ComCap – Direct to Consumer Brands Update The Lead July 2022 Special Edition

We are pleased to present our views on the market for DTC brands, doing so with the aim to help increase transparency and communication between the companies themselves, as well as financial and strategic investors.

As a firm focused on M&A and private placement transactions, we have been increasingly interested in seeing disruptive companies participate in this space.

We have seen many promising products/brands fail to grow beyond $10mm-$20mm in gross annual sales due to challenges in scaling up and ultimately failing at building a technology infrastructure or working capital financing.

DTC Notable Key Trends:

  • DTC brands are growing 3x faster than an average eCommerce retailer; innovative marketing use-cases like using social media influencers/content creators and digital-first approaches have led to this growth trend
  • As per McKinsey’s report on DNBs, over the past 2 decades (2000-2020), only 0.5% of the DTC brands have successfully scaled revenue past the $100mm threshold
  • The majority of the DTCs have raised funds to scale up operations, build brand image, invest in R&D and emerging technologies, and expand internationally
  • The DTC space saw 19 deals in Q1’22, up from 16 in Q1’21 (~19% QoQ increase). Notable deals during 2021 were SteelSeries ($1.2bn), DECIEM ($1.0bn), RugsUSA ($0.9bn), Igloo ($0.9bn) and Ecobee ($0.8bn)
  • Noteworthy players include: Pomelo Fashion (Total funding: $117mm, Apparel), Boll & Branch (Total funding: $112mm, Home), Jaanuu (Total funding: $98mm, Apparel), Serena & Lily (Total funding: $91mm, Home) and ALOHA (Total funding: $90.4mm, Health & Beauty)