DTC companies need ‘something beyond a good product’ – Glossy

Susan Lyne, BBG Ventures managing associate and co-founder, has had a front-row seat to the ups and downs of enterprise funding for girls.
BBG Ventures (BBG stands for “Built By Girls”) started in Sept. 2014 with its first two funds backed by AOL. BBG Ventures is an early-stage fund targeted on shopper tech startups with feminine founders. It usually leads or co-leads seed or pre-seed investing rounds and invests $500,000-$1 million. Since its inception, BBG Ventures has met with over 8,000 manufacturers and has invested in roughly 70. Of these 70, notable magnificence manufacturers embody Mented, Winky Lux, Glamsquad, Lola and, most just lately, Gen-Z skin-care model Starface by way of its third fund.

Covid-19 has not made fundraising for girls any simpler, although there have been some brilliant spots. Pitchbook information discovered that funding to feminine founders was down 31% in 2020 in comparison with 2019, whereas funding for all-male groups dropped by simply 16%. Yet, the proportion of totally female-founded companies that acquired funding elevated barely in 2020 from 6.2% to six.5%. And for the primary time, startups led by Black and Latinx girls crossed the $3 billion threshold in complete funds raised, in line with Project Diane which tracks funding for BIPOC girls.

Lyne spoke with Glossy about BBG Ventures’ new fund and funding thesis, the motivation behind the Starface funding, and the long-term trade impacts of Covid-19.
What is the main focus of the brand new, third fund?The first two funds have been extra shopper basic funds. But now we’re targeted on companies that may actually reshape the way in which we stay. We search for founders who’re constructing scalable options to large issues that hundreds of thousands of individuals face. The 4 focus areas that we’ve focused for this fund are well being and well-being; the way forward for schooling and work; climate-friendly merchandise and platforms; and neglected and rising shoppers.
What do you search for within the companies and founders you spend money on?We search for founders who’ve three issues: They’ve obtained imaginative and prescient and the flexibility to think about a firm that might go all the way in which, they’ve the flexibility to execute, they usually’re compelling storytellers. An ideal founder has to have the ability to persuade different folks to hitch them, to recruit a group, to draw traders and to construct partnerships, however additionally they have to inform a story to the shoppers they’re making an attempt to achieve.
We undoubtedly contemplate the scale of the general market. Female spending energy is $6.5 trillion. And girls are anticipated to regulate two-thirds of the U.S. shopper wealth inside the subsequent decade. But even whenever you begin taking a look at very underserved sectors, they’re big markets. Black, Asian American, Latinx spending energy is $4.3 trillion. In two years, Gen Z goes to overhaul millennials as the most important technology.
How has the buyer panorama shifted since 2014?The face of the buyer is simply quickly evolving. They’re more and more intersectional, and positively extra acutely aware of the merchandise that she or he buys. And it’s extra multigenerational; there are girls over 50 who’re driving the acceptance of latest manufacturers and the expansion of latest manufacturers in ways in which weren’t the case earlier. But they’re nonetheless fairly often underserved.
There was additionally a time period after we first began BBG Ventures the place a DTC model may get traction shortly utilizing social platforms to drive natural development, and the market wasn’t so crowded. That has modified. It’s a very crowded market, and it’s an costly market. DTC companies need to have one thing beyond a good product. They need to have values which might be aligned with new shopper preferences and, in some circumstances, very sturdy content material advertising, in addition to a distribution benefit.
What you in Starface?Starface, which has additionally actually damaged out shortly, understands this Gen-Z shopper in a means that different manufacturers don’t. They launched a skin-care firm that began with an pimples product, which remains to be their hero product. It’s the primary optimistic pimples model that claims to clients, ‘Don’t really feel dangerous about your self as a result of you have got a pimple. Stick a star on it. Take a image of your self and really feel nice going out.’ That angle shift resonated with Gen Z, and in addition made [the company] type of a social media darling, as a result of everybody likes to {photograph} themselves within the yellow stars.
What long-term impacts do you anticipate from Covid-19?As horrible because the pandemic has been, I feel there are some hopeful issues which have emerged as a end result. We’ve seen the willingness of shoppers to undertake new behaviors, and that’s the place we’ll see the longest-term affect. People who didn’t think about using e-commerce and have been principally pressured into it are actually saying they won’t return to their former [in-store shopping]. There are undoubtedly some constructive behavioral shifts that shall be nice for enterprise capital and, extra importantly, are going to allow sensible founders to create companies which have lasting worth.