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I’m often asked what I look for as an investor in emerging CPG
Many assume a high degree of subjectivity given the different category and channels, with limited data at the seed/A stage
At Selva we’ve built a framework and process to drive consistency
Thread
Many assume a high degree of subjectivity given the different category and channels, with limited data at the seed/A stage
At Selva we’ve built a framework and process to drive consistency
Thread
When we founded the firm, my partners and I agreed we needed a framework to evaluate brands across food, bev, beauty & wellness, on- and off-line
We established a set of questions to answer about each Company we looked at, and named it ‘the 5 Ms’ ensure it was remembered:
We established a set of questions to answer about each Company we looked at, and named it ‘the 5 Ms’ ensure it was remembered:
1) Mega Trend - What major consumer theme will drive this company’s success? (eg: plant-based, healthier alcohol, low sugar)
It’s infinitely easier to succeed by investing in a rising tide. Conviction in these themes helps us focus and proactively source as well
It’s infinitely easier to succeed by investing in a rising tide. Conviction in these themes helps us focus and proactively source as well
2) Matter - What big consumer problem does this company solve?
Great brands scale by giving their consumers better lives, which means solving problems that matter to them
@emilyheyward in ‘Obsessed’ says she asks this of every prospective @redantler client (& most avoid the Q)
Great brands scale by giving their consumers better lives, which means solving problems that matter to them
@emilyheyward in ‘Obsessed’ says she asks this of every prospective @redantler client (& most avoid the Q)
3) Management - Why is this the team that will solve this problem?
This could be the uniqueness of the product/brand they’ve created or an unfair advantage in their skills/exp
Notably some of the best CPG founders I’ve met are first-time founders without brand-name resumes
This could be the uniqueness of the product/brand they’ve created or an unfair advantage in their skills/exp
Notably some of the best CPG founders I’ve met are first-time founders without brand-name resumes
4) Momentum - What has this brand proven?
What statistics suggest this brand is an outlier? This can be sell-thru (velocity), distribution (doors), unit economics (LTV/CAC), audience (PR/social)
We also consider future momentum killers: margins & capital intensity
What statistics suggest this brand is an outlier? This can be sell-thru (velocity), distribution (doors), unit economics (LTV/CAC), audience (PR/social)
We also consider future momentum killers: margins & capital intensity
5) Market - Is this market big enough to matter?
Not “what is the TAM?”, but rather “can this be a big business?”
We didn’t invest in @drinkmudwtr or @drinkhaus because the US functional chai and aperitif markets are massive today — we underwrote the ability to grow a category
Not “what is the TAM?”, but rather “can this be a big business?”
We didn’t invest in @drinkmudwtr or @drinkhaus because the US functional chai and aperitif markets are massive today — we underwrote the ability to grow a category
We use a system because we’re not trying to be right by accident (h/t @samhinkie). We want repeatability, which is especially elusive in consumer products
We built it by asking ourselves: what framework would have led us to invest in the top 30 brands of the past decade?
We built it by asking ourselves: what framework would have led us to invest in the top 30 brands of the past decade?
At our investment committee we assign each company a score out of 10 for each of the 5 Ms
We did so retroactively on our favorite brands when we first started to calibrate the system, and we track our scores over time to evaluate when we were wrong
We did so retroactively on our favorite brands when we first started to calibrate the system, and we track our scores over time to evaluate when we were wrong
Some may call this false precision
I’ve found the system helps me avoid falling in love with a flawed company, or confusing my own tastes with sound investment judgment
Some method to the madness can reduce the subjectivity
I’ve found the system helps me avoid falling in love with a flawed company, or confusing my own tastes with sound investment judgment
Some method to the madness can reduce the subjectivity
