Navigating the VC landscape: How brands can attract investment
In the world of brand entrepreneurship, venture capital investors bring crucial financial resources, to accelerate growth and increase market share.
Emerging brand start-ups often lack the capital required to gather serious pace. However, nowadays VC involvement is often not just about cold, hard cash. They provide brands with access to strategic guidance and mentorship, as well as a huge network of valuable connections.
Know Your Value
At the heart of every attractive brand lies a compelling value proposition. VC investors are looking for brands that offer something unique, addressing a gap in the market and demonstrating their potential for sustainable growth. This could be IP, a trade secret, a supply chain - but also the brand itself.
“Everybody has product fit but not necessarily product market fit,” says Collin Eckles of Natureza. “I see lots of exceptional products, but the real crux is - are people willing to pay a price for your product that allows you to make a profit? Brand is paramount. We have to believe in these brands at the point of investing.”
The Craftory’s Olivia Cramer agrees: “We’re looking for brands with strong product market fit - we test that by growth, retention and ability to scale efficiently in each channel. Are they able to price at a premium relative to their peers?”
Emily Smithies, Fearless Adventures, says, “We look for an established brand with a loyal following. There has to be a proven market fit, and be moving into profitability at the point where we take on the relationship.”
Know Who You’re Talking To
It’s important to understand the key differences between VCs and do your research to make sure you’re aligned with their values, vision and mission.
VCs will usually have a style of investment which is favourable, but not exclusive, and will have certain criteria that need to be met before a relationship can blossom.
Olivia Cramer explains The Craftory’s different approach: “We only invest in mission-driven FMCG brands across five themes; Environment, Health, Society, Democratising Access and Championing Self Esteem.”
Nico MacDonagh of VGC Partners says that they, on the other hand, like to look out for brands, technology and IP operating in interconnected sectors within the consumer and digital media ecosystems (including luxury and lifestyle, health and wellness, sport and entertainment, content and gaming.)
For Emily Smithies of Fearless Adventures, “Passion is the thing that all our brands have in common. We’re looking to invest in businesses with a specific product that solves a problem, and with a purpose.”
Demonstrating an understanding of what each VC favours will help ensure you find the right partner.
Showcase Your Team
VCs need to know that they’re partnering with the right people, so getting to know the team behind the brand is essential.
Collin Eckles: “People are good to know at early stage pre-seed - we’re evaluating people and determining alignment. The founder is important, and do they have a good team?”
Nico MacDonagh adds: “For us, the founder and his/her experience are some of the most important decision-making criteria for investment. We look at their track record. Can they inspire potential customers and other employees? They need to sell the story, to believe in the brand.”
Emily Smithies, from Fearless Adventures, explains, “One of the main points of due diligence is around the founder. In terms of the kind of person we look for, it’s someone who’s driven, has resilience and isn’t afraid to be a little fearless.”
Importantly, The Craftory’s Olivia Cramer says it’s never too early to meet the right people: “We’re happy to meet people early on - it’s good to make friends and build that relationship even if they aren’t at the required revenue level yet.”
No two VCs are the same. Some invest in purpose-driven brands, while others will look at championing diversity in their portfolio, but when beginning a partner search, almost all will look for something unique at the centre of the brand and - importantly - an ability to operate cross-channel.
“We don’t have a uniform approach and will always look at brands on a category-by-category basis,” Nico MacDonagh of VGC says. “But we get excited by the synergy and opportunity where brands can operate across channels in a way that is unique to them.”
With the D2C market seeing a recent decline, investors now want to see brands using a more flexible and future-proof omni-channel strategy.
Olivia Cramer explains: “D2C represents a single-channel risk - and the economics have changed, supply chain is more expensive and shipping costs have gone up. There is an acceptance that for a lot of brands it can be part of a strategy - but omni-channel has deeper roots.”
Collin Eckles, MD of Natureza, loves to see brands start in D2C, as it allows them to test their products and get customer feedback. But it tends to be de-prioritised as brands grow. “We need to see that brands are enlisting an omni-channel approach - but more than that, the ability to think by channel,” he adds. “What the right channel is on day one won’t necessarily be the right channel in five years.
We saw how Covid obliterated many businesses overnight. The only way to future-proof a business is with an omni-channel strategy.”
Emily Smithies, from Fearless Adventures, agrees, “D2C can become quite a crowded market, an omni-channel approach is important across all channels because it allows brands to connect with their customers in different ways.”
Show you can scale
One thing all our VC friends agree is that you need a clear path to profitability. And it needs to be believable and achievable.
“If you have a clear path to profitability you’re much more investable,” says Collin Eckles.
Olivia Cramer says of The Craftory's approach: “We look at ‘what good looks like’ in each category - we benchmark where the company is, where they could get to, where they believe they can get to.”
“For it to be venture backable there has to be a line of sight for it to become a very large business,” adds Nico MacDonagh of VGC Partners. “Scale needs to be achievable. That doesn’t need to be entirely worked out when they come to pitch but there does need to be visibility on how a brand might get there.”
Emily Smithies of Fearless Adventures explains that scalability can mean lots of different things, depending on the brand’s product or market.
“Being scalable isn’t just about top line revenue growth, it can mean diversifying revenue streams, making efficiencies or expanding overseas.”
Behind every successful brand is a watertight marketing plan, even when the landscape is challenging.
“Marketing strategy is so important and is where we can often help. As a business, you can have a great brand but if you fail to connect with the consumer, then everything can fall apart.” she adds.
Nico from VGC agrees, “ We think there’s one area which is a key growth driver - and that is marketing, yet often it’s seen as the easiest line to cut.”
Paint an honest picture
To win over the confidence of potential investors, brands need to showcase evidence of traction, product market fit, and provide data-backed insights over a period of time. Metrics could include revenue growth, customer acquisition, organic engagement, or product development.
But whatever evidence you bring, it’s important you paint an accurate picture.
“One mistake we see founders making is not being transparent about risk or opportunities, often painting too rosy a picture,” explains Olivia Cramer.
“There are going to be things wrong in every business - we want to work with founders who have an honest picture of where things can be improved. We want an open dialogue about it - we’re a good partner - we need honesty in the relationship.
“We’re writing big cheques so we need to have a decent amount of data to base our decision on.”
But it doesn’t have to be perfect. In many cases, the VC can help.
“With some of our investments we need a lot to be in place,” explains VCG’s Nico MacDonagh, “but with some we can work a bit more with founders to put those initiatives in place.”
The Craftory, meanwhile, has its own team of in-house experts - offering support and expertise in brand, digital, product innovation, strategy, retail, impact and ESG and strategic landscapes. Olivia Cramer explains, “We are flexible in how we partner with a brand, with emphasis being on the network of support as opposed to solely financial funding.”
“We don’t just provide money,” adds Emily Smithies at Fearless Adventures, “We provide a whole platform of support that wraps around the business from the day we invest, which includes financial accounting, data analytics, fulfilment, recruitment and growth marketing expertise.
The expertise provides more value and mentorship than the cash.”
Amplify your brand
Throughout our chats with our VC investors, the strength of the brand was a recurring theme. Brand identity and positioning is not just about connecting with customers, it’s a key component of how VC investors evaluate a potential partner.
As businesses scale, gaps or flaws in the brand are quickly magnified, with the potential to hinder that growth. So where investors believe in the business and in the team behind it, but sense the brand identity could be stronger, they collaborate with design and branding agencies to craft compelling identities, visual aesthetics and user experiences that are multi-channel and scalable.
This is an alignment of vision and values that cannot be overstated for the strength of a brand.
Is your brand ready to take the next step?
At Robot Food we’ve worked with many start-ups who’ve gone on to achieve Series investment to scale globally and accelerate growth. We’ve worked directly with VCs on developing new brands and we’ve developed our own brand, Stories & Ink, that has attracted investment as well as strategic partners, and is currently launching in North America.