I have seen numerous articles over the weekend about why Unilever (NYSE:UL) bought Dollar Shave Club. To me, the answer is obvious. Dollar Shave Club disrupted a very established monopoly of razor brands. The disruption forced Gillette and Schick to reconsider the way they distributed their own product, but change is slow for mature companies. Unilever (UL) simply found a great brand, with a superior distribution model, and likely hopes that their current portfolio of soaps and other bathroom products will benefit from add-on sales to razors.
If you invested in Dollar Shave Club in one of its previous rounds, whether it was the $1mm seed round in 2012 alongside Kleiner Perkins, the Series B round in 2013, or even the latest round last November, you would be very happy today. If you invested or not, your money has been made or missed, so best to focus on the next early stage opportunity. It is better to discover these companies at the seed or series A rounds rather than waiting until the final round (the final round for DSC would have had only a 1.8X return).
There were three characteristics of Dollar Shave Club that are strong signals to consider when investing in private companies. The first is DSC's disruption of a large, established business by reduction of price through technology. The technology is simply the advances made in logistics (shipping) during the current 7-year economic cycle. DSC avoided brick and mortar and went straight to consumer, passing some of those savings on to customers and undercutting the competition. Tesla (NASDAQ:TSLA) and Warby Parker have both been successful at lowering prices through a disruptive direct to consumer model. One example of an early stage company that is doing the same is Wholeshare, which is distributing natural and organic food items to customers' doors. Not only is Wholeshare cutting out brick and mortar in larger urban areas, where there is greater access to organic markets like Wholefoods (NASDAQ:WFM), they are shipping to smaller markets that do not already have healthy market access. Utilizing advances in logistics, they are able to reasonably price the otherwise very expensive and quickly growing category of natural and organic food. Worth noting is Andreessen Horowitz made an investment in Wholeshare.
Dollar Shave Club very effectively utilized a guerilla marketing campaign to get the word out to mobs of millennials, who don't like to shop in stores anyway. The message was quirky, anti-establishment, and viral, reminiscent of GoDaddy (NYSE:GDDY). More importantly, it was simple to sign up to become a subscriber. The best technological disruptors have high conversion rates from marketing message to payment transfer. The most brilliant and simple user conversion I have seen is through a company called GoodWorld. The marketing isn't quirky, but it is viral through their do-good messaging (Millennials love doing good). GoodWorld allows you to type "#donate" into charities' social media posts and instantly donate to the cause. Also notable: DC Department of Securities, Insurance and Banking have a matching investment program in the current round, essentially increasing the post money valuation.
Finally, DSC drew a loyal following from customers early on, like GoPro (NASDAQ:GPRO) and Apple (NASDAQ:AAPL) have done in the past. These customers were dedicated to the product and became brand ambassadors. A new company I have seen this from is Revl. I recently met the founder, Eric Sanchez. Eric is a mechanical engineer and adrenaline junkie with a passion for designing next generation action sports video cameras. He already has a loyal following of over 900 Indiegogo backers and investors such as renowned VC and kite-board addict Bill Tai, and co-founder of Google Maps and music aficionado Lars Rasmussen. Revl has developed the first stabilized camera system with software that auto-edits based on quality and human emotion, solving for the problems of shaky video and hours of editing.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: Wholeshare, REVL, and GoodWorld are all companies currently utilizing Crowdfunder's platform. Crowdfunder VC Index Fund, L.P. may have invested directly into some or all of these companies. Crowdfunder and its affiliates do not recommend nor offer to sell securities such companies may be offering. Any such investment must be made by the company and through its offering documents.
Additional disclosure: Steven McClurg is the President of Crowdfunder, Inc. Crowdfunder VC Index Fund, L.P. has invested in Wholesale. Neither Steven McClurg, Crowdfunder, nor its affiliates make a recommendation to sell or buy Wholesale or any other company disclosed herein. Only accredited investors are able to invest in Wholeshare and any sale or offer to sell must be made by the company through its offering documents.