I predict large CPG conglomerates will acquire DTC brands just for the rich zero-party data on their customers. They spend millions buying the same data points from Mintel, SPINS, and other vendors.
I've seen companies raise at 8-figure valuations, pre-product, then be forced to raise a down-round. Meanwhile, Daymond John owns 17.5% of Bombas for $200k, which is now probably worth around $140M to him.
Hero Cosmetics, the brand behind Mighty Patch, sold for $630 million to Church & Dwight. They grew by expanding into retail, eRetail, and building a direct business simultaneously.
When selling a business, don't just think about what company would benefit from your customer list — that's thinking too small. Look for cost-saving synergies. Does your brand produce a product that can be manufactured in an existing plant, cutting COGS by 60%? That's a huge win for a strategic acquirer.
The angle that sold Dollar Shave Club: an investment banker told a Unilever executive that he has no idea who his customers are — only Walmart, Costco, and Target do. Figuring out what's in it for the acquirer makes it their idea that it's a good decision.
Some DTC brands' revenues have actually increased while their market caps have fallen by 90%+. Wall Street loves predictable, boring revenue — not revenue based on the fluctuations of Meta, trends, or things that fall under 'Want' vs. 'Need.'
Allbirds lost over $3.5 billion in market cap in roughly 24 months while revenues grew 7%. It went from a $4B+ post-IPO valuation to trading at a $200M market cap — significantly less than their 2022 revenues.
Kate Spade, under Tapestry's leadership, generated close to $1.5B in revenue. Coach, another Tapestry brand, was bought for under $600M and last year posted over $6B in revenue. The next generation of PE firms will likely model Tapestry's savviness.
Miguel was making $1M/year with his DTC brand Jack Archer. He sold it to OpenStore for just under $1M, and within 9 months the brand was on track to do $10M in revenue — after launching new products, building a mobile app, and testing 600+ variations of ad creative.
The days of raising $50M at a $500M valuation without a product, customers, or substantial revenue are gone for DTC and CPG brands. Venture money for unproven and unprofitable brands will mostly disappear.
When I bought Long Wknd, I stupidly trusted that product formulation, packaging details, raw ingredients, trademarks, and machinery would be fine. I only diligenced what I'm smart with — the Shopify backend, retention numbers, ads manager, reviews, and the tech stack. Almost everything I didn't check was broken.
Venture capital is ideal for businesses aiming to scale to $10B+ valuations. For sustainable, profitable DTC growth, bootstrapping or raising small amounts of capital is better.
M&A is a unique unlock for scale. Sometimes you're not acquiring the brand, but just the factory, the customer list, etc. More brands should consider M&A as a way to grow.
GymShark had a negative cash conversion cycle — they don't pay for product costs until after the customer has paid and the money has landed back in their bank account. They get about 3 months to pay their inventory back. This is also how Amazon and Walmart grow faster.
Ask your factory owner to take equity in exchange for a line of credit. I almost bought a brand where the factory owner would get 15% of the company in exchange for a $1M line of credit with 6-month payment terms, paying only factory cost — no margin on the transaction.
JOKR made $1.7M in revenue in July 2021 while losing $13.6M to do it. For the $1.7M in revenue, they spent $2.3M just to buy the goods. Sometimes venture money takes the fundamentals of business completely out of the picture.
When evaluating companies to invest in, if the deck is just product, team, and CAC/LTV projections, it doesn't intrigue me. I want to know how they plan to build the brand and get paid acquisition to be just one of 17 functions bringing in new customers.
Daymond John owns 17.5% of Bombas for $200k on Shark Tank — that's now probably worth around $140M to him. Meanwhile some companies raise at 8-figure valuations pre-product and are forced into down-rounds. If you can prove product-market fit, there are better ways to fund than giving away that much equity.
In a downturn, the most vulnerable eCommerce businesses are doing $4-10M in revenue with a low MER and high inventory cost — basically brands that are tight on cash flow. If that's you, either fix your unit economics fast or seriously consider selling.
If you raised a pre-launch round at a $10M valuation and you're only doing $2M in revenue, you can't raise another round right now. Use non-dilutive capital instead — it keeps you alive without destroying your cap table.
When I invest in early-stage CPG companies, I don't care about your TAM or how you think you'll disrupt something. Tell me about your CPA, click-through rates, what messaging resonates, and what audiences you can tap into. Moiz thinks the same — he just asked for Facebook Ads access before writing a check.
When selling a business, look for cost-saving synergies, not just customer list overlap. Does your brand produce a product that can be manufactured on a potential acquirer's existing production line? That shared infrastructure is where the real value is for a P&G-type buyer.
Distressed DTC assets are ripe for turnaround. Allbirds went from a $4B post-IPO valuation to a $200M market cap — a $3.5B loss — while revenues actually increased from $277M to $297.8M. The right operators could recapture massive enterprise value.
Wall Street loves predictable, boring revenue — not revenue based on the fluctuations of Meta, trends, or 'Want' category products. That's why DTC brands struggle as public companies even when revenues grow. FIGS used to be the darling DTC IPO, but even FIGS is having a tough time.
To get a CPG brand off the ground, you shouldn't need more than a friends and family round, a loan, or your own savings. The founders I know who built off savings own 100% and have full control. Be financially savvy: take financing loans, ask for longer payment terms, hire overseas when you can.
We aren't building tech companies where we can go acquire users — we're building brand equity, earning trust from consumers, and selling physical products. You can't just pump CPG the way you can a social media platform with VC dollars and expect the same outcome.
When acquiring a DTC brand, I trusted the Shopify backend, retention numbers, ads manager, reviews, and tech stack — all things I'm smart with. I stupidly didn't inspect product formulations, packaging accuracy, raw ingredient quality, trademarks, machinery, or the Faire business. With Long Wknd, the deodorant listed 4oz but was actually 3oz, raw ingredients were spoiled, and $17,000 worth had to be destroyed. Fly your manufacturing partner out and physically inspect everything.
When buying a brand that ships product from another country, account for Customs hold times. Long Wknd's container got stuck at US Customs for 3 months. We only arranged for the previous owner to ship product for 2 more weeks, assuming the container would arrive quickly. It didn't. We lost most subscribers and had tons of upset customers.
Long Wknd's deal was structured with virtually nothing upfront — instead paying the previous owner 25% of profits monthly. Sounds great on paper, but the operational reality was far worse than expected. An earn-out that protects your cash can still destroy you if what you're acquiring has hidden operational debt.
Richard Kestenbaum of Triangle Capital says brand value shows up in the numbers: lower CACs vs competition, lower total marketing spend with higher margins, and higher repeat purchase rates. That's how acquirers quantify 'brand' in purely economic terms.
Selling your business is like pointing at a random person in a crowd and asking strangers if they're attractive. When you reach out to 25+ potential acquirers, you'll be surprised by who's most attracted to your business and for what reasons.
There are many DTC 'zombie companies' running breakeven or with small losses that can survive for a while but don't have meaningful prospects for a sale. Only companies with both high growth AND high profitability are selling for compelling multiples right now.