I've seen a lot of prognosticating on the future of DNVBs, so I decided to bring DATA into the discussion to understand when a VC should (or shouldn't) invest in a digital brand.

1/ Trying me hand at a thread... https://buff.ly/3pLCic0 

2/ Setting the Stage: DNVBs, or digital brands, comprise a large segment of Consumer investing over the past 10 yrs. Recently, with the pillowy Casper IPO, Harry’s blocked deal, Brandless’s shutdown, and the macro headwinds of COVID-19 and the election, VCs have cooled on DTC.

3/ We surveyed 60 DNVBs that have successfully exited over the past 10 yrs, understanding exit dynamics (price, multiple, time length), company dynamics (revenue at exit, capital raised, profitability), and founder dynamics (race, gender, experience).

4/ We then bumped this data set up against our own internal fund modeling to understand the implications of backing DNVBs out of a $75M Fund III.

5/ Insights: Though there is a steep uphill battle, there are several factors that contribute to the likelihood of a DNVB as a fund returner:
- We need to believe a Seed company can get to scale without hundreds of millions of VC dollars and with a path to profitability

5 (con't)/
- Given that exit multiples and revenues compress (4.2X on $237M @ the high end), owning MORE of a Seed round is the primary way to ensure an outsized return
- As our fund size grows to $75M, it becomes harder – with typical ownership – to return the fund.

6/ Framework: coming out of this exercise, we created a repeatable framework for assessing brands:
- An Investing Tool to evaluate Seed check size, valuation, growth rate, ownership %, dilution, and expected returns
- 12 unique factors to consider when assessing brands (below)

7/ I hope you all enjoy and would love to hear questions and feedback! These Field Studies are one way we at @alpacavc continue to manufacture insights and deal flow in the sectors we love.

(Also realize I said "try me hand" in tweet #1 so now I am also a pirate )