Before I share with you our guide on investing in consumer startups…
I’d like to talk to you about an opportunity to invest in a startup that was just featured on Shark Tank…is right around the corner.
They’re searching for everyday folks to become part-owners of their company.
And you don’t want to miss this.
Their suite of innovative office products promotes creativity and collaboration, and are selling like hotcakes!
What makes startups in this space like this so FIRE?
- They typically have a massive total addressable market (TAM)…
- There’s a huge demand for innovative consumer products (people love spending their cash)…
- And they usually address problems people can relate with.
That’s why so many of the companies to walk on the Shark Tank stage are hawking consumer goods products!
Now, we invested in THIS company before they aired on Shark Tank.
And you know what else?
They’re about to open another investment round, which means YOU too can own a piece of this very company…
Now that’s 🔥🔥🔥 !
Members of our Angel Investing service get the timely investment alerts delivered right to their inbox, and you can too.
You should always have your eye on the next big consumer product.
Simple Products, High Demand, Big Potential
One vertical I’m always watching, and believe all startup investors should be, is the Consumer Goods Sector.
While this is a large space that encompasses many products, startups in this sector face similar challenges and opportunities.
More than anything, recent shifts in consumer’s buying habits have opened many doors. In particular, home goods and office goods startups are finding success.
Legacy consumer goods brands are poorly positioned to compete with the new ways of doing business, allowing savvy startups to slip in.
Startups are cashing in on their customers’ desire for socially conscious, authentic, and novel products, and are meeting them across many channels to give them the convenience they desire.
You better believe, when we find a breakout startup in this (or any sector), our members hear about it first.
Risk and Reward
But, it’s not all sunshine and daisies for consumer goods startups. There are inherent difficulties in the business structure, particularly for those that choose a direct-to-consumer model.
As an angel investor, you need to understand the roadblocks these startups will inevitably face, and decide whether the team will be able to overcome them or not.
However, because the opportunity is so great, competition is on the rise. If you are keen to invest in consumer goods startups, you must learn how to separate the wheat from the chaff.
Don’t worry, I’ve got you covered.
I will show you the opportunities and challenges that consumer goods startups face as well as some big startup success stories.
The Consumer Goods Space
Consumer goods are familiar to us all but still could use a bit of explanation.
These are products bought and used by average consumers. Consumer goods are the end result of production. These are the things you will see stocked on the shelf.
Today, I will focus specifically on home goods and office supplies.
Home goods include practically anything people use in their homes. Things like furniture, kitchenware, home entertainment devices, household appliances, towels, and toys.
Office supplies include desks, staplers, whiteboards, note cards, calendars, breakroom snacks, cleaning supplies, computer accessories, and much more.
While some of these things may sound mundane and not exciting to you, sometimes it’s less about what you sell and more about how you sell it.
This is what makes this area special.
Terms to Know
There are a few terms you must know to understand this space.
You see, I’m not talking about Bed Bath and Beyond or Staples here.
The startups that get me excited are using innovative strategies to cut out the middleman and sidestep major corporate competition.
These terms are the secret ingredients to the modern consumer goods startup.
- Direct-to-consumer (DTC) – A strategy where businesses sell products directly to customers, bypassing third-party retailers and wholesalers. This is the big new retail trend. Think, Warby Parker and Dollar Shave Club.
- E-commerce – Selling or buying products on the internet. This sales strategy is difficult to pull off but is the backbone of many modern consumer goods startups.
- Social media marketing – The use of social media platforms to promote a product or service. This is an ever-evolving marketing strategy that has turned advertising on its head. The only way DTC startups have succeeded and managed to undermine legacy brands is through this type of advertising.
- Vertical integration – Combining two or more stages of production that are normally carried out by separate companies. For example, a company that manufactures furniture that is also a retailer for that furniture.
Even with these innovative approaches, challenges wait behind every corner.
There are a handful of challenges all consumer goods startups must deal with. For angels investors, these things will make or break your investment.
While DTC allows lean businesses to compete with giant ones, it can be expensive early on.
There is a reason that large retailers have acted as middlemen for so long. Partnering with a retailer allows startups to gain exposure quickly and cheaply. Also, startups benefit from existing marketing and distribution infrastructure, they don’t need to build them themselves.
Many consumer goods startups choose to work with large retailers for this reason. But, those that go the DTC route will face added early-stage costs in return for long-term profitability.
Rising Cost of Social Media Marketing
Up until recently, the cost of advertising on social media was a fraction of the price of traditional advertising.
Startups like Dollar Shave Club have had incredible success with online ad campaigns made for next to nothing.
Before, a couple of thousand dollars could get you a viral video that’s worth millions of dollars of traditional advertising.
Now, virtual real estate is crowded and expensive.
Social media marketing can still be wildly effective, but startups need to craft meaningful brand stories that connect to their customer base in a memorable way.
Big Retailers Are Creating Their Own Brands
Lastly, we have a big downer for consumer goods startups — the big brands are using your strategies against you.
Traditional retailers are creating their own products to compete in this space. They are building direct relationships with customers and focusing on vertical integration themselves.
This doesn’t spell the end of the consumer goods renaissance, it just means there are more variables to consider and only the fittest will survive.
I hope I haven’t scared you off and that you’re still excited about startup opportunities!
Don’t worry, the opportunity in consumer goods startups outweigh the challenges and risks.
Shifting Consumer Preferences
More consumers turn away from brick-and-mortar and big brand companies each year.
People will buy anything online, and brand experience is king.
Modern consumers don’t care what dish soap their mother used. They want a dish soap that speaks to them, aligns with their values, and connects to them across channels.
Never before have small businesses and startups had the sales potential they do now.
Consumers are waiting for startups to connect to them, and startups know just how to do it.
New Consumer Goods Startups Are Agile
Young companies aren’t bogged down by legacy infrastructure — they are agile.
While legacy brands must spend millions to reinvent themselves, startups start out fresh. This gives them the speed and flexibility required to compete.
Startups have small teams that aren’t hindered by bureaucracy. In these companies, change is fast and audibles frequent.
This gives startups the edge they need.
Angels and VCs Are Changing the Game
In the past, consumer goods startups would chug along with limited funding for years before reaching a level of capital that allowed them to make a serious business.
Today, with a booming angel investing and venture capital space, startups can reach those capital milestones in a month.
Early-stage investors like you and I are the catalysts that create big-leap innovations that leave big brands in the dust.
With investments from savvy angel investors, startups have incredible growth potential.
Startups Success Stories
Here are some consumer goods success stories. These startups used the strategies I laid out to sidestep big competition and connect directly with their customers.
Today there are a few big DTC mattress companies, but Casper was the pioneer and is still the reigning champ.
Trading showroom floors for web pages, Casper brings convenience to the mattress shopping experience.
After the customer has finished shopping from the comfort of their home — dodging salespeople and saving time — a wonderful mattress arrives at their doorstep.
An idea many would have laughed at ten years ago garnered over $239.7 million in funding before reaching an initial public offering (IPO).
2. Package Free
Package Free makes zero-waste home and office supplies.
With all kinds of solutions for reducing household waste or creating an ecological workplace, Package Free sells products that make an impact.
This company maintains strict oversight of its supply chain. If a vendor uses any plastic in the shipping of a Package Free product, they are charged a penalty fee. For a second offense, an even greater fee.
That’s how devoted this startup is to reducing waste.
Investors see the potential here. Around $4.5 million has been pumped into the company in just three years.
Everlane sells its own luxury clothing line online for a fraction of the price of traditional luxury brands.
With a heavy focus on its brand identity and connection to its customers, Everlane promises “Radical Transparency”.
This means they only work with ethical factories and the finest materials to provide a product that people are proud to buy. This makes Everlane stand out in an industry that has come under fire for unethical business practices.
This strategy is great for workers, great for the environment, and great for business.
Selling its small, curated selection of simple, luxurious basics, Everlane has raised over $18 million in funding.
4. The Honest Company
Unlike the other startups on the list so far, The Honest Company has managed to succeed as a DTC company as well as through big retail partnerships.
Founded by actress Jessica Alba, the company creates eco-friendly, transparent, and affordable products for babies and homes.
The company’s skincare products, diapers, cleaning products, and supplements, all carry the same message — honesty.
And it seems consumers and investors believe in The Honest Company.
It has raised around $503 million in funding and achieved huge commercial success in the U.S. and Canada.
Having seen the challenges, opportunities, and startups in the consumer goods space, I’m sure you can see the investment potential.
The timing is just right for startups that offer something special and connect to their customers. The biggest successes we are seeing come down to brand identity and vertical integration.
But, you need to be sure that a consumer goods startup can dodge retail competition and reach customers without hefty advertising fees.
Luckily, if a startup makes something convenient, socially conscious, and accessible, you can be darn sure the market is hungry for it. Simple as that.
We’re always on the lookout for the next hot consumer goods startup. And when we find one, our Angel Investing Insiders are sent all the details.