When I started Outroll Ventures over two years ago, I never imagined that I would move away from Apps and focus mostly in Consumer Packaged Goods (CPG). Traditional wisdom said that CPG brands would take decades to be built, be capital intensive and come with impossibly low margins. This is far from the reality, as e-commerce, direct-to-consumer sales, digital marketing, and daigous (Overseas Chinese buyers that send products back to China) changed the CPG market forever.
One of the main drivers that pointed me towards CPG is that my generation (Millennials) is suffering from a severe case of tech tunnel vision. Talented people outside of software and tech are following the hype and dedicating their energy to create the next big mobile application, when they could be focusing on their domain of expertise and add more tangible value to the world. The opportunity cost of a whole generation focusing on hype is tremendous.
There are a number of CPG startups that received Venture Capital that are in the unicorn path, such as Brandless, Casper and The Honest Company. CPG companies are disrupting the traditional retail space where established companies had a virtual monopoly for decades. The new generation CPG startups have access to an endless supply of feedback, customer information and product-market fit. This enables the new generation of CPG startups to quickly adapt, create new products based on consumer demand and tweak products based on feedback.
Many of our portfolio companies utilize “pseudo agile” technologies to quickly adapt to consumer demands. Digital printing to update and tweak packaging, easy to modify product formulas and Just In Time production for maximum flexibility. Our portfolio company FitFlavours produces protein shakes. Previous protein shakes included an artificial coloring agent that would not be well accepted by the Australian market. After a quick discussion with the company founder, the formula for the whole product line was modified to only include natural ingredients.
Being an early believer of CPG startups, I see that the VC industry is catching up. There is a growing number of investments into CPG startups that would traditionally rely on debt financing to grow — and in most cases struggle with cash flow. Publised media is also giving more attention to CPG startups. Juicero is a good example how VCs are opening up to investing in CPG startups, no matter how bad and unpractical the product is — just like software (great!).
Day after day I am meeting more and more startup founders that managed to see beyond the tech hype and are adding real value to the world with their ventures. I see a rising sun for CPG startups and tangible life improvements that those startups can bring. Unlike the previous generations, we may be able to see cruelty free lab grown meat, less toxic cosmetics, plastic free packaging and, if we are lucky, practical flying cars. I am looking forward to the changes that the CPG revolution will bring.