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April 3, 2023
I am borrowing this title from a Train song, and to pull some lines from lyrics, our entrepreneurs "need to know you're here." Those entrepreneurs are screaming from rooftops that they "won't give up if you don't give up."
Okay, I've exhausted the parallels to the song, but I want you to rethink how you invest in this sector.
I understand the current economic climate is stormy and that many of you are keeping your powder dry, looking for that one genuinely venture-backable brand that has a realistic path to $100 million in revenue in the next five to seven years. But, for every one of those, there are dozens of niche brands that are inherently investable.
I will get out over my skis and be somewhat controversial. As a whole, we angels stink at portfolio management. The same can be said for most seed funds. An infinitesimally small percentage of our portfolio is responsible for the lion's share of the return. We can do better, and founders need us to do it!
There is nothing wrong with making a few bets on moonshot opportunities. But why not augment those with safer, smaller bets? Niche brands represent a great way for us to better manage our returns.
Using creative structures and terms and putting that mix of investment vehicles to work in companies with a path to $10 million to $20 million in revenue, EBITDA and cashflow positivity should yield healthy returns. Let's be realistic: Most emerging CPG brands aren't venture-backable. They are unlikely to deliver 10X returns. That doesn't make them unworthy of investment. A compelling brand with a well-carved niche, strong unit economics and innovative terms makes a good investment.
A strategic acquisition is one of many ways to monetize an investment. A company that approaches $10 million to $20 million in revenue that is delivering a reasonable EBITDA has options. They could stretch for venture dollars at that stage by platforming the brand and accelerating distribution. A P/E firm might take an interest in the brand cashing out the early investors at a reasonable multiple. Commercial banking becomes a viable option that allows for self-sufficiency. A crazy thing here—investors could receive meaningful annual distributions. There are also the less common founder buy-backs and ESOPs.
Our industry needs investors that are interested in more than just moonshots. These backable entrepreneurs are working to build great brands and good businesses that impact human health, climate action and social justice.
I am putting money behind this thesis. The TIG Venture Community is a rolling fund committed to investing in the types of businesses mentioned above. A managed portfolio with a few moonshots augment with a larger cohort of smaller capital-efficient brands will outperform most seed funds. Join our venture community if you're an angel or an accredited investor. Visit TIG Venture Community to learn more and start investing differently.
Elliot Begoun is a 30-year industry veteran, author, podcast host, founder of TIG Brands and champion of Tardigrades. TIG Brands supports a community of entrepreneurs interested in building nimble, capital-efficient, resilient brands that become Tardigrades, not Unicorns. Learn more about TIG Brands’ programs.
Read more about:IdeaXchange
Founder, TIG Brands
Elliot Begoun is a 30-year industry veteran, author, podcast host, founder of TIG Brands, and champion of Tardigrades. TIG Brands supports a community of entrepreneurs interested in building nimble, capital-efficient, resilient brands that become Tardigrades, not Unicorns. Learn more about TIG Brands’ programs here and catch Elliot at FoodBytes, the Hirshberg Entrepreneurship Institute, and the Natural Products Business School. Tune into the TIG Talks podcast and find Elliot’s articles in publications such as The Huffington Post, SmartBrief and New Hope Network.
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