1. Mission, vision and values
2. Competitive advantage/ differentiation
3. Metrics and Business performance reports
4. The benefits of first-party data
5. Plan for stickiness of product/ retention
6. Organic channels to scale, not just paid acquisition.
You have a direct-to-consumer brand and need money to grow it. If you have explored your options, VCs are your best bet because many funds now are focusing on innovative consumer products in an attempt to innovate traditional industries. They help with expertise as well as capital, which is quite important for founders like you who have to learn everything fast.
So what do VCs want to see to consider your brand for investment? Apart from your website and manufacturing details, that is.
Mission, vision and values
Investors want to see you have a long-term idea for your business.
Mission – why are you launching this brand? What do you want to change?
Vision – how do you plan on getting there? What methods are you going to use?
Values – what your brand stands for
Why do investors care about these things? Because having them means you are in for the long game, you’re devoting passion and effort to something you believe in. And those things are what inspires the most loyalty among customers, more on that in a bit.
Competitive advantage and unique selling points
VCs are not very keen on investing in traditional businesses. It just doesn’t make sense for them since they’re after fast growth, which can only come from something new and exciting. Sliced bread has already been invented.
So when pitching your brand, make sure you have what makes you different crystal clear.
- What do you do in a new, better way?
- How does this new way improve the user experience?
- Why aren’t the other doing it and how quickly can they start replicating it?
Metrics and performance reports
It is very important to monitor everything that is going on in your business from the start, even if it looks too much early on. This way, you will accumulate lots of data that can show positive trends in your brand’s development and strong points to anchor your pitch on.
What metrics are a must?
- Revenue – daily, all time, by market
- Website traffic and conversion rate, cost of acquisition
- Average order size, time between orders, number of orders per customer, customer lifetime value
Investors look at those numbers and make conclusions about business viability, potential for scalability, product-market fit, marketing performance and more.
Bonus: The benefits of first-party data
As a DTC brand, you have one very precious asset – access to your data first-hand, without any intermediaries. That’s one of the reasons VCs are excited about brands like yours, the abundance of own data and the ability to measure every action. Businesses that are not DTC and digitally native struggle to gather all data needed from all tools and offline activities.
You have your:
- Revenue trend reports
- Customer demographics, behavior on site
- Full interaction history – what has been looked at, what has been ordered, returned, etc.
- Product performance reports
- Traffic channels reports
Severin Zugmayer from Speedinvest says leveraging data from day one is crucial for strategic decision making and urges founders to work with DTC data tools instead of gut feeling.
Plan for retention
When coming up with your strategy, retention-focused brands get extra points because high retention takes pressure off acquisition and helps growth in a cheaper way. If your product is designed for repeat purchases, your cost of acquisition (CAC) will be offset by the repeatedly gained margin, thus turning you profitable earlier.
Another metric of retention potential is your approach to your customers. If you’re building a community and becoming a part of their lifestyle, you are working for loyalty and that’s a good sign. The more intimate the relationship with your target audience, the better it is for brand building. Funds like Samaipata focus exclusively on such brand qualities and have their own Customer Love Framework.
VCs will ask you for retention rate, engagement levels, length of customer lifecycle and average order value to evaluate your retention efforts. These numbers will show them how loyal your customers are.
Working organic channels
If you are able to show that you have free (organic) channels successfully bringing traffic and sales, you have a VC’s ear. Since paid acquisition is costly, they want to see that you have a more effective channel.
The problem with paid acquisition is that it scales only when fueled with cash. VC capital is given for growth, but investors are not happy to see that you just take their money and give it to Facebook.
On the other hand, if organic channels like content generate sales for your brand, you prove interest in your product and scalability.
A pitch deck with answers to those questions stands a much better chance with VCs than a business presentation about milking consumers so prepare well!