- When Jaime Schmidt launched VC firm Color Capital in 2018, she invested in mostly DTC brands.
- Now she’s investing in Web3 companies like TYB, Outdoor Voices founder Ty Haney’s new venture.
- Schmidt still dabbles in DTC deals, but is more picky. Here’s what brands can do to stand out.
Venture capitalist Jaime Schmidt’s latest startup investment looks a lot different than those she’s traditionally made in direct-to-consumer retail brands.
Schmidt is now an investor in Try Your Best, a Web3 “community commerce” platform started by Outdoor Voices founder, Ty Haney. TYB, which launched in March, helps brands engage with and reward customers by offering non-fungible tokens and brand coins in exchange for feedback.
It’s just one of many Web3-related deals that Schmidt currently has in the works and is planning to announce in the coming year through her VC firm, Color Capital.
“This is the direction the internet is headed, and what I get most excited about is that intersection of brands or consumers and this new future,” said Schmidt, who declined to disclose details on deals that Color Capital has in the works.
Schmidt, along with her business partner and husband, Chris Cantino, has also started a Web3 consultancy for brands called Club CPG — CPG stands for “crypto-packaged goods.” Club CPG will advise brands on how they can engage in the metaverse in an authentic way.
“Not every brand is suited for Web3, but our goal as an agency is to help brands understand how they can get involved in a way that makes sense for them,” Schmidt said. “The key for a lot of brands who are new to this is to start understanding the opportunity on a bigger scale.”
Club CPG officially launched at the Natural Products Expo in early March, but Schmidt said it has already amassed a long waiting list of potential clients, ranging from early-stage startups to heritage brands at conventional CPG companies.
For DTCs, ‘it’s really difficult to stand out’
Color Capital has invested in over 15 companies, including Live Tinted, Seed, and The Sill. Most were at the seed-stage level and predominantly in the consumer packaged-goods space.
But in today’s crowded consumer brand market, and with Color Capital’s growing focus on Web3, she and Cantino are being a lot pickier with the brands they invest in.
“The categories have become so competitive and crowded that it’s really difficult to stand out,” Schmidt said.
When founding Color Capital in 2018, Schmidt and Cantino were looking to invest in emerging consumer brands not unlike the one Schmidt founded herself over a decade ago. Schmidt debuted her natural deodorant company, Schmidt’s Naturals, in 2010, at the very beginning of the DTC-brand boom and sold it to Unilever seven years later.
“I was walking through the Natural Products Expo in Anaheim this past weekend, and I’ve been going to that show for many years, ever since I’ve been building Schmidt’s, and just the saturation across different categories was just so extreme,” she said.
Color Capital looks for DTC brands that have already built highly engaged customer communities. Brands with built-in audiences are usually attractive to acquiring companies, as they are likely to bring them new and younger customers.
“Now more than ever, that’s really important,” she said. “Just a group of product and brand enthusiasts sharing the love for what you’re building — keeping them happy and engaged and really involving them on feedback and future initiatives and the road map for the brand.”
One brand that made the cut recently is Athletic Greens, the green-powder supplement that has taken over TikTok. Color Capital participated in the brand’s most recent $115 million funding round, announced in January, which valued the brand at $1.2 billion.
“What Athletic Greens is doing is really smart — it’s convenient and it solves a problem for a lot of people,” Schmidt said. “I think their flavors are also a big piece of it — a lot of products like this end up being something people try once, but this really tastes good.”
‘Access is key’
Schmidt said brands should also embrace a wider distribution strategy and expand beyond direct channels — especially in today’s environment, where supply-chain disruptions are rampant and consumers are prioritizing convenience.
“For brands that are consumables, it just makes sense,” Schmidt said. “Access is key.”
A decade ago, brands like Dollar Shave Club that sold only DTC were considered a novelty. But many new DTC brands are entering retail stores as soon as six months after launch because of a higher influx of brands and higher operating costs during the pandemic.
Brands that have mass appeal and can appear on shelf at a wide range of retailers, from Walmart to niche upscale groceries like Erewhon, have a good chance to stand out, Schmidt said. Ultimately, that wide appeal is a key sign a brand will be able to grow in the future.
She was able to achieve this with Schmidt’s by focusing on simple brand messaging that differed from how “industry veterans” talked about their products.
“The trick is being able to sell across multiple channels — that’s the thing with Schmidt’s, you can find us at Walmart or the corner store down the road,” she said. “And that’s really hard to achieve.”
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