DTC Investing, Tech Stacks, and Data Analytics with Taylor Brandt
Taylor Brandt is an investor at Headline (fka e.ventures), a global venture fund with investments in Acorns, Bumble, Farfetch, GoPuff, and The RealReal, among others. Prior to joining the team, Taylor was an investor at Red Sea Ventures and the Director of Growth & Analytics at Rockets of Awesome.
We sat down with Taylor to chat about her experience as both an operator and an investor, the big shifts she’s seeing in venture capital, and what analytics DTC operators need to track in today's competitive landscape. Needless to say, she’s seen both sides of the table, a rarity in the digital ecommerce ecosystem.
The Dynamics Behind Venture Capital
Venture funds all target wildly different outcomes at each stage, Taylor notes.
With seed funding, the focus is on the return multiple, which typically necessitates around a 40-60x return for a billion dollar company. While seed funds drive amazing returns for ecommerce brands, multi-stage funds see fewer and fewer investment opportunities in the space.
For a Series A fund, as valuations continue to skyrocket, it becomes harder and harder to drive a 10-15x return, especially if a VC can’t envision a $2B company in sight. Hot sectors like SaaS and fintech have consistently produced billion dollar acquisitions, but unfortunately, there hasn't been that many billion dollar DTC acquisitions.
Due to the trepidation on display from Series A funds—in regards to DTC investments—seed funds have similarly become wary, as they’re unsure if a markup from larger funds will occur.
Given this dynamic, the question remains: Does it make sense for DTC operators to continue to raise venture capital? Or, is it best to raise from angels, family and friends, and credit lines?
Taylor’s advice for DTC founders: Don’t let the venture market get you down.
Hearing "no" after "no" can be disheartening, especially because it's unclear exactly what funds are looking for. But, there's no malicious intent behind it. More so, funds are looking for pretty specific things to drive returns.
“Many ecommerce founders want to build the next unicorn. But, every time you go out and raise another dollar, the return expectations get higher and higher.”
DTC Tech Stacks, Insight, and Access
According to Taylor, DTC founders should prioritize finding an investor who holds them accountable and ensures better insight into key business functions—whether that's greater access to distribution or increased visibility into potential wholesale partners.
Put simply, great investors supply that bird's-eye view of an ecosystem.
In addition, investors should have a strong POV on a digital tech stack as it relates to best practices and new technology across the ecommerce landscape.
For example, if there’s a new supply chain or logistics tool that’s yielded strong results for a handful of emerging brands, it’s the investor’s job to provide the insight and access to that technology.
That tech stack can range from fulfillment and marketing tools to rewards, upselling, and payments platforms that have all gained traction in niche DTC circles.
As it relates to new tech tools and potential distribution channels, good investors might only have the insight and awareness that an arbitrage opportunity is coming to market. But, great investors share that insight, make introductions, and provide direct access.
However, Taylor notes that this should be all taken with a grain of salt.
Ultimately, founders need to realize that investors always index for performance.
If a company is floundering three years after the initial investment, investors might be able to allocate some time to working with the partner, but they also need to be spending time with their winners.
That’s just the nature of venture. Unfortunately, founders can’t expect all their investors to be in the trenches with them, solving problems side by side.
At the end of the day, investors all have to index scarce time across their entire portfolio.
“There are still a few investors that try to be there whenever their founders need them. I really try to be that partner to them, but I do want to share my honest take on fund dynamics and the venture ecosystem as a whole.”
Harnessing Data Analytics within the VC Landscape
As the former Director of Growth & Analytics at Rockets of Awesome, Taylor points out that operators should be spending more time in the weeds than investors.
In tandem, investors should be spending more time tracking leading indicators of their investment portfolio, which include:
- Payback period
- LTV to CAC ratio
- Contribution margin
- MoM revenue growth
- CAC trends by channel
- Annual recurring revenue
When Taylor worked at Rockets of Awesome, their leading KPIs were top-line revenue growth and contribution margin.
Her team looked at each factor that drove contribution margin at a unit economics level. And, they held weekly business reviews to go over their top leading indicators for weekly, monthly, and quarterly performance.
At Rockets, her team also got into a habit of harnessing data analytics to better understand consumer behavior.
For example, if a customer cohort was consistently buying less items, she would always look into whether or not they were returning at a really high rate. Then, Taylor would ask if it was a solvable problem or if they were just wasting their time going after a customer they didn't want.
At some point, brands have to stop trying to acquire the customers they don’t want and start testing out channels to acquire a new breed of customer.
That’s the profitable path forward.
“You always need to be asking: Is what we’re doing repeatable? Is it scalable? Are our customers happy? Are we building a product that makes them happy?”
- What to pledge
- How to improve
- Which tools will set you up for success
I think the most important thing brands can do in 2023 is to better manage their customer data—both ethically and effectively. There’s an opportunity for brands to know their customers better than ever before—a clear benefit for both the customer and the brand. When you manage your data correctly, you’ll create stronger and more personalized ads, creative, site experiences, and so much more.
This is a classic: Let the data guide you. Go where the buyers for your products are and communicate with them on a personal level (i.e. by persona and funnel position) and nurture those relationships (past, present, and future customers). It’s possible—all through data.
We recommend that Shopify brands analyze and update their websites using data-driven decisions. Using analytics tools such as heatmaps and scrollmaps can help brands better understand how customers are interacting with their store.
Store owners tend to make assumptions about the way customers interact with their website. Most never go back and analyze their design choices to find pain points or areas of opportunity. By using heatmaps and scrollmaps, they can see where real customers are clicking and concentrating their attention. Leveraging this data, brands can start to iterate on design and make their online store experience streamlined and intuitive.
Hotjar provides a simple way to implement heatmaps, scrollmaps, and recorded user sessions on your site, helping you acquire incredibly informative user data. Additionally, it gives you the ability to create on-site surveys, which allows you to obtain direct and often critical feedback from users about their experience.
Test various attribution models and analyze the impact on your business. At Fifty Six, we are always here to help our clients identify and optimize their approach—a critical step in any successful marketing strategy.
If I’ve said it once, I’ve said it a million times–Customer Lifetime Value. And even more importantly, Future Lifetime Value (FLTV). With the ever-growing importance of first-party data, it is crucial that brands take a good look at their CRM and FLTV metrics.
Stop allocating budgets to low-hanging fruit that doesn’t move the needle on conversion. Think about what’s really going to improve your CX and the return of undertaking different initiatives—not just on what’s top on your list of bugbears on the site!
One of the best ways to understand your customer behavior is by using HotJar. Their heat-mapping and screen recording tools shine a light on where customers are navigating to and from on your site, where they're rage clicking and experiencing frustration, and where conversion is dropping off within real life customer journeys and flows!
Understanding your customers’ pain points via data and analytics , will allow you to work with your CRO/CX Agency to solve customer frustrations and improve conversion.
Rewind backs up all product, customer, and order data for Shopify sites—essential since Shopify itself doesn’t provide this solution. It's saved so many of our clients time and money from administrative accidents.
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33% of customer service inquiries are pre-sale questions. What does this mean? If you’re not investing in customer service, you’re missing out on revenue-generating opportunities.
The benefits of elevating your customer experience:
- 10% to 25% increase in AOV for customers who engage with live chat pre-purchase
- 21x higher conversion rate for customers who reach out via Live Chat or SMS compared to other site visitors
- 87% of customers who have a great customer experience will make another purchase
- 72% of customers share positive experiences with 6 or more individuals
Gorgias is our favorite Helpdesk platform. They can reduce costs by 35%, primarily by decreasing the average ticket handle time. Their machine learning algorithms are trained on millions of ecommerce-related interactions across Gorgias’ customer base and provide accurate, automated replies for the most common ecommerce inquiries. This helps our agents resolve tickets faster, which provides the customer a seamless experience.
Trust your agency! Agencies do the same things across multiple brands and niches, so we see the trends and have the practice and experience!
Don't be afraid of data and insights. If customers aren't clicking on your emails, try a new CTA. If your ads are driving good metrics at a small spend, start scaling. If your customers are complaining about a product, look into QA! If the data tells you something isn't working, let it go and try something else!
I'm supposed to say Tydo, right? 😉
Double down on differentiation. There will be a lot of headwinds this year and standing out from the crowd will set you apart.
A picture is worth 1,000 words. A video? Probably millions. In ecommerce that value translates into engagement, acquisition, and retention—everything you need to impact your bottom line.
At soona, we've seen the we've seen the impact of creative and the continuous split testing of it yield results. Our resolution is to challenge ourselves and double down on innovation and creative optionality so that each brand we work with can distinguish themselves in a crowded sea of D2C ecomm. We'd love to see our brands share this resolution and keep pushing the creative limits.
Klaviyo. We're using it to power our email and newsletter at soona too!
Optimize your returns strategy! This can lead to valuable customer insights, enhanced user experiences, and increased revenue and customer loyalty.
Brands need to dive deeper into understanding their customers to set themselves up for success. Conduct research to gain insights into customer needs, preferences, and behaviors. By doing so, you can develop targeted strategies that will enhance customer experience and boost overall retention.
Right now I would say Gorgias. Having a good customer service tool is crucial to building strong customer relationships.
Start paying heavy attention to data, specifically around retention. We see a lot of effort put towards acquisition with the assumption that once someone buys, they are your customer forever. Instead, get to know your customer, understand their needs, and analyze their behaviors once they are on-site and judge their sentiment after they have visited. Work with a retention focused and data-driven agency to implement tools that contribute to repeat business and customer delight. It will pay dividends.
When surveyed, about 80% of ecommerce merchants think that they are delivering a great experience to their customers. However, when the same customers are surveyed, only 8% of those customers think that they are getting a great experience from the merchant. Now, more than ever, retaining loyal customers is an essential part of any online business and you should spend time with your customers to judge their experience with your website and products and offer improvements based on that feedback.
Tydo's report cards are an essential tool, along with Klaviyo for email and SMS, Recharge for subscriptions and memberships, Okendo for reviews and surveys, Rebuy for AI driven collections and upsells, Loop for self service returns... each tool is great on their own, but their strength as the ultimate tool comes from when they are used together!
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