What do investors look for in a DTC brand before they fund it?
Norwest partner Lisa Wu, an early investor in Jet, Ritual, and Remedy, walks through the 10 attributes her team uses to spot a breakout consumer brand. She covers why a well-built consumer brand should only need one or two rounds of capital, why replenishment categories need gross margins north of 60%, and why supplements and personal care can sell for five times revenue while apparel can trade at one times. If you run a $5M to $50M brand, use her list as a scorecard and mark yourself green, yellow, or red on each attribute.
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Key takeaways:
- Know which of the 10 attributes your brand is weak on before you raise, so you fix the reds instead of pitching around them.
- Avoid funding a consumer brand like a tech company. Too much capital at rising valuations buys mercenary customers and forces you to chase targets your unit economics can't support.
- Be first-ish instead of first. The later mattress-in-a-box brands drafted off the category education the early, venture-funded players paid for.
- Build clinical proof into the brand from day one. Science washing (adding a dermatologist, a survey, and a claim once you notice the trend) is something customers can sense.
- Cut acquisition costs with a distribution advantage others haven't found yet, like a trusted clinical voice whose audience includes other creators who look up to them.
- Make paid acquisition work by pairing it with strong retention. Natural replenishment categories let lifetime value cover what you spend to acquire.
- Price for the premiumization of mass, and keep investing in brand, because a cheaper competitor is always coming.
- Protect gross margin early so wholesale and retail stay open without a reformulation later.
- Choose a category acquirers want to buy. A $100M brand at five times revenue sells for $500M. At one times, it sells for $100M.
- Win with one product first, then expand into adjacent products where the customer already trusts you.
About the guest:
Lisa Wu is a partner on the venture team at Norwest, where she has invested in consumer brands for more than a decade. Her investments include Ritual, Remedy, and Jet, which was acquired by Walmart. Norwest runs venture and growth equity on one platform, so it can back founders from seed through profitable scale. Reach Lisa at lw@nvp.com.
https://norwest.com
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Timestamps:
02:10 Why Health and Wellness Is Booming
08:45 How Ritual Built Consumer Trust
14:05 10 Attributes of Breakout Consumer Brands
24:05 Building a Distribution Advantage
40:55 Consumer Trends Investors Are Watching
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