Investing in and Building a Direct-to-Consumer E-commerce Brand: Andrea Drager and Taran Ghatrora
What happens when relationship-wise investor meets relationship-focused entrepreneur? Business blooms.
Recently, The51 hosted Andrea Drager of Azure Capital Partners and Taran Ghatrora of Blume to discuss investing in, and building a direct-to-consumer (DTC) e-commerce brand. As you’ve probably already worked out, Andrea is on the investor side of that conversation and Taran, the entrepreneurial.
What excites Andrea and her team right now, she began by explaining, “is the persistent relationship that companies are able to build with the consumer.”
“By leveraging technology that is able to create this relationship and deepen it over time, a consumer business becomes not only relevant, but very valuable as they foster and own a special link with their consumers.” - Andrea
“We’ve seen that play out,” Andrea continues, “both in the ability of DTC brands to grow from the early stages to growth stages, becoming big brands and household names, but also in terms of venture outcomes through IPO or through acquisition—there’s a very active path for a lot of these DTC companies to follow.”
With Andrea’s championship, Azure invested in Blume’s seed-round in the beginning of 2019, right as they were beginning to scale and take-off—their trajectory has been rising ever since.
So, what is Blume?
“Me and my sister Bunny launched the brand in June of 2018 with the goal of being the go-to brand for girls going through puberty. [Blume sells] everything girls need—from sex-ed, to safe, effective products. When we first met Andrea, we were working on an earlier iteration of the company which was very different—a DTC, organic pad and tampon subscription business. We bootstrapped that business and ran it part time while we were university students, and it steadily grew. We saw a huge demand for the products and an affinity to the mission. In running that business, we started to see potential future partners, and glean interesting insights.”
“Every single month along with the pads and tampons we would ship third party wellness products and survey our customers to find out which products they liked and didn’t like.”
“People would say things like, ‘I really need an acne treatment, but one that is all natural that I can wear under makeup that doesn't make my skin peel or scar,’ or ‘[I need] something I can use for my period cramps that is a natural solution.”
“We heard the same things over and over again; the brand was resonating with teens and especially with parents who had finally found something they were looking for. So, in 2018 we decided to go full-time and start a new business—pursue the larger white space and grow a brand that would help girls’ self-esteem as they grew up. We invested our money and time (one angel cheque at the time) and put together a deck for a larger round—about $250K. We completely rebranded and launched a line of products—Blume—in 2018.”
Why involve your community in your process?
Taran has first-hand experience in the importance, as Andrea emphasizes, of a persistent relationship with consumers. Having the ability to build community doesn’t happen overnight. In Blume’s case, it required intense dedication to communication with customers on a monthly basis, including personal phone calls from the founders themselves, to really understand their needs.
These days, Blume offers four categories of personal care products: organic tampons, cramp oil, face-wash and natural deodorant, and excitingly, they’ve recently launched of a fully comprehensive and medically accurate sex-ed curriculum. Every single one of these products was not only informed, but personally crafted by the Blume community. Taran explains:
“When we launched Blume, every product was crowd-created. The community was involved in the formula, the scent, the texture—we would send out samples (and we still send out samples) to our most engaged customers. We also do focus groups regularly, in different cities and with different age demographics, as well as customer calls every month. We have a loyalty program called “Blumetopia” where customers get points for different actions, and when they gain enough points they’re invited to the private Facebook community group where community members are able to engage with us, and with each other, and get early access to product samples, etc.”
“It’s about reminding people that you know you're not the only brand in their inbox. We walk the walk; Gen Z consumers are very conscious about the brands they shop with and what they stand for. We respond to every single comment, every DM, every email—make sure to be that brand that they know is a safe space.” - Taran
How does community building make a startup stand out?
“Right from the beginning that was something that jumped out about Blume.” Andrea says. “After the relaunch, the community component of the brand was clearly such a strong driver for the other economic aspects. If you're able to drive a strong, organic acquisition co-efficient by building community with people who are wanting to participate in your brand, wanting to engage with you—that drives higher participation, and the extension of that is sales. We saw that with Blume; they were able to activate very specific behaviours in their customers.”
Early on, as Andrea recognizes, Blume took a stand on two really big issues: They launched information on sex education, specifically targeting the US where sex-ed is only mandatory in 9 states, and they produced content and facilitated conversations that normalized things like acne and changes to the body that happen around puberty. By openly talking about those subjects and persistently engaging their audience, Blume generated, as Andrea points out, “significant organic press.”
How did the ever-shifting landscape affect investing?
“When we raised our seed round, investors were looking for something very different than what they'd looked for in the A stage—both because of the changes in the DTC space but also because we were, by then, a larger company with more data and a longer history for them to look at. At our seed stage we had super rapid revenue growth, and I think it became very clear that we were creating space in the market very quickly, and we knew where we wanted to be a year out—that being said, when we did our seed round, we had really early metrics. At our Series A, we were able to show the continued evolution of those metrics, and how they continued to stay steady . We were also able to show the education content, and the level of engagement within our Instagram and Facebook communities. Knowing where our customer is today, and being able to show the channels that we are going to leverage to grow – including paid acquisition were important at the A.
What about the fundraising process?
“Almost every single investor in our seed was someone we had a prior relationship with. We wanted to make sure that who we were bringing on as an investor was [not only] really aligned with our mission and would be a good partner in our growth, but also vice versa, that they felt confident that we were the right founders to build this business. Once we had those longer-term champions and investors come in, we went out wider to more investors—for our seed round, we raised $3.3 million in a month, and we’re very grateful for that.
[In terms of] the process, we tacked all of my fundraising meetings into one short span of time to make sure everyone could be updated along the same path; when I sent information to investors I wasn’t spinning up a new document for hundreds of investors over 3 months, it was more efficient for everyone's time. Putting meetings into a short span of time, being super, super prepared with all the due diligence materials you need and making sure you ask your investors what they need from you and how you can interact with their plans—all very important steps. Also, timing made a big difference. We went on the Today Show in March which definitely had a huge impact on our sales.
Ultimately to make sure you actually close—that can be the hardest part. It involves following up with people, setting a clear deadline and getting documents signed and wired. For me it was very hard—I didn't want to be pushy. But it's super important because the longer fundraising drags on for a company the harder it is on a company.”
What are the fundamentals investors look for?
According to Andrea, there are a few fundamentals to strive for when building your DTC e-comm business:
1. Tell your story: talk about the big vision, and what step one is to get there.
2. Be clear on your milestones: why do you need capital? Where will it get you?
3. Know your metrics inside-out:
Repeat Rate (% revenue from repeat customers per month)
CAC (customer acquisition cost)
LTR & LTV (lifetime revenue and lifetime value)
LTV / CAC ratio (an important metric for evaluating the efficacy of acquisition and the health of the expenses vs. revenue equation)
“We really look for passionate founders who understand their space,” Andrea says, “who are not just looking to build a product and sell that product, but who are thinking beyond the product/customer equation, and focusing on what the business stands for, and how it can create long-term value. If we don’t see those things, that’s when we get skeptical.”
“In any given year there are clusters of companies that get started that are similar—whether because technology allows it, or subscription is the new thing, etc. One of the things that’s been interesting with COVID and even before, is there was a lot of funding going to DTC businesses, and unfortunately there were some companies in the DTC space that created a bit of a ‘bad rap’ from an exit potential for investors; whether they went public or were acquired at lower evaluations, people started to get skeptical about the thesis of consumer in general, and a lot of that skepticism remains with the challenges that COVID has around the uncertainty of consumer spending going forward. That being said, our perspective is that if we build healthy, high-growth businesses they can become huge businesses for large brands who have trouble innovating.”
“As a founder, think about how you communicate the difference in your value—that’s worked out really well for them in the long run.”
In only a few years and through a significant rebrand and model-shift, Blume has created a unique and valuable format for building a successful DTC E-commerce brand. After hearing Taran describe her experiences first-hand, we’re unsurprised by Azure’s confidence in Blume’s growth, and enamoured of their strong investor/entrepreneur relationship.
Thank you Andrea and Taran for sharing your experiences and expertise! We can’t wait to watch what Blume does next.
- The51 Team