving the consumer sector significantly underfunded. Yet, the consumer market constitutes a substantial 70% of the U.S. GDP. Bottom line, is for investors who understand the category, there is a huge white space opportunity for capital allocation within early-stage consumer brands.
Consumer brands often have diverse founders
When you look at the way that capital is allocated, it’s evident that a relatively small and homogenous group of individuals still make the majority of allocation decisions. By diversifying the pool of capital allocators, there is the potential for greater innovation and creativity, driven by a more diverse group of founders who can better address the needs and desires of a broader population since they are focused on bringing healthier, more sustainable and equitable products to market.
Wellness-seeking behavior is here to stay
In a survey released by McKinsey, research estimates the spend on wellness products and services to be more than $450 billion in the United States and growing at more than 5 percent annually. The survey also found that Consumers increasingly value and seek out products and services that can address needs across several wellness dimensions such as mindfulness and fitness, nutrition, and appearance.
Consumer Brands Leverage Top Talent & Influencers
Recently, Goodles, a female-led consumer brand that is disrupting the mac and cheese category, announced $13 Million in Series A funding. Why was this company attractive to investors? First, the product is absolutely exceptional. The team’s obsession with making the best product and really listening to their customers is truly remarkable. Led by the experienced founder and CEO, Jen Zesut, every team member exudes genuine joy, love, and an unwavering passion for the brand. Also inspiring is the involvement of celebrity founding partner, Gal Gadot—an award-winning actress, producer, and philanthropist. Gal not only embraces the mission but goes above and beyond what’s expected. It’s this remarkable combination of factors that made Goodles truly stand out to its investors, including Consumer-Focused Investment Firm, L Catterton and our fund, Springdale Ventures, which also led its Seed Round.
Consumer Investing Can Happen Multiple Ways
There are several funds today that focus on early-stage consumer investing. These funds, such as Willow Growth, Goat Rodeo, Brand Project and others, are very experienced in the life cycle of consumer products from building consumer products, services and digitally native businesses to shepherding early-stage companies through growth and exits. These types of funds require a larger investment, but many cool consumer brands participate in crowdfunding campaigns. Some of the top crowdfunding platforms include Wefunder and StartEngine, which recently bought SeedInvest.
Dan Graham and Genevieve Gilbreath are co-founders and general partners at Springdale Ventures.
Footnotes / Stats
https://www.insiderintelligence.com/content/software-startups-vc-funding
