If You are Building a Vertically Integrated Brand and Taking VC Money, Good Luck!

So you’re one of these new age, vertically integrated brands such as Warby, Brooklinen, Away Travel, Casper etc. and you want to grow your brand. You have had some success, proven the market fit and now you are evaluating whether you should take Venture Capital investment to fuel your growth, expand to new markets, expand your product line etc. Here are some concerns to keep in mind as you evaluate this pivotal decision in your brand’s trajectory.

Venture Capital firms are primarily concerned about their investments hitting aggressive and rapid growth targets. They come in once you’ve proven that your target market totally buys your product and there are millions more of your exact target user who will totally buy your product and you just haven’t presented it to them yet. That’s what VCs need from you – rapid growth and that’s the direction they’ll drive the business in using their ownership.

Brands take a very long time to gain permanence, preference and consumer loyalty. And that’s not just time that you’ve ‘been around’ – it’s the number of consistently positive and increasingly deeper connections and touchpoints you establish with each consumer. That is how you turn consumers into loyalists and ambassadors. That takes years, just look at how long the world’s largest luxury brands have been around.

Hence, if you are really building your business for the long term, which I hear so often from these newer brands, it’s much more recommended to grow off of your revenues. Do not give up a percentage of your company for VC rounds and then subject the business to hit crazy growth targets.

Case in point, look at what happened to Nasty Girl. The founder of Nasty Girl built this amazing business from the ground up, became a self made millionaire and then she took VC money and they just grew too fast, had to go through bankruptcy and now she no longer runs the company. You can totally grow your brand into a huge business without raising VC rounds – Spanx and S’well are two recent examples of this.

If you do need outside capital, look into alternatives such as Kickstarter – craft a compelling brand position on that campaign. Bond Street is another great resource, it’s akin to a modern SBA. Also look to friends and family, or pre-sale exclusive access to your consumers to raise money fast – see what Public Goods did.

I’m afraid I can already tell that many of these “new modern luxury brands” will not be around in a few years. Brands are supposed to take time to develop. These brands aren’t giving themselves the time and the opportunity needed to develop organically. Raising VC money seems like a rocket boost in the opposite direction. Be careful and good luck.