What Investors Look For in a DTC Brand: Norwest's 10-Point Framework

to me it comes down to trust. Brand is synonymous with trusts.

“One of the things I get asked is what are those attributes that create a breakout brand?”

Because we're able to sit in our sea and meet a ton of companies every year, we've been able to distill it down to this framework of 10 attributes. Successful brands really find a unique way to reach customers. Whether it's through social media, it's through a wholesale channel relationship, it's through a strategic partnership. They are really just savvy about how they figure this out so that they can offset

those expensive customer acquisition costs. Wherever you think the brand is, it needs to be one to two places above that. This episode is brought to you by TripleWail, the AI operating system for e-commerce. Just a quick gut check for brand owners and media buyers. Have you started your Black Friday

Cyber Monday planning yet? If the answer is not yet, you're not alone.

But the brands that win BFCM aren't the ones scrambling in November. They're the ones planning right now. And here's why it matters. BFCM keeps getting more expensive. Last year, ad spend climbed faster than demanded CPMs went up, and the season stretched from a single weekend into a full month of promotions. Show up unprepared and you spend more to reach the same shoppers right when your margin matters the most. TripleWail built a free resource to help the BFCM hub.

It's like a command center for planning your most profitable Black Friday, with everything in one place. Real benchmarks from tens of thousands of brands so you know what performance should actually look like for brands just like yours. Free tools, to set goals, and forecast outcomes, strategy guides, and checklists covering ad performance retention, and conversion. An AI powered tactics you can put to work before BFCM weak hits. The best part, it's completely free

and there's no log in required. Go to triplewail.com/bFCM-26 and start building towards your most profitable Black Friday Cyber Monday today. Hello and welcome to the DDSC podcast super excited for a little bit of a different conversation today. I'm chatting with Lisa Wu who's a partner at Norwest. She has invested in consumer brands from more than a decade and early investor in jet.com, ritual, and remedy today. She's walking us through

the 10 things that Norwest looks for in a breakout consumer brand Lisa. Welcome to the DDSC podcast. How you doing? I'm good. Thanks so much for having me here. Beautiful. Let's start with maybe an overview

“of the investment space right now. I think, you know, everyone is going crazy for AI and the”

multiples that can come with that. But in our pre-interview, you mentioned that if AI is the defining tech trend of this generation that health and wellness is the defining behavioral trend, can you make the case up for investing in this side of consumer right now? Yes, that is a line that I love to educate internally because all of my partners are chasing AI deals and we continue to have a lot of conviction around science, back to health and wellness. I think we really feel like

there really isn't a better time to start a science, back to health and wellness brand. Health and wellness, it really is a defining behavioral trend of our generation. It's driven by just consumers recognizing that they are much more proactive. They are taking more control of their health in a more self-directed way. You have the millennials aging and their taking care of their parents, and this is making them reflect on their own health journey in adopting products and services

10 to 15 years earlier than their parents. And it's just a mind shift that has happened just post-pandemic where people are just recognizing that it's important to invest in one's health as well. So I also feel like there is just a counterbalance that's happening with AI, you know, and so

“as AI is taking off, I think it actually creates consumers seeking more embodied health experiences”

to counterbalance it. So I kind of think they rise together as well. And so we have a very deep thesis on science back to health and wellness. Very cool. I'm excited to dive into that. But just

for my elucidation, I've never taken funding myself, everything I've done has been bootstrapped,

and I know Norwest runs venture and growth equity out of one fund. Can you explain the difference and why that matters in the consumer space? Yeah, I think that this is one of the unique advantages Norwest has as a platform is that we have venture capital and we also have private equity. And what I say then for consumer founders is that we can meet founders wherever they are in their journey. So venture capital is companies that often make take one or two or three rounds of financing

before they become profitable, but they are trying to create breakout brand leadership and so they're investing ahead of it in their growth. And then you have private equity, which are companies that

year or year about but out executing in the particular niche that they're in, of course, the best are the intersectionality of both, which is companies that are high growth and profitable. And so I sit as a partner on the venture team. So we are really thinking about just emerging tailwinds from the consumer. And we look at not just one tailwind, but converging tailwinds that are happening at once in order to create a title wave. And then we are trying to create

companies that are leveraging those tailwinds in order to be the next generation brand leader. And so one of the unique things of having both asset classes in the same fund is that as a venture investor, we don't fund consumer product companies like tech companies, right? And these are tech companies that raise a bunch of capital because the ceiling may be less capped and therefore might end up in the public markets. I think that there was a series of D to C companies that were founded

maybe eight to ten years ago that were funded by investors who did not really have deep expertise in consumer products. And therefore funded these companies like tech companies, which means that they just gave them lots of capital in order to get to market. And what that, there's, you know,

that can create just, I would say poor unit economics underneath the business because you basically

would have investor money to acquire customers. And if someone just gives you a bunch of money to acquire customers, you may not be thinking about how do I actually efficiently acquire these customers and create loyal customers as opposed to buying a bunch of mercenary customers because

“you have to hit your revenue targets. And because you continue to raise money, usually the last”

round valuation continues to increase and then the bar becomes higher. And so I think you see a series of companies without naming them that raised from a bunch of tech investors that continued to raise at high valuations that feel like they need to chase lofty revenue and profitability targets. And then eventually you feel like they have to go to the public markets because they can't access capital from, I think, just a traditional investor base that wants the

sustainable unit economics when you're at a certain scale. And so our view is that if you actually have the right strategy at the beginning, it really should only take one to two rounds of capital in order to create kind of breakout brand leadership. And then you can operate just profitably

and drive your own destination. And then ultimately sell to a strategic which we think is the best

way to maximize and exit if you're a consumer products company. I remember when I first kind of was breaking into this space where I was really holding up ritual as an example of someone of a brand really doing recurring supplements in a great way that the building it into the lifestyle of a consumer so that you feel happy to have your ritual supplements out on your counter kind of thing because they look so cool in there. I'm curious, having been through that, I don't know if that was

“the first phase, second phase of, you know, unicorn supplement companies. And I think we're now in”

this era of groans and I am eight and all of these things. I'm curious, what are some of the things that you think have maybe changed about the space since ritual? Absolutely blew up. So maybe we can first start with ritual. So ritual for the, don't know, you know, they're one of the largest not largest private women's health platforms. They're profitable. They're on track to achieve,

I think about 300 million retail sales and how they started is that they started with a prenatal

and the whole platform, the idea behind it is that they want to meet women at each need state from pregnancy to postnatal department of laws which we just launched into. And so when I think about consumer investing and what creates a enduring consumer brand, to me it comes down to trust. Like, brand is synonymous with trust. And once you have that trust, it gives you the foundation in order to create a long-term relationship with this customer, as well as offset customer acquisition

costs because you trust the brand, you love the brand, you're going to talk about it more organically with your friends and family circle. And so with ritual, they meet a, you know, a population that is very, in a vulnerable period, whether it is pregnancy or perimenopause. And trust is built best during times of vulnerability, right? Because you're able to help folks when they're feeling vulnerable, that is the foundation of trust. And then the beginning of that long-term

“relationship with them. And so that's what's really been the foundation of them is creating that”

relationship, which we really feel like is a moat. And then we do all the different things in order to continue to build trust, which is we get the certifications, like the clean purity or reward, awards, and just all the certifications that can meet that skeptical consumer where he or she is and say that there's trust behind this brand, we have five clinical trials, they're published

helps this woman at different needs states. I think that what has changed since then is that

“now it's just so fast, you can get to scale, right? Like I think the timeline to create brands”

have just continued to compress just with the morality, with social, with the different agencies you can work with, et cetera. And so you have some of these other brands that demonstrate that the well can be actually quite deep, right? And you don't need to have a large brand platform, you can have a deep well. And that can be the likes of grooms, it can be the likes of neutrophil, it can be also like a liquid IV, and this actually, if you think about it, it's a lot of the brands

that evenly veric wires, is that they've recognized that the well is deep, and so if you're able to show just strong product and brand market fit at rapid speeds, then they can take that asset

and bring it out to their distribution channel and make it a billion-dollar brand in a matter of

years. I think the counterpoint of that is that you also have a set of strategics that just don't know whether these brands that are just coming out of nowhere, and all of a sudden they've become a hundred million in three to four years, if they're going to be around three to four years after that. And so then you have the counterbalance of brands that have been around, rituals have been around for over 10 years, they've had a very consistent messaging around

their brand and loyalty, there's more data and years to show that this is a brand that will likely be around in another 10 years, and so it creates a brand platform that can really become like a woman's workhorse for strategic who is interested to get into women's health too. So it's a little bit of both, right, is that because you're able to see the set of companies now start two, three years ago and grow very, very rapidly, it does create a bar because you

see these opportunities, but then the strategics are going to wonder, will this be around two to three years too? And so then what are the different layers that you've been able to demonstrate

“to show that this is a durable and scalable brand that will still be here in 10 years time?”

Because yeah, they can be spun up so quickly with AI and chat and cloud. I'm sure there's an absolute gold rush of supplements that have sort of seen what this recent round of brands like IMA and Grint has done and is rushing to market. So having those differentiators

actually to make you stand out from the crowd becomes absolutely essential.

Yeah, and I think that's one of the benefits of AI is that when I think about ritual, they rank number one in AI search across various product categories, and it's because they've put in all that detailing over the past 10 years that the engines are in LMS are able to surface up and say that you can trust this brand. And so feel free to say no comment here, but one of the things that we've reported pretty heavily on the general catalyst deal for IMA were basically

their funding funds up to 70% of IMA's marketing spend each month and IMA covers the additional 30. This kind of sounds a little bit like the challenging issue of funding acquisition spend that you kind of mentioned off the top. What are your thoughts on that deal for both general

“catalyst and IMA? I think it'd rather say no comment only because I haven't dug deep into”

really have a first party view on it. I would say just generally as an investor, something I do

look at is like how much capital has this company raised and have they been able to spend it efficiently in order to acquire customers. I think a lot of the proof comes down to the retention, right, is that you can grow in acquire customers. I think I'd be curious about what is the actual retention rates, how long are these folks subscribing, how long are they there after 12 months, et cetera, to see how high quality these customers are? Make sense. Okay, well let's jump into the framework

that Norwest uses to find brands that have this winning framework to foster this winning framework. Maybe walk me through what you're looking for from the money side of things for winning consumer brand. Yeah, so one of the things I get asked internally and also by founders is what are those attributes that create a breakout brand? And so because we're able to sit in our C and meet a ton of companies every year, we've been able to distill it down to this framework of 10 attributes. And so

just going through this, you know, the first is we look for an authentic father, just founding teams that are experts in their field. They can speak with authority and from experience and that really gives them a unique ability to build trust with consumers. The second thing is, you know, early mover advantage, which means being first-ish to the market, to establish just really strong brand and name recognition. I think that when you're first-ish to the market, you get PR brand advantages

because people want to talk about you, people want to write about you, et cetera. And so if you're early entered, you're able to really create that new category and thought leadership. And an example

And as I mentioned earlier, we're looking for not just one tailwind, but a few tailwinds that are swelling at the same time in order to create a bit of a wave. And so with hair, you have the rapid rise of gilp, you want adoption that impacts hair quality. You have women moving through different hormonal stages, whether it's pregnancy or very menopause, menopause that impacts their hair quality. You have the oils on lifestyle that creates stress, which impacts hair. You have just the

lack of nutrient density in the moderate diet that impacts hair. You have just a broader shift in aesthetic and a longevity mindset that creates more attention and destigmatization around hair. And so that, for example, is creating a swell into this category that we think will continue to

gooey up the next generation of brand leaders in that space. I love that you say first-ish

“because it's not, I think a lot of people think they have to be first. But quite often,”

I've done a lot of podcasts where people where I have been the second or third entrance into this space. And that can actually be beneficial then being the first. Talk to me about what you mean by first-ish. I think two things come to mind is that it's really hard to be first when you're doing consumer products, give it how many consumer products are out there, right? And so if you're going to do something innovative in hair care, personal care supplements, there's just so much competition

out there. And so you can't really claim yourself to be like the first supplement company, right? And so where you first-ish in terms of recognizing a change in consumer expectation behavior and in working along that side. And if there was another thing that you just mentioned,

what was your, what was just talking about brands that are beneficial to not be the first,

to even see the mistakes and be able to reposition yourself against that first mover. What I love to think about is the mattress companies, is that there was a set of mattress companies that had raised from venture investors and therefore spent a lot to acquire customers.

“Because you have to be constantly spending in order to figure out which customers actually”

in market for a mattress. And so they essentially created a lot of awareness around it, because venture investors were investing in the space, reporters were writing about these mattress and a box companies, etc. And what happened was that those folks that spent a bunch of their marketing spend much of their dollars in marketing that the second and third and fourth-ish players were able to draft off that, right? And so they could draft off just the education that these

brands were having in the market and have more, I think, sustainable unit economics underneath because they they have to spend into just the education of the consumer. It reminds me of friends with Tony Yu from Vesi and he was explaining to me one time about the nature of like when you're when you're trying to get a new shoe to work. It's like you need to be building off of the silhouettes of shoes that have already existed in a way. So people know what

they're looking at in a way. So like so you can just see this trend in shoes from larger to chunkier to more minimalistic. And really when you're thinking about a product, you're thinking about not copying the product, but being in the same product silhouette, which I thought was an interesting way to view things. Yeah, yeah, yeah, I love that. Yeah, because again, like it is expensive to educate and create a category or a new behavior, right? And so if you're working along just the

incremental shifts that are happening in any, whether it's with the other technology or consumer perception or consumer mindset, then that's already happening and you're just sitting on the wave

and surfing it. So. Beautiful. What's the third element that you look for?

So the third is just building a best in class brand. You know, so achieving best in class is not only being best in class in terms of quality innovation, performance and customer satisfaction, but what I also look for is just companies that can raise the industry to a higher standard, right? Because then you're seen as the thought leader in that category. People are looking to you, not only from your existing category, but also from adjacent categories, because you're doing

something that is challenging the status quo that's creating just a better way to do business for the industry and for the consumers. So that would be best in class brand. The next is rooted in science. You know, one of the just consumer shifts that we just noticed is that over the years, the consumer is increasingly skeptical and they increasingly want demand of just proof of efficacy. And this is correlated with the explosion of just consumer products.

How easy it is to start companies these days. The rise of AI. All of this just enhances just the consumer skepticism. And so how do you actually build that trust via the science, right?

“Which is you should be investing in patents and in clinical results in case studies and just”

other proof points that can show that when a consumer comes to your site, why am I buying this product? Why does it work? And those things are really kind of immediate so that you can convert that customer. How do you avoid your first point here around authentic founder? You have the term

with hand waving and maybe some like light science. What is what is science-washing essentially?

Science-washing is folks that understand this is where the consumer is heading and potentially because they've already been in market. So it's really hard to do it natively and therefore needs to just start grabbing by grab the term, grab the clinical proof, grab some surveys and try to make see if that's enough to convert the customer of clinical proof even though it's a survey, etc. And so, you know, there was greenwashing, there was cleanwashing and then there's science-washing.

“And I think that this comes down to the authenticity of a brand, right? Is that how much is actually”

there because the DNA at the brand is around science and efficacy versus how much is just land grab because they realize they're losing the trust of the customer and therefore need to

figure out how they can start just attaching themselves to these tailwinds. I just think the

consumer is a consumer is like a very natural marketer. Like they have a really good BS meter, they can really tell authenticity. And so that's where I think that they're able to send science-washing, but these brands they have to do something about it, right? Especially if they don't have that DNA in that. And so, you know, we have this company Remedy, which is founded by a dermatologist, Dr. Munib Shaw, and he's, you know, the most followed dermatologist and social media,

but that was started, dermatologists founded from day one, right? And so it's not like it's it's very authentic in how we've just started from the beginning with the right values and integrity

“and focus on that business. And so that's why I really like investing at the earlier stages,”

whether it's the seed or series A, because there's more that we can start still bringing into the brand

DNA so that it is authentic before it reaches mass market and it's harder to unwind. versus later stage, it's like if you're already off these tailwinds, it's really hard to get on it in a very authentic way. Makes sense. This episode is brought to you by Focal, the AI asset management platform for creative teams. Everyone working in D to C uses an LLM now, but almost everyone uses it in their own silo.

Your media buyer and your creative strategists each have their own chats and neither knows what the other knows. In creative, that can get expensive real fast. Brands winning on meta-intic talk are shipping dozens of new ads a month across different angles and formats because that's what the

“algorithm rewards. Keeping that pace only works if the whole team knows what's winning.”

Try pulling up last black Friday's ads and figuring out which ones actually drove sales. Most teams I talk to end up digging through drive, slack and a pile of spreadsheets. Focal ties add performance to the creative itself across every ad it ever ran in. You can find any asset in seconds with AI search and run your whole production process from brief to approval in the same platform. Brands using Focal ship four times more creative

with the same headcount and get from brief to live ad 50% faster. AI is already taking over the slow parts of creative work like tagging, reporting, and drafting briefs, but an agent is only as good as the context it can access. With Focal MCP, your whole team and the AI tools they use work from the same creative memory. Everything you've tested and what actually won. So the next brief starts from what already worked for your brand and you can make more of what sells.

Ddc podcast listeners get a free 14-day trial of Focal and 20% off annual plans when they sign up in October. Head to focal.ink/dtc that's [email protected]/dtc. The fifth is something obviously near and dear to my heart which is differentiated distribution was what we talk about largely on this podcast. What do you mean by it from the normal west side of things? So it is just so expensive to acquire customers. Anybody who

is just trying to establish brand recognition recognizes that. It is an intensely competitive environment out there and it is just expensive to get that incremental customer at every stage of the business. And so what we look for is that successful brands really find a unique way to reach customers. Whether it's through social media, it's through a wholesale channel relationship, it's through a strategic partnership. They are really just savvy about how to figure this out so that they

could offset those expensive customer acquisition costs and kind of create awareness and distribution in a more efficient way. So a lot of our brands that we start these days tend to be attached to somebody such as a clinical social authority like a doctor Shaw who has spent years just building trust on his platform by combating misinformation in a very authentic way. And so with the trust and credibility that he's built when a new brand comes,

This goes back. I mean consumer investing has come down repeatedly over the years to

like the distribution advantage. You know, even if you go back to the gaming companies back in the day, when there was the rise of Zenga, right, and there was like a spot of companies that grew up on Facebook notifications when it was very easy to just add your friends via the Facebook social graph. Once that shut down, it was very hard for new game companies to scale. And so as an investor, we're constantly looking for a, like, what is the unfair distribution advantage this company has at

this point in time, right? And there is something that I typically believe that it's really difficult to build a brand of paid marketing alone. You really if, like, want to develop a brand that's rooted in love that has, you know, organic customer acquisition that. And it is possible to do it

“through pay, but you need to have really amazing retention then, right? Because then you're able to pay,”

but then the lifetime value of this customer offsets those customer acquisition costs. Otherwise, it is just a battle out there. And so the more discerning a team can be around where there is still opportunity that the others have not found out in order to acquire customers,

that's going to make a breakthrough business. And it's got to have an organic component to it.

It has to have a flywheel component to it in a lot of ways. Like you say, you can't, if you're spending 30% of your revenue on marketing, it's hard to create a flywheel, whereas if you have an organic presence, if you have, I think of Bush, but my friend who runs Bushball, and their professional business that they have, where they're selling to estheticians, and then estheticians are selling them. It's the same kind of concept as affiliates,

where you can kind of create, you have creators, and you can escalate them to affiliates, and then then they're sort of the gift that keeps on giving in that you don't have to re-acquire them every single time. They're going to keep driving even when you turn the add dollars off, which is really important. Yeah, yeah. And one of the, since we're talking about science back

“health and wellness, I think one of the strategies that ends up evolving over time is that the idea”

of influence the influencer, right, is that if you have a someone who is a clinical authority that has millions of followers, oftentimes they have also other who are looking up to their platform too, because they kind of want to continue to develop their reach too. And so you have kind of, all these eyeballs looking at kind of the goat of the industry, and that allows you to very, to say cost effectively, influence the influencer, because everyone has their own pockets of trust

that they've built. So. All right, number six. Yeah, so number six is we've kind of touched about it in different parts of our conversations so far, but it's natural over replenishment. And so something that we really focus on on the venture side here is we are looking for retention. And so transactional commerce is hard to scale. It's doable, but it's hard to scale, because you're spending all this money to acquire a customer if they're only going to buy with you once.

“Then you have to go constantly re-acquire the next customer, etc. And what you want to do is”

acquire the customer the first time, and they've already kind of bought into the trust and

the journey, and now they are a customer that will spend, you know, and buy multiple products and services via you over time. So we really look for those categories that have just natural repeat rates that you can build a strong base of recurring revenue of high value repeat customers. And this also allows companies to spend more on marketing as well. And so I think this is why you continue to see just strategic interest in the categories of personal care and supplements, because there is

strong repeat behaviors that happened in these categories. And they are dependent sometimes on the other factors that we've already talked about. Like I think about the I don't have a lot of brands and I'm super loyal to one of them is salt and stone. I just love the way Santal smells and I don't have any other deodorant that's ever smelled that way. So I'm like super, but also the brand is so good. So it's like the product is great, the brand is great, the experience is great, and that

leads to being like, okay, well, why would I buy another deodorant? I'm just going to keep replenishing this. Yeah, and I also think yes to those three, and there's a fourth, which is the affordability component. So one of the areas we really love is the premiumization of mass, because if you're able to nail those things and oftentimes when I counsel founders is wherever you think the brand is, it needs to be one to two places above that, right? Because people don't buy products, they buy the best

versions of themselves. And so if you're able to create a brand that has an aspirational component to it, and is affordable, you're going to have these vectors where the consumer's going to come in, because they continue to feel like this brand delivers on just the experience. But then it's also affordable. So you're not going to spend the cognitive load to try to compare and pay up for it.

Yeah, affordable is such a relative thing, because I never, it's the deodorants three or four times

more expensive than what I'd buy in the grocery store. But it sort of changed my perception of what I'm willing to pay to smell great in a way, right? Which is a really great magic trick that the best brands do, where they are able to kind of move your perception of the whole category of the product to a higher price point and be better for it in a way. Like I'm not going to buy old spice now because it's inferior to me. Right. And then that is where we say it's the premiumization

of mass, right? Because you're going from old spice to that solid stone. And so that we think is a big opportunity. I mean, it also has to come back to the expectations that the consumer is that consumers have access to information online and with that, they're able to recognize

“that they don't have to pay prestige pricing for efficacy. I think this is bond the rise of”

deodorant in a positive way when deodorant is there and people realize they can get efficacy at affordable price. It makes them actually feel smart, right? And smart and in power. And that actually helps continue to drive the tailwind around the premiumization of mass. And you've got up, it's, I think, one another example, true earth. One, I was like the first to the market with like the laundry strips. It's a friend of mine's company. I think he's at least on the outside of

it now. But then shortly after I sort of had committed to buying laundry strips, another brand popped up and it was half the price of the true earth laundry strips. And I had no, you know, I had no compunction about moving to the half price version because it hadn't maybe anchored me in, you know, the brand or the product itself. And so you got to be careful, I guess, when you premium, when you premiumize a product category like that, that you can actually hold

the consumers interest of a lower price consumer moves in there or competitor moves in there.

Yeah, which you always have to assume that there's going to be a lower price competitor coming to,

right? And this is where the investment in brand matters, right? And so I think a lot about just, you know, how do you build that emotional connection between the company and its customers? Because they may be costs that don't pencil out economically in the short term, but they drive long-term value. And so the brand equity is really important in a place where everything gets commoditized. All right, talk to me about the strong margin profile that you look for in winning

“consumer brands. Yeah, this is important if you want to just continue to find scale. And so if in the end,”

the, if you think that can North Star is to be an omnichannel brand, which is to be online as well as offline, because you want to meet the consumer wherever he or she is, as well as continue to find that incremental customer, which may be shopping offline at a target or a Costco instead of online, you need to have the margin profile to sustain that. And so what could happen is that you could, a lot of founder let brands, they come to the market because they want to use better ingredients,

create a better experience, et cetera, and that can take away from the margin profile. But yet find the first set of customers. I think you just have to be really thoughtful of like, how do I deliver the value proposition? Well, maintaining north of 60% gross margins, for example, which tends to be a bar in a lot of these replenishment categories, so that you have the optionality to be able to go into wholesale and still run as sustainable business over time.

And so sometimes I see founders just shortcut that because they're not thinking so far into the future, but it's important from the early days to think about that, so you can have the right product margin, so you don't have to reformulate later on, et cetera, so that you can just continue to expand your channels over time. So just be thoughtful about how do I get as high of a margin profile as possible while delivering on the brand promise so that I can go on the channel in more sustainable

way over time. The next one is, you know, optimize financing, we started our conversation about this, but the financing needs really very widely, depending on the business and the business model, and what you really want to do is just pursue a financing strategy that's appropriate for your business, right? And so back to our earlier conversation is that if you're a consumer products company,

you probably don't need to raise $700 million in revenue and take the company out to the public

markets, right? Like if you're really thoughtful about these different aspects of creating the differentiated distribution and a category that has natural run of plenishment and high margin,

“then you should probably get profitable pretty quickly and then it's opportunistic of whether you”

want to take that incremental growth round in order to just build the leadership that you're continuing to have. And so it's just be thoughtful about just how much capital that you raise and it's not a vanity metric, it should be something that actually supports durable economics over time because that will save you a lot of headache down the road when you want to exit the business, but maybe you phrase too much capital at high valuations and your investors want you to

there. Do you have a preference when you're working with a brand, would you rather,

which, you know, in your perfect world is a brand bootstrapped to $5 million and you guys come

in there and at that point it's the right time to scale things up. Do you have a preference for

“the brands that you work with and they're financing profile that they've architected to that point?”

I think this is why there is the beauty of the Northwest platform. I know this sounds self-serving to say, but because we had this, it allows us to meet them wherever they are. And so if you're bootstrapped and you're profitable and we've seen very successful businesses that have that profile, that is a good fit for a private equity team. And then if there is just some, you know, differentiated advantage, we can figure out about this business, then then I'd rather actually

give them some capital upfront to just get out to market and be able to have the resources to hire the best team to invest in the clinical studies and do something truly differentiated to create

kind of the splash in the momentum around it. So the answer is no. Yeah, you can, you could pursue

either path. Very cool. Next one is awareness of buyer appetite, you know, what, one of the things that a founder will eventually learn is like, whether you create a bootstrapped profile of business or when that goes public one day, it takes the same amount of time, you know, like because you're obsessing about it all day long. And so in the most valuable asset and commodity in

“our life is our time. And so if you really want to maximize strategic value, which is, you know,”

create an interesting business that generates healthy revenue and margins that somebody will buy, which that's where you get the extra kicker, right? Like in you, you scale a business to 100 million in someone pays by times revenue for that, that 100 million revenue business can sell for 500 million. But if you build a business that no one cares about to buy, then you're kind of stuck at this 100 million, but still could be a great lifestyle business, right? It's cashflow and

etc. So they're both successful paths. I think it's just, if you're going to be talking to an institutional investor, they are eventually looking for an exit and they're eventually looking to maximize the entire value of the business. That this is where you just want to play in lanes where you know there is appetite to make acquisitions and they're done at premium multiples. And which is why you are seeing that in personal care and in supplements, which is why you see a lot

of investors flocking to that area. You know, other areas like a peril is that it is just harder, even though you can have breakout brands there, is that it can trade at one time's revenue multiple and sometimes even lower than that too. And so, you know, 100 million revenue business, you can either choose the lane that trades at a one to two times revenue multiple or you can choose the lane that trades at five times revenue multiple and that's going to be the difference of

which lane you play in terms of the buyer appetite. Beautiful. I imagine some verticals are just like with a peril for instance, it's going to come with a lot more, it's going to come with a different set of headaches than something like supplements in a way, right? You've got sizes, you've got breakage, you've got the fact that you probably have to get to retail in order to achieve either your own retail or wholesale in order to get to that nine figure plus mark,

whereas I feel like a good supplement funnel, you know, can really be run through digital ads a

“lot easier than something like a parallel. Is that true? Yeah, I think that's true. I think there's”

more loyalty that can be created. Of course, we're talking generalization, so this is not in all companies that are big of a parallel companies that can be built, but there is more loyalty that you can have in supplements. There's something in the beauty category that's called the lipstick effect, and that means during times of recession, the consumer can still buy that lipstick and feel beautiful. I think that that's the case in supplements, too, right? Is like during times of recession,

if you actually look at the data, supplements actually continue to grow and be one of the more durable categories through down periods in the market. And that's because you're able to continue to buy that supplement and investing your health, feel like you're investing in your health, and maybe that's going to save you the trip to the doctor. And so there's just more resilience

in the category in general. And the last one is something I think founders are always interested

in hearing when you take money, how much should you pay yourself, how much operational discipline should you have? Yeah, so I, you know, when we talk about pain, pain oneself is that I do think that you want to create enough that they can feel comfortable, and that they're not just worried about day-to-day life, so they can sit and be very strategic in just the business. But you do want to be disciplined. And this is goes beyond just what is pain themselves. It's just how do you actually

focus and drive a sustainable growth? You know, a lot of our conversation comes back to how do you

scaling with profitability? And that requires a lot of skill and discipline. And oftentimes this can

be also solved by hiring just great executive team, too. Right in the beginning, you mentioned

“headwinds and I think our story tailwinds, not headwinds. And you, you know, personal care and beauty”

have supplements seem to have these headwinds. How do you, what are their headwinds do you see in the space our tailwinds that you're focused on? Oh, there's so many that we're intrigued and also making investments in. And so one would be gut health. I think consumers are increasingly aware about the importance of having a healthy gut microbiome for living a healthy life. And so this has led to a couple of investments in fiber. We think that that is a big opportunity. And just

different ways to consume fiber, to have consumers reach 25 to 30 grams of fiber. It really is a miracle nutrient. That's a lot of body of knowledge around it. And so we think that that's going to be a continued wave. We still like precision probiotics as it relates to gut health, too. And so companies that are potentially finding new strings to bring to the market because a lot of the probiotics that consumers take today is actually just two strains that are marketed over and over again

called lactobacillus and bifidale. But there are many species in our actual guide. And so we think that there are opportunities to bring just more precision into that category. We love men's health. Like I loved hearing about just all the different consumer products that you yourself are using

“and men's health in personal care. I think Dr. Squatch showed which was acquired by Utilayer”

4.5 billion that I think there was a thought that men didn't care about personal care, but that

was a true. They just didn't have a brand that was coded to them that created a world for them. And so I just think that men are increasingly becoming proactive about their health and they are getting information online outside of traditional health care. And even if I interview men in our office, they're taking centrums in one of the days. Like this is these are brands that women, there's so many more options than those brands, which are just modern. It just shows that there

is an opportunity right now to create a brand similar to a ritual. But for men in various need states that is male-coded to them and has to talk about strength and energy and cognition and appearance and sexual function, all of these things that men want to stay their prime longer. I think that that's going to be a really interesting opportunity. And we like nice smells. We're allowed to

“like nice smells. I think for years and years and years, we were sort of like, I personally,”

it was always looking for the unsented thing. And then it's really the salt and stone addition

to my life where I'm like, wow, I really like smelling nice. Right, right. What I love about that is just hearing how much of the scent allows you to talk about salt and stone in such, you know, would such for birds too, right? And so it's true. We continue to see opportunities in just pantry revolution. It's correlated with our interest in fiber as well, too. But we're just seeing every generation just seeking functional benefits in everyday snacks. Of course, this is driven

by the rise of gelpy ones. But you also have exit lately with simple mills unless you're evil both acquired for north of 800 million or about 800 million. Hair health is another one. I mentioned that as well, too. I think that that is another area that we're going to see just continued consumer demand for. I relevant for me until we get a GLP one for hair growth, which I'm sure is just around the corner. Yeah, I heard. I think yeah, you got to do more digging.

I've heard that this is out there. So I know it is. I got to get, I'm going to get on the experimental list. Cool. I think a parry amount of, you mentioned it in your own products that you have in your portfolio. But I feel like underserved areas like parry of menopause is got to be a massive tailwind as well. Just sort of this. Women's health in general being an underserved, under-understood, under diagnosed sort of situation, and parry of menopause being specifically

among that being a really big tailwind. Yeah. And I think that comes back to something we think about when we think about next generation brands is large markets that are opaque with a lot of customer confusion. Because then you can come with education to create that more trusted relationship with the customer in parry menopause and menopause is one of those areas that has been underserved, under-funded, and there is just a continual destigmatization of the category as women are talking

about it more online as well to women and men. And so that's definitely a big opportunity. Well, this has been super interesting. I'm curious if, if someone to come to you and say, "Okay, I'm developing a whole world of products. I've got 10 products that are queued up they're all in this specific space versus someone that came to you and was like, "Okay, I've got this killer one product." And like, do you want brands that are thinking about things

killer product that they want to focus on? I think the answer is both, but it's really important

“to start on the one killer product. I really believe in focus and wedges into competitive markets”

and startups are naturally a scarcity constrained environment, right? You have scarce capital, you have scarce timing resources, and so focus helps just compounds the ability to create success. And so what I do like is first just understanding what is the wedge, right? Like what is the problem that we're trying to solve for consumers and what is the initial wedge of a product that potentially stands for the value proposition of the brand? And then where can it go over time, right?

Like you might have it where that well is very deep on that one skew, but because we're thinking about optionality, we also want to figure out is like if we win the trust that this consumer at this product, where else can we continue to build adjacent trusts so that we can navigate this consumer

through that journey and increase their basket size and lifetime value over time? So the answer is both.

Very cool. We could talk about this stuff all day. I'm curious for our audience members. We have a lot of $5 to $50 million brands who listen to this podcast. What's maybe your message to them, who are maybe a brand who maybe took a seed round, but hasn't done a series A, what would be a great outcome for you from those $5 to $50 million brands listening to this podcast right now? So come back to these 10 attributes, right? It's kind of use it as a framework to check

where you are green, yellow, red, and where those red and yellow might need to flip to a green.

“And so it's okay to, I think, $5 to $50, it's more about where does the continued growth come over”

time in a sustainable way, right? It's like if you're $5 million, what are you going to do to get this to a $10 million to a $20 million? And it can be slower growth because as you as long as you're continue to double, eventually that base will be $30 million and then you're $60 million, right? And so I think it's just continuing to figure out how you're focused in the market. What is your differentiation? Like a differentiation that you can kind of hang your hat on and feel you can

continue to build along that differentiation over the next five years. And do you have the right financing structure in place to just continue to invest into growth too while you're trying to drive both growth and profitability? And so yeah, so it ends up being, you know, fortunately I think with consumer products what I like is oftentimes someone has solved the problem that you're trying to solve. And so what I'd say is like get resourceful too because oftentimes someone has

solved that problem, they have unlocked that bottleneck and as long as you just find who that person is or the two or three people that you could talk to in order to unlock that bottleneck and move to the next phase that will be a huge safety net as you can do to build the business Thank you for coming on the D to C podcast today. If people want to get in touch with you

“or understand a little bit more about Northwest does, what do you recommend they do?”

I'd recommend just email in me. My email is LWU and wp.com. I'm always happy to chat.

Nice. All right, well, thanks for coming on to explore this with me today and we'll have you on again soon. Great, great. Thanks so much, Eric. Thanks so much for listening to today's episode. If you're not a subscriber to our newsletter, you can do that right now at direct to consumeralloneword.co. I'm Eric Dick and this has been the D to C podcast. We'll see you next time.

Holiday starts early on Walmart Marketplace. Apply to sell and get your inventory to Walmart fulfillment services to prepare for millions of holiday shoppers. Build your seasonal assortment with customer favorites. Products Walmart customers love and are actively searching for. Add eligible customer favorites to your catalog and you could receive up to 100% off referral fees on those items. Get holiday ready with Walmart Marketplace visit Marketplace. Walmart.com/dtcpod

and sign up today.