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Ryan Caldbeck @ryan_caldbeck
, 25 tweets, 5 min read Read on Twitter
1/ Things about CPG that people wouldn’t understand unless they live in the industry. Most of these relate to how difficult it is to be an entrepreneur in that space- and how unfair it is for them historically.
2/ The inefficiency is crazy. No Silicon Valley, no TechCrunch or YC of scale that comes close. There is an absurd amount of networking- it would dwarf what is considered normal in tech.
3/ The data providers in CPG are horrible. Most are high precision with very low breadth. In addition, there is so much money in CPG (the industry is HUGE $15 trillion) that the same few data providers are used by everyone - thus commoditizing the impact.
4/ …..Yet data is everywhere. While data providers are out there and bad, there is an absurd amount of unstructured data out there. Far more is publicly available than any other industry.
5/ Almost every single VC firm has no idea what they are doing in CPG. But they are all trying to invest in CPG.
6/ The PE firms are terrified and can’t put money to work. Too many investors chasing, strategics too hungry- deals bid up.
7/ Proof of #6? Try to start tracking the head of consumer at any multi-billion dollar generalist PE fund. Avg tenure right now is <2 yrs; their colleagues outside consumer avg 10+ yrs. Why? Cant get deals done.
8/ There is a super bizarre dynamic where some investors focus just on d2c CPG (think Casper, Hims), others focus on predominantly offline CPG (think @HaloTopCreamery , @KINDSnacks). They are confused by other type of investor, which typically leads them to disliking each other.
9/ Trade shows are the standard. Everyone goes. It’s a disaster. Crowded and the companies pay >$25k a pop to be there. Highway robbery.
85,000+ people are at this show (Expo West):
10/ If you think those tradeshows sound cute, consider this- the parent co. for Expo West makes about $40 million in EBITDA from that trade show during that 5 day stretch.

The co’s spend a big portion of their marketing budget to attend. It’s sad to watch.
11/ To source deals, investors get on planes and fly to these trade shows. Then they meet a company - get on another plan and go visit them. This is why consumer investors spend 70-80% of their time sourcing deals.
12/ Investors in the space have never heard of the term data scientist. They don’t know the difference between a CS eng and their IT dept. If you don’t believe me just pick 1 at random and ask . Their answer will be to pivot the convo into how much experience they have in cpg.
13/ Strategics talk openly about dying. It isn’t a secret. They are smart, hard working. They just don’t know what to do to fix it. What would you do?

Fear is palpable.
14/ Companies w/ $1-10m in rev on average take 8+ months to raise a round. Think about how many entrepreneurs there would really be in tech if it was that hard to raise a round. The sources of capital are just so disperse, fragmented and move up market quickly.
15/ There are crazy pitch events where companies PAY to pitch investors. A lot. That’s their best option- because #14 is so horrible.
So sad.
16/ Entrepreneurs in CPG by and large don’t care at all about your tech VC fund. Seriously- they care less about your fund than you care about the random consumer PE fund you haven’t heard of.
17/ The best consumer investors in the world spend about 10% of their time actually executing deals. It’s all about sourcing. They also spend very little time helping the companies post-close. Did I mention they just source?
18/ To illustrate #17- all consumer PE funds pay what’s called Double Lehman deals if you bring them a fund: 5% on first $2m they invest, 4% on 2nd $2m, etc. Ends up being $300k-$1m for an intro to a deal. I once paid $350k for an email intro. True story. That's inefficiency.
19/ But get this. One of the top first gives away a $100k car ON TOP of that Double Lehman fee. Why? a) because you cant split a car with your investment banking colleagues, b) because a car is more memorable than the $$.
20/ Some public CPGs and Retailers call themselves data companies. 99% aren’t and they know it but their CEOs tell them to keep using that term. It’s super awkward and a bit embarrassing.
21/ d2c is a horrible channel for scaling a business but it is a wonderful channel for testing new products and iterating. For scaling there aren’t many companies in history that have scaled w/o raising $X00m and without expanding into offline eventually.
22/ Everyone gets excited because the d2c juice company raised $150m. Wait- what?? Why are you excited it is capital inefficient? Why is that a good thing? Is anyone listening to this? I feel so alone!
23/ Consumer PE funds hate co-investing together. They love to take the deal all for themselves- thus robbing the entrepreneur of having more smart people around the table to help the co. grow.
Top 10 consumer PE funds have never co-invested in history. Never once.
24/ There are crazy things in consumer. But it’s also an amazing place to be. The journey for the entrepreneur is always hard- but in CPG in matters so much. It’s the opportunity to help change what we eat, feed our kids, give our pets, put on our bodies.
25/ CPG matters - a lot. The entrepreneurs are building something special that matters - and disrupting stale incumbents that have been selling us sugar water for 100 years. Celebrate those consumer entrepreneurs. They are going to change your life for the better.
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