How do Consumer Product start-ups raise money?
I have said this before and I will continue to say it, we are living through start-up nation. It doesn't matter the vertical there are companies being built to change everyone using technology and new concepts. It is pretty remarkable. The one area that is really starting to take off is consumer products. The biggest issue with consumer products is getting funded.
I have the luxury of being connected to the technology world where the investment one makes has a quicker larger return upside vs. investing in a consumer product brand. It doesn't always work that way as it takes time to build a company but the margins are generally better and the tenacles can reach longer much faster in the tech world.
CircleUp is providing crowd funding for consumer products that are generating $1m in annual revenue. It is a welcoming addition to this vertical but how do the products making less get funded? I am an investor in Willa Skincare. There is no question that the product is filling a void in the skincare marketplace. It is a skincare line for tweens/teen to start taking care of their skin now when the damage is getting done. The customers love it. My nieces love it because it is theirs not theirs Moms. They own it and they own it with their friends. That is powerful.
The line is being sold online and in brick and mortar stores. The stores right now are Target, Harrods, more than a dozen of independent Mom and Pop chains that appeal to this customer base such as Lesters and they are in talks with two huge chains. They are using a factor to fund their orders and can continue to do so but why is it so difficult for a company of this size that is growing, creating a solid brand, building awareness and creating traction to get funded. Most private equity companies that fund these type of ventures need to see the company doing $8-10m a year. How can you grow to be that big without an infusion of cash vs factors that only back up the costs.
There is definitely a void in the marketplace for this type of funding. Not sure if there are a group of angels out there that I have yet to meet but there are a variety of interesting products being built that need smart investors. I look at many of them and see what they can become; some big, some small but without the proper funding and team of smart investors it is hard to figure out how to navigate the growth.