DTC Investing, Tech Stacks, and Data Analytics with Taylor Brandt

December 1, 2021
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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 Acorn, Bumble, Farfetch, GoPuff, and The RealReal, among others. Prior to joining the team, Taylor spent time as 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, big shifts she’s seeing in venture capital, and what analytics DTC operators need to be tracking. Needless to say, she’s seen both sides of the table, a rarity in the digital ecomm ecosystem.

The Dynamics Behind Venture Capital 

Venture funds need to target wildly different outcomes at different stages, Taylor notes.

When it comes to seed funding, it’s all about the return multiple, which necessitates around a 40-60x return for a billion dollar company. While seed funds can still drive amazing returns in ecomm brands, multi-stage funds see fewer and fewer investment opportunities. 

For a Series A fund, as valuations begin to skyrocket, it becomes harder and harder to drive a 10-15x return, especially if a VC can’t envision a $2B company in its sights. It’s important to note here that hot sectors like SaaS and fintech have consistently produced billion dollar acquisitions. Unfortunately, there just haven’t been that many billion dollar DTC acquisitions. 

Due to the trepidation on display from Series A funds as it relates 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 operators to continue to raise venture capital, or go down the route of angels, family offices, and credit lines?

Taylor’s advice for founders: Don’t let the venture market get you down. It can be disheartening because it’s unclear what funds are looking for or why they’re saying no, but there’s no malicious intent there. It’s just that they’re looking for pretty specific things to drive returns.

“Many ecomm 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, a founder’s priority during a fundraise is to find an investor that both holds them accountable and ensures that they have better insight into key business functions, whether that’s greater access to distribution channels or increased visibility into potential wholesale partners. Put simply, great investors supply that birds-eye view of an ecosystem.

In addition, it’s critical that investors have a strong POV on a digital tech stack, especially as it relates to best practices and new technology across the commerce landscape. For example, if there’s a new supply chain or logistics tool that’s yielded strong results for a handful of recent 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 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. Great investors not only share that insight, but make introductions and give direct access to them.

However, Taylor notes, this should be taken with a grain of salt. Ultimately, founders need to expect that investors index towards performance. If a company is still floundering three years after the initial investment, investors might be able to allocate some time to working with the founder, but they need to spend time with their winners. 

That’s just the nature of the job. Unfortunately, founders can’t just expect that their investors will be in the trenches with them, solving problems side by side. 

At the end of the day, investors 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 spend more time in the weeds than investors. In tandem, investors should spend more time tracking leading indicators of their investment portfolio, which include:

  1. Payback period
  2. LTV to CAC ratio
  3. Contribution margin
  4. MoM revenue growth
  5. CAC trends by channel
  6. 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 was driving contribution margin at a unit economics level. 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, were they returning at a really high rate? They would ask themselves if it was a solvable problem, or if they were just 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 other 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?” 

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