ComCap LLC Hosts Second DNVB Forum in Los Angeles

ComCap held its second successful DNVB (digitally native vertical brand) Forum in Los Angeles this week, and we wanted to share key highlights for those that couldn’t attend:

DNVB brands speaking included DSTLD, Winc, Italist.com, and Tipsy Elves. Respective leaders of these companies provided the following insights into their success:

• Provide a clear value proposition and customers will be willing to accept paying for returns.
• Customer surveys during the product development process can drive product success. Launch new products / collections with an SEO mindset from the beginning.
• There is an advantage in basing the business in California near advertising platforms like Snap and Instagram.
• As a marketplace, increasing selection and UX can increase transaction

Capital providers – including Lightspeed, Provenance, H.I.G Growth, and Brentwood Associates – discussed what they look for in DNVB investments:

• Focus on knowing your core customer and how to find more them – don’t try to be all things to all people.
• Stickiness is important in core demographic
• Gross margins of 50%+, which usually means having your own brand.
• LTV calculated as gross margin after fulfillment. Previously investors had looked for a 3x LTV/CAC ratio, now seeking 4x to 5x.
• Being breakeven is important – some investors have a preference for material EBITDA for larger deals, but can accept breakeven for a business with scale and growth even if that would be below their traditional investment threshold.

Outside experts – including General Growth Properties, Union Bank, Moovweb, W Promote, and others provided the following best practices advice to attendees:

• General Growth Properties has used the decline of some malls to re-purpose stores into more productive uses including fitness centers, grocery stores, and other uses. GGP offers consulting services to emerging online brands that are looking to explore physical retail opportunities.
• Union Bank is experienced with working with online and offline retailers at different sizes and with different capital structure needs. From inventory facilities to $10m GMV online companies to comprehensive $100m+ term loans.
• W Promote advises focusing on your best CLV segments. Bid up substantially for most productive customers, bid down 80% for least productive. Focus on Facebook properties given 26% of mobile time spent on these. Leverage 3rd party data (i.e. Epsilon) and don’t use aggregate cost per conversion number.
• Moovweb – largest mobile seller in the US after Amazon and eBay. The mobile consumer is complex, demanding and fickle – one misstep and bounce rates spike. Employ a joint technology and agency approach to rapidly test options – especially related to major sales or holidays.