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?”
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