D2C
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‘The best VC on Instagram’ is now VC-backed
About 18 months ago, Jenny Gyllander created an Instagram account by the name of @thingtesting.
The premise was simple. Gyllander, who was at the center of the London startup ecosystem as an investor with the British seed fund Backed.VC, would upload photos of interesting direct-to-consumer products with a caption that served as a bite-sized review. The experiment began with Birchbox, a provider of curated boxes of beauty products that rose to prominence amid the subscription box hype of yesteryear. In her short review, tailored perfectly for the Instagram generation, Gyllander admitted to being “like 10 years late to this much hyped subscription-everything party,” adding that “after two boxes and ten products, only three products were relevant to me.” Her honesty, and perhaps more importantly, her brevity, garnered her a small following of venture capitalists, founders and consumer-brand enthusiasts.
Since that first post, Gyllander has featured and reviewed more than 100 products on her Instagram account — which today counts 32,800 followers. And she quit her day job and began building an Instagram-inspired, full-fledged review business.
“I found something I am very, very passionate about,” Gyllander tells TechCrunch. “Finding the D2C niche was for me a little bit of a Holy Grail. It’s where brands and startups align for the first time in a concrete way.”
With a $300,000 pre-seed investment from angel investor and Homebrew co-founder Hunter Walk, who previously called Thingtesting “The best VC on Instagram,” early Spotify investor Shakil Khan and more, Gyllander wants to create a full-scale D2C review platform with a team of reviewers and content creators, and a portal for her loyal followers to write and submit their own reviews. She compares what she envisions for Thingtesting to that of Rotten Tomatoes. Akin to the popular website for movie and television reviews, each product review on her future website will include a Thingtesting score and an audience score. The goal is to help consumers shop smarter and filter through the D2C noise.
“People are confused right now by the sheer amount of products launching,” Gyllander said. “I want Thingtesting to be a filter for people to consume better … It’s a role department stores used to have back in the day, but nobody has really filled that role in the online world.”
Gyllander, already making money from what was once a side project, has plans in store to generate significantly more revenue. Currently, she’s capitalizing off Instagram’s Close Friends list, which the social media hub launched last year to allow users to share content to fewer people. Gyllander, like a slew of other Instagram influencers, however, quickly realized an opportunity to monetize content using the feature, a trend explained in detail in a recent report from The Atlantic.
Gyllander charges a lifetime fee of $100 to her followers hoping for a spot on her Close Friends list. Those followers are then provided exclusive content, including behind-the-scenes looks at her product review journeys. So far, 300 people have been granted access to the exclusive group as others sit on the waitlist. Gyllander explains she hasn’t green-lit every request to enter the coveted group because she wants to maintain a sense of community as the account grows in popularity. Early next year, she hopes, she will have launched a Thingtesting website and a new subscription-based membership tier targeting D2C connoisseurs, investors and anyone interested in a front-seat view of the booming D2C industry.
As Thingtesting morphs into a digital review platform and expands from the bounds of Instagram, Gyllander will have to work harder to differentiate what she’s built from other review sites and D2C blogs. Her secret weapon, she believes, is her authenticity.
“It’s my honesty,” Gyllander said. “And it’s the fact that there’s no payment involved from the brands and that I’m not being paid to review products. That’s something quite rare in the Instagram world today. There aren’t that many accounts that are just talking about new products with non-monetary incentives.”
Since launching with a review of Birchbox, Gyllander has shared her thoughts on Magic Spoon, a D2C cereal company: “one bowl kept me full for hours,” she wrote, ultimately concluding she wouldn’t continue eating the cereal. More recently, she referred to the D2C aperitif brand Haus as “stunning;” wrote a lukewarm review of the blue light-protecting eyewear brand Felix Gray; and posted a glowing summary of Dripkit, a D2C coffee brand.
To secure a spot on Gyllander’s grid, a product must bring something new to the market, as well as boast killer branding and packaging. The former VC says she tries out about 20 products a month and shares official reviews of four or five.
“The majority of people today, when it comes to modern brands, they have their first interaction through an ad or an influencer telling them about the product,” Gyllander explained. “Discovery is in a weird place right now when it comes to the general consumer.”
It’s difficult to imagine a venture-scale business within Gyllander’s vision for Thingtesting. But one should never underestimate the value of an exclusive and hyper-focused network. Gyllander, in a short time, has created a meeting place for D2C aficionados and venture capitalists and, as she’s proven, her thoughts are worth paying for.
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Startup ads are taking over the subway
If you’re a New Yorker, one of the easiest ways to keep up-to-date on the latest consumer products — furniture, beauty products, mobile apps, you name it — is to hop on the subway.
Even before you board, you may find yourself walking through a station filled with colorful startup ads. And once you’re actually on the train, you may find yourself surrounded by even more of those of ads.
It felt very different when I first moved to New York in 2013, back when the only companies that seemed to buy subway ads were local colleges, law firms and sketchy-sounding surgeons. Over the next few years, I noticed that the companies I wrote about in TechCrunch were starting to show up on the subway walls.
These ads are managed by Outfront Media, which has an exclusive contract with the MTA and says it’s worked with more than 150 startups and direct-to-consumer brands since 2018.
“Startups and DTC brands, now more than ever before, are looking for ways to raise awareness and gain market share among a heavy competitor set,” said Outfront’s chief product experience officer Jason Kuperman via email. “For these brands, it is all about testing and learning, and leveraging out-of-home (OOH) [advertising] and advertising on the subway allows them to do just that.”
Kuperman added that when they launch their subway campaigns, many of these startups are unknown, so they “find value in a permanent place to advertise that people pass through every day.”
From out-of-home to in transit
John Laramie, CEO of out-of-home advertising agency Project X, agreed that there’s been a big shift over the past few years.
He and I first spoke in 2011 about startups buying billboard ads alongside Silicon Valley’s main highway, Route 101. More recently, he told me, “Fast forward to the last four years, and who cares about the 101? It’s all about the New York City subway.”
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What we can learn from DTC success with TV ads
Kevin Krim is EDO‘s President & CEO. His 21-year career has spanned search, social and TV advertising across start-ups and major companies like Yahoo and NBCUniversal. Sebastian Chiu is EDO‘s Chief Data Scientist. He earned his undergraduate and post-graduate degrees from Harvard, working previously as a data scientist at Dropbox.
One of the most-discussed plot twists in recent advertising has been the pivot of Direct-to-Consumer (DTC) brands to linear TV. These data-driven, digital-first players are expanding well beyond Facebook and Instagram—and becoming serious players on the largest traditional medium in advertising.
A January 2019 Video Advertising Bureau study found that in 2018, 120 DTC brands collectively spent over $2 billion in TV ads—up from $1.1 B in 2016. 70 of those 2018 advertisers ran TV ads for the first time.
But while we know that they’re advertising on TV, what may be less discussed is whether they’re succeeding on television—and what strategies they use to achieve their success.
At EDO, we have a unique and differentiated ability to measure how DTC advertisers perform on TV by tracking incremental online searches above baseline in the minutes immediately following individual TV ad airings as viewers translate their interest in advertised brands and products directly into online engagement with them.
By measuring incremental search activity across 60 million national TV ad airings since 2015, we are able to effectively isolate the effects of TV ad placement and creative decisions that are most likely to cause online engagement.
We ran the numbers on DTCs as well as advertisers in various other categories to better understand how DTCs specifically are succeeding in TV ads—and what DTCs who are considering TV advertising can do to achieve success on TV.
Table of Contents
- Does the David vs Goliath story play out on TV?
- Is there a newcomer advantage on TV?
- How does the DTC marketing playbook translate to TV? (A brief history and how-to, plus a Casper mini-case study)
- Conclusion: 3 keys to DTC TV success
Does the David vs. Goliath story play out on TV?
The DTC revolution is a quintessential David and Goliath story. In vertical after vertical, small, digital-native upstarts are changing the game and overtaking major brands. Does that story play out on TV as well—or is TV advertising one area where DTC marketers have finally met their match?
To answer that question, EDO looked at how effectively TV ads elicited viewer activity since September 2018 across eight major industry categories including DTC. Guided by historical ad performance across billions of ads, we rated ad performance based on how closely the DTC ads came to meeting the benchmark volume of brand-related online activity in the minutes following each TV ad airing.
We index each industry accordingly—giving an index value of 100 to an ad that meets benchmark standards, and below-par ads getting a score under 100 while higher-scoring ads receive a score over 100. We chose to set our index baseline of 100 to the average Consumer Packaged Good (CPG) ad since it is such a large and broad ad category. Our results are as follows:
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Mejuri raises $23M Series B to serve women buying jewelry for themselves
New Enterprise Associates, the 42-year-old venture capital firm, has invested in the $23 million Series B round for Mejuri, a startup capturing millennial women’s penchant for affordable and treat yo’ self type of jewelry rather than diamonds and precious stones for special occasions.
It’s the latest instance of startups drawing investor interest with their direct-to-customer retail model. Based in Toronto and Buenos Aires, four-year-old Mejuri designs, makes and sells jewelry directly to women online and through offline showrooms, bypassing middle-person costs. Besides striving for reasonable prices, Mejuri also wants to upend an entrenched practice in its industry.
Traditional jewelry, the startup points out, targets men for gifting and makes higher markups acceptable. With its D2C play, Mejuri believes it’s putting the purchasing decision back with women; indeed, it found 75 percent of its customers are buying for themselves. Its team of 120 employees is constantly on the watch for trends and consumer feedback, a strategy made possible by its online presence of more than 422,000 Instagram followers. Instead of releasing large batches of seasonal pieces, Mejuri adapts the so-called “drop” model that introduces only a small quantity of products each week, which allows it to timely translate customer sentiments into designs.
Photo source: Mejuri
Another enabling factor is the company’s female-led team: 80 percent of the staff are women, headed by founder Noura Sakkijha, a third-generation jeweler and a former industrial engineer who scored the company’s latest capital when she was seven months pregnant with two twins.
“Mejuri’s mission really hits home for me,” said NEA partner Vanessa Larco in a statement. “I noticed a shift in trends when none of my friends wanted to go to any of the traditional fine jewelry companies to purchase jewelry anymore, and I realized a lot of those big brands were in trouble.”
Natalie Massenet, founder of Net-a-Porter and partner at Imaginary, another venture fund that participated in Mejuri’s Series B, said the startup is set to “disrupt” the jewelry industry through supply chain standards that modern consumers demand, “like sourcing from conflict-free and socially responsible diamond suppliers and maintaining affordable prices to serve a consumer who is buying for herself and her friends.”
The user-centric focus has brought customer loyalty to Mejuri. The startup claims that 30 percent of its monthly transactions come from returning shoppers, and 70,000 customers are on the waitlist for its products. It’s accumulated a total of 20 million visitors to its website and released 1,500 designs since launch. Revenues have quadrupled year-over-year for the fourth consecutive year, and the company, one of TechCrunch’s favorite picks from 500 Startups’ Batch 15 Demo Day three years ago, said it’s on track to achieve the same level of traction in 2019.
The new proceeds bring Mejuri’s total funds raised to more than $29 million to date. Others in the new funding round include follow-on backers Felix Capital, BDC Capital, Incite Ventures and Dash Ventures. The company plans to spend its latest financial injection on offline expansion, overseas growth and investment in branding and customer experience.
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Femtech’s billion-dollar year
There are a lot of people who never thought they’d see the day venture capitalists would funnel millions into femtech businesses, direct-to-consumer tampon retailers no less. But that’s our new reality and Cora is proof.
San Francisco-based Cora, which develops and sells organic tampons, pads and other personal care products, has just closed a $7.5 million Series A led by Harbinger Ventures. Cora is one of many femtech startups to raise funding this week alone, in what is turning out to be a red-hot year for VC investment in the space.
Femtech, defined as any software, diagnostics, products and services that leverage technology to improve women’s health, has attracted at least $241 million in VC funding so far this year, according to PitchBook. That puts the sector on pace to secure nearly $1 billion in investment by year-end, greatly surpassing last year’s record of $650 million. For more historical context, startups in the space brought in only $62 million in 2012, $225 million in 2014 and $231 million in 2016.
“Investors have realized there is a huge pent-up demand in the market for healthier products for women,” Cora co-founder Molly Hayward tells TechCrunch. “The way in which the VC world is structured, there just has not been a lot of representation. It’s really difficult to understand the value of a product you aren’t ever going to use or to understand a problem you aren’t ever going to have, particularly around period care. This isn’t something we were talking about as a society five years ago.”
The four-year-old startup operates a little differently than your run-of-the-mill D2C company. Like TOMS, the popular footwear brand, Cora donates a month’s supply of products for every month’s supply sold. To date, Cora has donated 5 million pads to girls in India and Kenya and 100,000 products to women in the U.S.
“To me, [Cora] was this incredible, holistic opportunity to change the way that women experience their period,” Hayward said.
Investors must be excited about Cora’s growth. Though she didn’t disclose specific numbers, Hayward says the brand has expanded 400 percent year-over-year, a metric they are expecting to sustain with this new bout of funding. Cora’s products are sold on a subscription basis, with prices ranging from $8 per month for six tampons to $16 per month for 24. For those unfamiliar with the costs of such products, $8 for six tampons comes at quite the premium. A box of 50 Playtex tampons, for example, retails for around $9.
In Cora’s case, customers are shelling out extra cash for millennial-inspired branding, a soothing unboxing experience and a general ease of access to its products, as well as Cora’s organic, hypoallergenic and compostable materials, which aren’t characteristic of many similar products on the market.
Cora plans to use the capital to put more of its items in Target stores, where it already sells its tampons and pads, and expand its portfolio of products. As part of the funding, Cora has added two more women to its board of directors: Lisa Bougie, the former GM of Stitch Fix, and Andrea Freedman, the former chief financial officer of Method. Its board is now 80 percent female.
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Retail-as-a-service provider Leap raises $3M and launches first store
The past decade in retail has been the golden age of direct-to-consumer (D2C) and digitally native vertical brands (DNVBs) that use the internet to communicate with customers, execute transactions, handle distribution and offer better economics.
But as small independent startups have scaled into unicorn territory and as countless brands have saturated digital channels, customer acquisition has gotten harder and costlier. Companies are now trying to meet customers with different purchase habits by developing physical stores.
However, building an effective brick-and-mortar presence can be expensive and risky for DNVBs, requiring resources outside their core competencies. Chicago-based startup Leap is hoping to make it easier for digital brands to grow physical retail footprints without the typical risks of store development by taking care of the entire process for them.
Leap offers a full-service platform covering the complete life cycle of a brand’s brick-and-mortar launch. In addition to owning the lease and the financial commitments that come with it, Leap covers everything from staffing, experiential design, tech integration and even day-to-day operations.
(Photo by Alexander Scheuber/Getty Images)
Less than a year since its founding, Leap announced today the launch of its first store and the close of a $3 million seed round, led by Costanoa Ventures, with participation from Equal Ventures and Brand Foundry Ventures.
The debut store will act as the first Chicago location for Koio, the high-end D2C sneaker brand backed by headline-grabbing names like the Winklevoss twins, director Simon Kinberg and actor Miles Teller.
Instead of paying a monthly lease fee, along with all the other variable costs associated with operating a physical store, companies like Koio pay Leap on a percent of sales basis, effectively minimizing risk and incentivizing performance.
On top of minimizing development expense for brands, Leap believes its customer insights and intelligent logistics platform can help improve shopper engagement, increase customer traffic and drive brand lift. If the startup’s thesis proves true, brands can improve both sides of their brick-and-mortar unit economics by reducing customer acquisition costs and amplifying customer value.
At its core, Leap simplifies a DNVB’s physical retail operations into a single line item on its P&L, allowing the company to focus on brand building and supply chain rather than retail strategy, while also allowing them to scale faster.
With the latest fundraise, the company hopes to build out its team and continue new location expansion. Longer-term, Leap’s co-founders hope to build a vast network of sites that can help provide intelligence around new store development and shopper preference.
“We want to be the platform to help brands go to market in the offline space”, said co-founder Amish Tolia. “We want to help brands build direct-to-consumer relationships in local neighborhoods across the country and enable them to focus on what they’re best at. Enable them to focus on product innovation, supply chain management, great marketing and brand building.”
A glimpse into the future retail
While Leap’s value proposition is straightforward, its business model points to a bigger trend in the world of retail.
By opting to sell its software and brick-and-mortar services rather than creating its own brands, Leap effectively acts as a “retail-as-a-service” platform. The as-a-service strategy is already quietly growing in popularity in the retail space, with companies like b8ta, the Internet of Things gadget retailer, launching its hardware-oriented “Built by b8ta” platform earlier this year.
Though likely heavy in upfront capital costs, retail-as-a-service businesses don’t have the same constant concern around supply chain, manufacturing, consumer acquisition and marketing spend. And in certain pricing models based on a monthly fee or percent of square footage basis, platforms can see more stable revenues relative to pure retail startups.
From a brand perspective, DNVBs have been looking for ways to extend growth runways while minimizing the cost and uncertainty that deterred them from physical stores in the first place. The as-a-service model can make brick-and-mortar retail a much more scalable engine, possibly even cooling rising concern around bubbling consumer valuations.
As more of the young digitally born D2C giants resort to as-a-service companies to find marginal customers, we may see the rise of a new set of startups fighting to establish themselves as the platform on which brands operate.
If the last decade was defined by retail online, it’s possible that the next decade will be defined by retail-as-a-service.
And if you find yourself in Chicago, feel free to check out the Leap-enabled Koio Store at 924 W Armitage in Lincoln Park.
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