With the explosive growth of the direct-to-consumer (D2C) economy over the past few years, it’s clear that the way we spend money has changed forever, and the Private Equity world is taking notice.
In fact, brands that are native to the online universe and focus heavily on customer experience, or “digitally native vertical brands” (DNVBs), are growing nearly three times as fast as the average e-commerce retailer.
Whereas in the past it was difficult to find capital for consumer products, the industry’s staggering growth in recent years has encouraged many VCs to expand their portfolios to include D2C companies alongside their traditional tech investments. The rapid development of popular brands like Away, Purple, and Allbirds are great examples of just how quickly that growth is taking place.
VCs investing in DNVBs are looking for new data sources to;
- Identify growing early-stage consumer brands and
- Validate their investment decisions.
Financial performance, the experience of the team, customer acquisition cost, product development capabilities, market opportunity, growth in social metrics, and distribution channels are a few signals VCs have been constantly monitoring.
But traditional signals are no longer enough for VCs to predict the success of a DNVB.
That’s where we come in.
Tagger is an Influencer Marketing platform that allows its users to look behind the scenes of social media and gather powerful data that can track, analyze, and even predict a brand’s online success. And NO, we’re not just talking about tracking a brand’s growth in followers, likes, and views.
Tagger’s innovative Mentions Engine aggregates over 9B social posts from the top 3.5M+ influencers to offer VCs (and beyond) two new investment metrics that are essential when predicting the future success of DNVBs.
When an influencer mentions a brand (Tagger tracks over 165k brands worldwide), Tagger breaks those mentions out into sponsored (paid by the brand) and organic (fans of the brand). Within a group of brands, the brand that has the most sponsored mentions from influencers is the brand that knows how best to market itself and uses influencer marketing to go direct to consumers. The brand that has the most organic mentions from influencers is the most popular brand and has generated the most awareness amongst the set. These are two metrics that were almost impossible to measure in the past. Tagger’s unique technology allows users to do that with any brand, or set of brands.
Since most DNVBs launch and gain success through social media, social listening is an essential tool that VCs must use while navigating away from unreliable metrics like growth in Followers and Likes. Those vanity metrics have been gamified and are easy to manipulate through bot farms.
What drives awareness and sales via social media are the brand mentions from influencers. Marketing budgets are shifting from traditional media to influencer marketing because brands understand that influencers drive cultural trends. Additionally, brands can measure the success of an influencer marketing campaign using the same KPIs they use when measuring their other media mix (CPM, CPC, CPV, trackable link conversion, etc.).
Real-world example: Allbirds vs. Vessi
The following use case compares the influencer activity (organic and sponsored) of Allbirds and Vessi, two wool footwear companies that launched in 2016 and 2017. Allbirds, however, was recently valued at $1.4B and has officially reached unicorn status.
Allbirds generated 8x more organic posts than Vessi during the first 21 months and 15x the reach during that time period. Organic activity represents the awareness and popularity of a brand compared to its peers.
Allbirds also generated 1.5x more sponsored posts than Vessi during this time period, and 5x the reach. Allbirds worked with influencers with larger audiences which created the higher sponsored reach compared to Vessi. Since influencers with smaller audiences generate higher engagement rates, Vessi was able to capture a higher engagement rate but lower overall awareness.
Popularity, awareness, and the ability of a brand to market itself are new metrics VCs can add to their investment criteria to effectively evaluate early-stage consumer and retail companies.
It’s worth noting that if a company is not in Tagger’s existing platform, our users can add that brand and the data will pull instantly.
Understanding a brand’s competitive position and brand strength are vital signals going forward, for VCs and beyond.