ComCap held its second successful DNVB (digitally native vertical brand) Forum in Los Angeles this week, and we wanted to share key highlights for those that couldn’t attend:
DNVB brands speaking included DSTLD, Winc, Italist.com, and Tipsy Elves. Respective leaders of these companies provided the following insights into their success:
- Provide a clear value proposition and customers will be willing to accept paying for returns.
- Customer surveys during the product development process can drive product success. Launch new products / collections with an SEO mindset from the beginning.
- There is an advantage in basing the business in California near advertising platforms like Snap and Instagram.
- As a marketplace, increasing selection and UX can increase transaction
Capital providers – including Lightspeed, Provenance, H.I.G Growth, and Brentwood Associates – discussed what they look for in DNVB investments:
- Focus on knowing your core customer and how to find more them – don’t try to be all things to all people.
- Stickiness is important in core demographic
- Gross margins of 50%+, which usually means having your own brand.
- LTV calculated as gross margin after fulfillment. Previously investors had looked for a 3x LTV/CAC ratio, now seeking 4x to 5x.
- Being breakeven is important – some investors have a preference for material EBITDA for larger deals, but can accept breakeven for a business with scale and growth even if that would be below their traditional investment threshold.
Outside experts – including General Growth Properties, Union Bank, Moovweb, W Promote, and others provided the following best practices advice to attendees:
- General Growth Properties has used the decline of some malls to re-purpose stores into more productive uses including fitness centers, grocery stores, and other uses. GGP offers consulting services to emerging online brands that are looking to explore physical retail opportunities.
- Union Bank is experienced with working with online and offline retailers at different sizes and with different capital structure needs. From inventory facilities to $10m GMV online companies to comprehensive $100m+ term loans.
- W Promote advises focusing on your best CLV segments. Bid up substantially for most productive customers, bid down 80% for least productive. Focus on Facebook properties given 26% of mobile time spent on these. Leverage 3rd party data (i.e. Epsilon) and don’t use aggregate cost per conversion number.
- Moovweb – largest mobile seller in the US after Amazon and eBay. The mobile consumer is complex, demanding and fickle – one misstep and bounce rates spike. Employ a joint technology and agency approach to rapidly test options – especially related to major sales or holidays.