Evaluating Funding Options For Consumer Brands (RCD Ep11)

L-R clockwise. Leon Bailey-Green (Editor, Upper Clash), Kevin Davis (Creative Director, The Designlab), Sheena Amin (Director, UKTV Ventures), Paul Adrian (Founder & CEO, Mojo Skin and Hair), David Lockwood (Co-founder, The Tapestry Agency), Rob Bridgman (Founder, Snug), Freddy Ward (Co-founder, Wild Cosmetics)

RETAIL COMMERCE DISCUSSION, Episode 11
Evaluating Funding Options
For Consumer Brands

Scroll down or click here to watch videos. Find us on LinkedIn and YouTube.

SYNOPSIS

In this discussion founders of consumer brands shared experiences, advice and opinions on funding options – from venture capital, to private investors, equity-for-services, inventory financing and running on cashflow. The founders of Mojo, Snug and Wild shared all. (Videos below).

Rob Bridgman, founder of sofa-in-a-box brand Snug, thinks brands in the home space taking venture capital might find themselves being pushed towards becoming tech, rather than furniture, businesses – “Being a tech company unlocks a different valuation multiple” he said.

“I’ve met lots of people that have wanted to invest, but thank god they didn’t. You start speaking to them and within five minutes they’re trying to run the business” said Mojo founder Paul Adrian, who thinks founders should look to emerging financing options to raise capital.

Natural deodorant brand Wild recently closed its second seed funding round led by JamJar Investments. Speaking of his new venture capital partners the brand’s co-founder Freddy Ward said “They’re not looking for 100x, I’m sure they’d love it, but they’re realistic and willing to let founders grow at their own speed.”

Paul, Freddy and Rob were joined by Sheena Amin, Kevin Davis and David Lockwood for this discussion hosted by Upper Clash editor Leon Bailey-Green.

Sheena, a director at UKTV Ventures, explained the rationale behind the company’s venture fund which offers direct-to-consumer brands advertising airtime across its portfolio of TV channels in exchange for equity.

Similarly, Kevin, from creative and e-commerce agency The Designlab, spoke of tie-ups between agencies and brands, when the former take an equity stake in the latter as part payment.

As marketing budgets increase post-investment, David, from marketing strategy company The Tapestry Agency, offered tips on customer retention.

VIDEOS

Scroll down for the long edit.

The returns investors are looking for – 2 minutes 43 seconds

In the home category, Rob thinks investors will push companies towards being a tech company to unlock higher valuation multiples. The financial return is not the main driver of Sheena’s venture fund – there’s a wider strategic goal in proving TV advertising works. Freddy says his investors are realistic about growth. Kevin says it’s important to get the split of fees and equity right in services-for-equity deals.

Interference from investors – 2 minutes 16 seconds

Freddy says his investor JamJar act more like a family fund rather than a venture capital firm. Rob says too many companies become investor (and market) centric, rather than customer centric, after raising investment. “I’ve met lots of people that have wanted to invest, but thank god they didn’t” says Paul. Sheena reveals how her venture fund interacts with companies in its portfolio. Kevin says agencies need to understand taking a stake in a brand, as part payment for services, does not necessarily give them control over the company’s direction.

Equity deals, inventory funding and venture capital alternatives – 2 minutes 59 seconds

Rob warns founders against following the crowd when it comes to raising venture capital. Freddy mentions Uncapped as an alternative funding option for consumer brands. Paul urges founders to look out for growth schemes provided by larger retailers, as well as suggesting Gapcap and Market Finance to access finance. Sheena shares how brands without budget can advertise on TV through equity deals. Kevin explores the brand-agency relationship, when the latter takes an equity stake in the former.

Negotiating with investors and presenting the opportunity – 4 minutes 15 seconds

Freddy talks about his first time negotiating with investors – and offers advice for those on the journey of courting funders. Paul says founders need to spend time learning how investors operate in order to get negotiation ready. David offers tips for presenting the market opportunity. Kevin says founders wanting agencies to take equity as part payment need to have a credible proposition.

Different routes for different founders – 1 minute 41 seconds

Paul urges founders to go as far as they can without selling any equity. Rob reveals Snug was started for a five figure sum, and is entirely funded on cashflow – no funding taken, no equity given. Freddy says crowdfunding can get you in front of investors but it means a lot of people on the company’s CAP table.

Glamorised venture capital funding VS Profit – 1 minute 20 seconds

Freddy says there is a movement to being impressed by continued profits over raising investment. Rob says raising VC money is glamorised, but sensible economics is coming back. David says for most businesses returning customers are the real profit drivers.

Post-investment marketing – analysing spend – 2 minutes 7 seconds

As marketing budgets increase post-investment David has wise words for brands, urging them to focus on retention. Sheena explains the process for analysing the results of TV advertising.

Starting out – 1 minute 20 seconds

Paul, Freddy and Rob talk about the beginnings of their brands.

The Long Edit – 30 minutes 17 seconds

In this discussion founders of consumer brands shared experiences, advice and opinions on funding options