Episode Summary

Ryan Springer is a founding partner of MidnightVP, an early stage VC investing in world class DTC & CPG brands. Portolio investments include Jinx, Disco, Barcode, Jolie, Beli, and Boisson to name a few. Growing up in the industry, Ryan gained expertise in retail strategy, trade marketing, data analytics, and retail execution. After college, Ryan began working for his dad and quickly became an outsourced national sales manager, learning the ins and outs of retail strategy. This was the perfect launch pad for Midnight, a value-add VC that invests in the best brands and leverages their industry connections and know how with the biggest retailers, operators, and builders.

Episode Notes

On this episode of DTC POD, we discuss the key factors that investors look for in a business, such as product excellence, differentiation and the ability to manage capital responsibly. We cover benchmarks for what it takes to be successful at each stage of raising capital for your brand. We discuss the best types of businesses to launch, what VCs look for in a crowded space, and the importance of retail margins and unit economics when launching a business.

Timestamps

[00:03:58] Networking and pattern recognition in CPG industry vital for success in BD; takes 6 years to know if VC is successful.

[00:08:47] Austin is an excellent city for CPG, supportive culture, helpful community, and over a third of portfolio companies are based there.

[00:11:11] Portfolio companies doing well; 15x markup, 300%-200% growth, 98% retention rate, 8-9x growth

[00:17:24] Investing in pre-revenue businesses requires special conditions such as high retention rate, LTV to CAC ratio, high AOV, and other metrics.

[00:23:04] Founders need to manage capital responsibly, focus on break even and not overhire; gaps between funding rounds are getting longer.

[00:26:04] Need resources, plan, and know-how to succeed; don't forget freight costs; raise money sooner; treat retailers like laboratories.

[00:31:55] Valuations have been compressed, but there are still some companies that can get high valuations if they have strong metrics and a compelling founder. Some companies are being undervalued and some are being overvalued.

[00:36:52] Exploring a variety of categories, looking for something special and unique.

[00:45:31] Get advice from experts and understand your product's channel and unit economics to find the path of least resistance.

VC Investments are Paying Off:

"Within 18 months, one of our portfolio companies just had a 15x markup, another is growing 300-200% every year, and Jolie Skincare is doing unbelievable on a monthly basis." — Ryan Springer 11:11

Metrics for Pre Revenue Success:

"If you're under 20% on retention and customers order twice or more in a year, it's going to be tough for us to get interested. You have to be like a couch that's a little outside of where we would normally invest." — Ryan Springer 21:43

Valuation Compression:

"We've seen valuation compression. It's definitely real, but it's not the same. We use projections to see whether or not you have a realistic understanding of how the business works, not what weight to value a company. We don't do trailing twelve months either, necessarily."— Ryan Springer 31:57

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Past guests & brands on DTC Pod include Gilt, PopSugar, Glossier, MadeIN, Prose, Bala, P.volve, Ritual, Bite, Oura, Levels, General Mills, Mid Day Squares, Prose, Arrae, Olipop, Ghia, Rosaluna, Form, Uncle Studios & many more.

Additional episodes you might like:

• #175 Ariel Vaisbort - How OLIPOP Runs Influencer, Community, & Affiliate Growth

• #184 Jake Karls, Midday Squares - Turning Your Brand Into The Influencer With Content

• #205 Kasey Stewart: Suckerz- - Powering Your Launch With 300 Million Organic Views

• #219 JT Barnett: The TikTok Masterclass For Brands

• #223 Lauren Kleinman: The PR & Affiliate Marketing Playbook

• ​​​​#243 Kian Golzari - Source & Develop Products Like The World's Best Brands

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Ryan Springer - Founding partner of MidnightVP & Founder of High Desert Cactus Vodka
Ramon Berrios - CEO of Trend.io
Blaine Bolus - Co-Founder of Seated

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