Amanda Schutzbank on the Pros and Cons of Subscription-Based Consumer Brands
On this episode of LA Venture, Willow Growth Partners co-founder Amanda Schutzbank discusses how her venture capital firm takes a unique approach to consumer investing.
From the work that Schutzbank does at Willow Growth, she’d say about 90% of the firm’s focus is on consumer brands, with focus areas that include beauty, personal care, health and wellness. The other 10% revolves around what Schutzbank calls commerce enablement tech.
“Something we continue to talk about is margin profile; I'd say that that is our kind of North Star,” she said. “To build a profitable, long-standing consumer business—which is, at the end of the day, not like the tech world where you can be wildly unprofitable for pretty much ever—you need to build something sustainable and profitable.”
With businesses increasingly moving toward subscription-based models, Schutzbank noted that some companies that have tried out such a model have not seen success, with consumers realizing that not everything needs a subscription.
One brand that has seen success, though, is one of her own investments, Coterie Diapers. As a startup that delivers baby wipes and diapers, Coterie’s products were tailor-made for a subscription service. “When it works, it works,” she said.
Shutzbank recalls how she and her partner Deb Benton had just sent subscription docs for Willow Growth's Fund I one week before the pandemic took hold in March 2020. Even in normal times, first-time fund formation is not for the faint of heart and the two worried they might be in over their heads.
“But we decided to power through,” she added, with the belief that Willow Growth was filling an important gap for brands between traditional venture capital and private equity. “We were like, ‘No, we're doing this—this needs to exist.’ We had so much conviction around that. And we ended up setting a [fund] target for $25 million, and we raised $25 million plus more and were oversubscribed.”
While she’s had success, Schutzbank tries to take it day-by-day, as there are no magical answers in the venture capital world. What she knows has worked, however, is pushing brands to make emotional connections with their consumers, and acknowledging that not everything can succeed 100%.
“I try to say, ‘Okay, today I did okay—give myself a B-plus today and that's okay,’” she said. “It has to be enough.”
dot.LA Engagement Fellow Joshua Letona contributed to this post.
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