Unlocking the Potential of Beauty and Personal Care Brands With Manica Blain

Manica Blain
The focus today for me as an investor is the question is always, is this a long lasting the environment today? I would say it's really different from when I first entered early stage consumer investing. I think that the focus now is on sustainable growth and profitability. But I would say list consumer isn't going anywhere. Great brands are built every day.

You know, there's brands that are built, there's consumer products, businesses to invest in. A long lasting consumer brand isn't built overnight. The cost of customer acquisition, it was quite a bit cheaper a decade ago. I may be a minority, but I, I don't actually care to see that. They got to like 2 million or 3 million within the first year or two years.

Like, to be honest, that's always kind of scared me when I've seen that level of like quick growth really, really, really early on. And I think what you're realizing, what you're seeing today is that not all the growth is sustainable, right? But it's just like loyalty has become really important to me and that is, to me, a marker of a brand with long lasting abilities. Hello, I'm your host Mike Gallup, and this is the consumer VC, where we discuss the intersection of venture capital and consumer innovation. This show is brought to you by propeller Industries, the leading strategic finance and accounting partner for ventures hedge companies.

Mike Gallup
If you're enjoying the show, please subscribe on YouTube or Spotify or Apple, wherever you're listening to this content. That would be tremendous. Also, if you're really loving the show, I highly recommend checking out the email newsletter@theconsumerbc.com I share all the latest fundraisers in the world of consumer and also you'll be the first to know when a new episode drops. All content and episodes are for informational and entertainment purposes only and is not investment advice. Thank you, Luke Vernon, for the introduction to our guest today.

Manica Blink Manica is the founder of Topknot Ventures. She's an advisor, investor, board member to early stage consumer brands. Previously, she co founded Campfire Capital, whose notable investments were leading the $5 million series A for figs in 2016 and for being a meaningful investor in both of Cotopaxi Series A and series B rounds. Even though I just mentioned two apparel companies, we primarily focus this conversation on Manica investing in beauty and personal care companies and why now is a really interesting time and also the past couple years have also been really interesting times to invest in beauty, personal care and why that's one of her main focuses today. Without further ado, here's Manika Manika, thanks so much again for coming on the podcast.

I know, I know. It's been, we've been wanting to do this for some time, and now we finally got the opportunity and it's so great to reconnect. How are you? I'm good. I'm good.

Manica Blain
Likewise. I'm really happy to be here. You've been in consumer your entire career. I believe it started with you reaching out to Lululemon, just saying, hey, I'm here, I'm here. And you being so amazed by that business.

Mike Gallup
And of course, I'd imagine that you've seen from the investment lens, consumer as investable category kind of have its ups and downs over the past few years. Can you describe the pulse of investing in emerging consumer brands today from an investment lens? Yeah, it's a good question. And I actually started my career in investment banking and I've actually never worked for Lulevin. This is a little known fact.

Manica Blain
I reached out to them looking for a job. They didn't actually eventually ever hire. They never hired me. But eventually I collaborated with some other former executive to start a fun, so that's the Lululemon chapter. But no, the environment today, like, I would say it's pretty different from when I first entered early stage consumer investing, which would have been in the 20 14, 20, 15, 20 16 era.

I would say today the climate is, I think there's still a lot of appetite, but it's certainly the tone has come down a bit in terms of all the excitement and what you thought a consumer brand could achieve and the time it could achieve. I think that those expectations have changed. I think that the focus now is on sustainable growth and profitability much sooner than it was, call it a decade ago. But I would say consumer isn't going anywhere. Great brands are built every day.

There's brands that are built, there's consumer products, businesses to invest in. I would say investors, they've become, I would say, much more discerning than they ever have been before, at least since I've been in the early stage space for about the last decade. So since you've been in the early stage space in the last decade, let's talk about your own kind of expectations for consumer brands when you were starting out versus now have they changed? I know that right now you certainly hear an outcry. You got to get profitable.

Mike Gallup
And let's see about how you can, how you can actually grow sustainably, as you just pointed out, or think about even organic growth versus, you know, paid growth or, you know, when you're, when you're, when you're doing paid, is it, is it actually, um, sustainable? And are, and are you getting the, the actual return on your ad spend? But how, how have you seen like, how, how have, like, your expectations of, um, on the investment side maybe changed or have they been kind of the exact same in some ways? Because you always have, like, been in consumer. I mean, I think what I've always known is that a long lasting consumer brand isn't built overnight.

Manica Blain
I think I've always known that and I've always seen that. I think the difference between the climate that we find ourselves in today versus the climate that you may have been in a decade ago is that the cost of customer acquisition was quite a bit cheaper a decade ago and even a few years ago. And so I think the focus today for me as an investor is the question is always, is this a long lasting brand? Right? And I'm not, I may be a minority, but I don't actually care to see that they got to like 2 million or 3 million within the first year or two years.

Like, to be honest, that's always kind of scared me when I've seen that level of like, quick growth really, really, really early on. Because to me it's been like, okay, so you've just acquired all your customers, right? Like, it hasn't so much. No, but seriously, I mean, that's, that's the reality, right? I've always, to be honest, the brands I'm most attracted to are the brands where it's taken a little while for them to build their base and to figure out their unit economics and to figure out product market fit.

And once they figured that out, they've been putting the fuel in the tank to really grow and gas up. That growth like that, to me, has always made a lot more sense. And I think what you're realizing, what you're seeing today is that not all the growth is sustainable, right? And so when you grow it, a really, really quick clip early on, because you're putting a lot of cash into the acquisition machine, a, the economics just don't work today. We all know that.

But it's just like loyalty has become really important to me, right. And that is, to me, a marker of a brand. You know, long lasting abilities. What's typically your entry point for brands? Not even, like on the investment side, maybe, but even just in terms of engaging conversations or even when you're thinking of yourself, could this be, you know, a long lasting brand?

Mike Gallup
Is there something really here? I love engaging early as an investor, I personally like coming in when a brand is already doing at least somewhere between half a million to a million dollars in sales at least. You know, I'm not, my strategy isn't to invest, like pre launch, pre rev, like, that's, that's not where I get the most because I do like to see a bit of traction. I like to understand who their consumer is. I like to see them know who their customer is as well.

Manica Blain
So I'm not, I'm not as early as pre revenue, pre launch. Like, I do like to see traction. I guess the difference between maybe how I look at things and how another investor might look at it. And I have a lot of friends that have their own funds and then invest in the early stage, and a lot of them will be very explicit and be like, within year one, I want to see a million dollars in sales. And I'm like, cool.

You do you? But I'm actually most attracted to the brands where I call them sleepers. I don't know if that's a good way to define them or not, but I'm most attracted to brands sometimes where they emerge, it takes them a little while. They're really, they're iterating on their products, sometimes they're iterating on who their consumer actually is, and then they find it and then they grow. I think that to me, that I get really excited about businesses like that.

Mike Gallup
Do you happen to have any examples when it comes to, you know, brands that maybe took a while to figure out whether it's their positioning, whether it's who their kind of target market is, but you thought there was kind of. Something that comes to mind. Yeah, I have two that I can talk about. They're both in my portfolio and they both come to mind. One is a business called Sahajin.

Manica Blain
It's an ayurvedic beauty brand. Lisa Mattam is a former pharma exec, and she started the business at the end of 2015 and back when people probably couldn't even pronounce or spell the word ayurveda. And it's a market that she was really, really early and probably too early, to be honest. And she grew, and it was small, and it was the first couple of years, and it always grew, but it was small, it was tiny. And then she had this magic moment in 2020 where I think it was an editor of Oprah magazine or someone within that, Oprah, whatever, and they called one of her core products her brightening mask, her favorite thing to do during the pandemic and then all of a sudden, like, God bless Oprah and that whole brand, but the business just like, it sort of, all of a sudden, it was on the scene.

And it's an interesting one because she was actually a part of Sephora's first accelerate program back in 2016. Right? Wow. Yeah. The very first Sephora accelerate.

And so she cultivated that relationship with Sephora over time as well. And, you know, as any beauty brand, aspiring brand, you know, she'd probably been trying to get into a brand or retailer like that, but that door didn't actually open for her until very recently. She launched at Sephora, CA, here in Canada about six weeks ago. And it's just been, and it's been, for me, the definition of what a successful launch looks like within a retailer like that. Multiple sellouts within the first ten days sold out of every single one of her ten or seven skus.

And it's interesting because when Sephora all of a sudden sold out on their site, she saw a surge of new customer growth on her own site, unlike sahajin.com dot. And that told me and her that this is interesting, that the demand for the products that I'm creating, whether it be the ingredients, moringa, all of Amla, like, all of these ingredients that her products have, like it. The market for it is clearly, the demand is there for it now. And it wasn't there maybe a decade ago. You know, she was clearly too early back in 20 15, 20, 16, 20 17.

But through that period of time as she built her brand, I think two things happened. A, the market developed the demand. You know, that that has happened. If you look at the market today, I can name 15 different ayurvedic beauty brands that exist in the market. You know, all great brands.

But she was kind of there from the beginning. She was one of the first. Right? And I think the other thing is that in that time, she had the ability to really build her consumer base, and she's developed really, really powerful and loyal community. I led around for her last summer, and it was totally oversubscribed.

We were in and out of the market in four weeks. And one of the biggest, like, I would say, interest points as the investors drilled in, was just how valuable and recurring her loyal customer base was. Like, I think, like 15% to 20% of her, of her lifetime value net sales came from customers that have purchased ten times or more. You know, I don't know about you, but I can't think of too many brands where I've, like, gone online. I've shopped, like, ten times or more, like.

And as you start to drill into that ultra vip customer, I mean, this isn't just somebody ordering 1011 times. There's people ordering 22 times, 32 times. I'm like, what are they eating? The products? It was wild.

Sorry, that's my dog. What's wrong?

So I think that's an example for me of a brand that took a little while to really find its footing. And I think it's the next touch. I think it's like the tatcha of ayurvedic beauty. It's a great product, and she's having her moment now. You know what I mean?

Like that. That's an example. Another example would be Everest, which launched at the end of 2020, beginning of 2021. It's a hair care concentrates brand. And they initially launched with more of their messaging around sustainability.

And the fact that in your shampoo and your shower, probably 90% of it is water. And you think about shipping that all over the world, and the carbon emissions and that footprint and just the environmental sustainability angle was something they really, really led with. And I think they realized very quickly, you know, in the first year or so, in that they needed to lead with performance, you know, and then they reformulated their product, their, you know, their conditioning product. They. And they, in the last, like, six months, they've experienced explosive growth.

I don't know if I'm allowed to say this. Hopefully they don't kill me, but I don't think they will. But they've had. They've. Year to date, I know.

I know this because I know this business very well. But year to date, their sales are up, like, eight to nine times over the same period last year. Like, I'm honestly, Mike, I'm looking at these numbers and I'm like, is this 2017? Like, the more they spend on digital spend, their cap comes down. I'm like, what is this 2017?

Like? I don't understand playback. Like, this is wild. Like, how is your cat coming down? I don't understand.

But it's the fact that they found their groove. It took them a while to find the right messaging. They did have to. They did have to iterate on their product, right? That happened at the end of 2022.

And now, you know, I would say from about November 2023 to now, they've unlocked explosive growth. And that's so cool to see as an investor and as somebody that's been following. I mean, I only invested at the beginning of 2023, but I'd been following this brand since they launched. Like, I remember, like, dming them. Like I was right in there, you know?

And, and so it's so cool to see as someone, you know, I'm attracted to opportunities like that. Now another investor might say to you the opposite of that. Where I like to see quick traction, I like to see out of the gates. This was like she blew up on TikTok and viral. Yeah, virality around the product.

My experience, I've always felt this way, especially when it comes to celebrity TikTok influencers. All of those things scare me a lot because I think you're quick to rise and you can be quick to fall. You know, we live in this, like, terrible, cancel culture world today. And, like, it's just like, if your brand is so, like, becomes notorious and almost, like, fake, like, it, like, that really actually scares me. Like, I want to see more longevity.

Mike Gallup
I also, with celebrity, um, led brands, you, you also, I mean, as you pointed out, um, you certainly have risk as well when it comes to, um, you. You could have risk. Right. Um, when it's someone kind of the face of the brand. Right.

We've also seen, you know, um, risk as well when it's a founder. Maybe the face of the brand. Um. Um, and maybe, you know, wasn't a celebrity before, but, you know, the brand very much is part of their, you know, DNA. What do you think?

Does that also maybe scare you in the same way? Or do you like to see the founder maybe a bit more behind the scenes of the brand? How do you think about that kind of relationship? I would say with an individual and the brand itself. Yeah, it's such a good question because, in a way, I think a big piece of brand will come down to the founder, especially in the early stage, and not just in terms of consumer like, focus, but it's.

Manica Blain
You're building your team, you're building, like, it's so founder led. Right. So I understand the inclination for founders, rightfully so, to be more, you know, front and center. I do just feel that the brand and the products and everything else need to stand on their own. Right.

So, yeah, I mean, it's interesting if you drill into, like, Everest is a great example. Like, I think maybe I've only ever seen, like, one or two ads of Jamie and Jess, you know, but it's, it's before and afters of the hair. You know, this is what your hair looks like before Everest. Like, you know, like, same with Sahajin, like Lisa's. You know, you.

She leads very much with her product and she certainly has a pharmaceutical background and that comes out in her and she's very authentic. I mean, her family is from Kerala, which is like the epicetter of ayurveda in India. Right. It's that region of India where, you know, a lot of ayurveda retreats happen, all that kind of stuff. So I don't know.

It is a good question. I think. I think there is always a bit of risk in too much of that, though. Yeah, I think it makes sense in terms of like, you know, especially when you're kind of getting the brand off the ground. Like, I love looking, looking at, you know, the about pages and kind of like the story of the brand.

Mike Gallup
Right. And that has to have, yeah, you have to be, you know, a storyteller even if you're not, you know, in a video or anything like that. Like there has to be a really, really kind of compelling story, in my opinion, in terms of why you exist. And typically that involves the founder. It's going to involve a person because that's also, I think, how we make connections too in terms of connecting with a brand early on.

But I can also understand as you go up and you move on up why as well. That also might be something that you have to be careful with as well and also manage. So that makes a lot of sense. Yeah. Like, I'm trying to think, have I ever invested in a brand where the name of the founder was like, in the, like, I'm, like, I don't think I ever have, like, I'm trying to, like, I'm, like, I'm sort of saying them out loud in my head right now and yeah, I worry about stuff like that.

Manica Blain
But then again, listen, I mean, I think in beauty as well, like, especially on some of the things that are like dermatologists back, like Doctor Barbara Sturm and Doctor Dennis Gross. And like, I think there is sometimes, like you need to. Right, like lean on, on the founder in a big way for a brand. But yeah, hopefully that answers your question. Yeah, I know it does.

Mike Gallup
How, how do you think? Seems like now in the world of consumer, seems like beauty and personal care are just, everyone wants to invest in beauty and personal care. Like I've, you know, I've talked to, I know, I know we've kind of spoke about this a little bit before, but it seems like investors that maybe typically, traditionally would be investing in food and beverage brands also have evolved in terms of their thesis to maybe include beauty and personal care. I'd love to hear, hear. First of all, why beauty and personal care is interesting to you in the world of consumer, what is interesting about those types of brands, how they operate and, um, and even breaking down maybe, um, some, like the, the economics of the business.

And two, if you've seen this shift, and if so, why, why you've seen this shift? Yeah, it's, it's a great question. So, first of all, I'm biased because of the ten investments that my own vehicle has made, like direct investments that I've made in the last, you know, twelve to 18 months. Six of them have been in beauty. So I don't know if you're going to get, like, a biased answer here.

Manica Blain
Like, maybe I'll just answer from my perspective, like, what's attracted me to beauty. Look, I think the first thing, and just to be super honest, I only did my first beauty deal in 2021. At the beginning of 2021, I led the seed for Iris and Romeo when I was a venture partner at another firm. And that was my first foray into beauty. I'd done no beauty before then.

And so, like, I'm relatively new too. So I'll caveat with, a, I'm biased and I'm on that train of, you know, recent interest in beauty, and b, I've only been in that category for a few years, admittedly. But from my perspective as an investor, I've been really attracted to the economics of the underlying business. I've been really attracted to. So when I say that, I mean, margins are quite a bit higher.

You know, I, like, we talked about this with food. Like, food hurts, right? For the most part. You know, it's so I've been really attracted to the overall business model in terms of margins. I've been really attracted to the loyalty that you'll find within personal care and beauty.

So that's been a really, that's been a point of interest. I would also say as an investor, many of us, especially within consumer, not me, but I know many of my consumer investor friends, sometimes they're still sitting on things that they've invested in from like 2015, 2016, and they're like, maybe it'll sell one day, I don't know, like maybe there's a buyer. Like, you know, it's like investors, I think, are becoming increasingly focused, as they should be, on their exit. And the beauty and personal care industry happens to be one where there just so happen to be a lot more acquirers than the food and beverage space, as an example, just, you know, as a comparable. And so with a larger set of potential acquirers.

Mike Gallup
So when you say requires. Excuse me, what do you mean? Like, active acquirers? Like, they're actually going out and actually are interested in terms of acquiring versus, like, the actual number of, like, their. Business model is to add to their portfolio and add business.

Manica Blain
Like, that's what they do. They're a large conglomerate, they're a unilever. They're either. They're pooj, they're, you know, you name it, they're. They're looking to acquire brands.

And the other interesting aspect of the exit dynamic that I've seen anyway, is that you don't need to be too large for that to happen. Right. So in terms of scale, the scale that you need to get to, in my opinion, that I've seen, is anywhere between 50 and 100 million. You're already in a bit of a sweet spot. I was speaking to another investor the other day that just led the deal for a business that was just announced today, and she was telling me in the scope of her research, she was like, it was her first beauty deal, too.

And she was like, I was amazed to see how many acquisitions happened between 20 and $40 million of sales. And you don't really hear about it on beauty independent or business fashion or glossy or any of these publications because they're so small. But exits do happen. That was interesting to me because there just isn't as much public data on that. But through the course of her research, she had shared that with me, and I found that really fascinating.

So, yeah, I would say the exit dynamics are certainly a reason why I think a typical consumer investor may have not seen the returns they would have liked to see in apparel or food and beverage or some of these other consumer categories. However, the dynamic is such that there just are a lot more options for exit from an acquisition standpoint. In beauty and personal care, how do. You think about the overall trajectory of a beauty personal care brand? Because, as you say, the exit maybe is happening earlier than you would expect sometimes.

Mike Gallup
Still, of course, from the investor standpoint, you want to have an outside return. Right? How should a founder, or what you've seen in terms of to get to maybe, for example, like 40 million, let's say, or 50 million revenue, that trajectory in terms of fundraising, what does that typically look like from your mind? And are those kinds of discussions that you have with founders in terms of what you. Before you invest?

In terms of. In terms of when they actually should next fundraise or if they even want to continue fundraising? Yeah, I mean, I think the decision to fundraise and when to do. It is so company specific and brand specific, and it depends on, you know, all sorts of other things in terms of where they've gotten to. Like.

Manica Blain
Yeah, like, Sahajan, for instance, is a great example. She completely bootstrapped, you know, from 2015 until last summer. Right. 2023. Yeah.

Eight years. Right. Which is incredible. But she built a profitable business from day one, and, fine, maybe she didn't have, like, zero to a million in the first year. Right.

But she very, like, intentionally, very carefully, you know, grew the business and. And didn't need to. And when I convinced her to raise capital and she went on the journey.

Yeah. Like, I mean, I think she's. She's in a great spot. She'll. She'll do a series a suit, and that might be her last round.

And that's because she's built just a really profitable business. And that's great. But it depends on your structure. It depends on your margins. It depends on first term profitability when you've gotten there, how you've gotten there.

It depends on how much of your business is d to c versus retail as well. I think in her case, she's been in retail since, you know, for. For the last several years in credo and detox market and some smaller accounts. Sephora is her first big account, but fortunately, she has a really sizable d two c business. Right.

Which, if you can nail down the economics, especially with loyalty and repeats and stuff like that, like, it's. It's pretty. Like, it's like that piece of. It can be, if you have that piece of it in your business model, even as you go into retail, that might cushion some of the cash requirements or working capital and inventory and all those. Those other things.

So in her case, her trajectories looked like bootstrap for eight years, you know, a sort of pre series a round and then a series a. And I think she might be done right. So in her case, she will have probably at the end of the day, I'm guessing, hope she doesn't mind speaking so publicly about her brand. I should have checked with her before, but in her case, I could see by the end of the day, her raising less than 10 million for sure and achieving a nine figure exit. This episode is brought to you by Propeller Industries.

Mike Gallup
If you run a high growth business and your focus on profitability, extending your Runway, and improving your operational efficiency, you probably need a finance and accounting wiz that will grow with you. Well, instead of hiring someone full time, what would be cost effective is working with Propeller industries, Propeller Industries is a leading strategic finance and accounting partner for venture stage companies and has partnered with over a thousand startups and high growth businesses across consumer products, consumer tech and enterprise. Some of the brands that they've worked with are liquid death, Alipop, hymns, farmer's dog away, movie Pass, and Giphy. Propeller also provides specialized support for fundraising and m and a with transaction advisory services. Propellers TA team of former investment bankers and investors can step in on more of a project basis when pursuing full scale financing and m and a there's a link to propeller industries in the show notes if you want to learn more information how also do you think about well, I guess when we talked a little earlier, we talked about sleepy categories or sleepy kind of companies that are kind of slow to kind of get the ball rolling or the revenue to come in the first couple of years, maybe because they're a bit early to the category.

How do you within beauty and personal care, how do you think about today maybe what are some of the sleepy categories or categories that you think are potentially overlooked? I really, it's interesting, as I look at my beauty portfolio in specific, the one underlying theme, I would say maybe just with one exception, but for the most part I've been really attracted to brands that have gone after women in their power years. That's a category that I feel has often been overlooked. You know, women that are 40 plus, happen to have the capital to spend, happen to be extremely loyal when they find something, you know, or like. It's so, it's, it's interesting that I think, I don't think it's the case anymore.

Manica Blain
I think people have clued in in the last, probably year or two in particular. But when I started my journey in beauty as an investor, I was certainly seeing that there was more white space in that category of demographic, regardless of category, whether it's color, cosmetics or skincare. I definitely think that continues to be a little bit of an overlooked overall category, but I think that there have been a number of entrants as well. So I think that's lessening more and. More because you have so much experience investing in companies that start off d, two c and e commerce.

Mike Gallup
Does that have to be a must have for you or can they start in retail wholesale? I know from, I imagine from a data perspective it's obviously d two c. You just have so much information when it comes to customers and loyalty and are able to kind of put it in cohorts and, and what have you. But would you, do you also consider like companies that maybe start, start out wholesale? Yeah, I think wholesale needs to be part of the playbook, if there is a playbook.

Manica Blain
I just, maybe I'm old school in this regard, but I do really think that building your brand, knowing your consumer as well as you can know your consumer, you're just not going to get that level of insight unless you launch direct. So I'm a big fan of soon thereafter starting to look into retail and wholesale and diversifying your business and growing your channel mix early on. But I do just think that there's so much that you can learn and then Everest is a great example. Right. 85% of their business right now I think is still d two c.

And they've experienced extremely like a crazy amount of growth in the last little while. But they just, they know their consumers so well now and I think they can use that to better serve their customer within retail channels as they start to grow that out as well. Does that make sense? I think there is something about if you can do it and if you can do it profitably, I think you end up learning a lot about what you need to do to really find that product market fit when you own your customer data. Yeah, that makes sense in terms of why for you as well, in order to be comfortable, it makes sense to have that data and to have hopefully a decent amount of data.

Mike Gallup
Five hundred k to two million in sales at least. But that's the hope. What happens if, and has this ever happened to you before? When you source a company, you like the company, you get to due diligence and maybe there's a red flag in due diligence if this has happened. What's an example of a red flag once you get to that point?

Manica Blain
Yeah, it's a great question and there's one that comes to mind and it's when and if I ever get the inkling that the customer is not like the core, you know, like, I think that how you deal with your customers very, very, very early, you know, and I'm talking like sub a million dollars even in sales, except even half a million dollars in sales is going to say a lot about like the team, the founder, core values and whether or not they are here to exist for their consumer. And I have had, there's one instance in particular where, you know, there was a product quality issue. I came to discover it. You know, they were honest with me and told me about it and it was, it was the fact that there was a product quality issue. There's always going to be product quality issues when you scale from you know, 10,000 to 500,000 to 10 million.

Like hell. Like, why did see through pants happen for Lulu? And that was when they were at a billion, right? Like, in sales, like, there's like, something's going to crack as you scale to higher levels. Like product quality issues.

Like, that's always going to be a thing. You're never going to skirt that. That's not the issue. The issue is how you communicate that to your consumers. It's how you deal with that, you know, and the interesting, in that specific instance, I remember the founder and the company, you know, they're telling me, you know, so this is affecting, like 20%, this issue where something shows up to your home and it's not in the way that it's supposed to be packaging, whatever, but it's, like, not usable, right?

Like, it's like, it's like this, this product was no longer usable, okay? And they were getting complaints from, they were saying 20% of their customers they were shipping to in a certain region. And I was like, okay, okay. So what are you, what are you doing about it? And, you know, the answer is we're fixing it in the background.

We're, you know, changing up the packaging, whatever. But yeah, that's what we're doing about it. And I'm like, no, no, no. What are you doing to communicate to your consumers that you've shipped product to where you know already you're getting 20% of your customers? 20%.

That's a big number. That's not insignificant. That's immaterial. You know, coming to you and saying, like, hey, this showed up unusable, right?

And they didn't have an answer for, they were just like, no, no, we're just going to fix it. And when somebody complains, we'll deal with it. We'll give them, you know, gift card, a promo code to use on their next purchase. And that just wasn't good enough for me, Mike, because I was like, if 20% of your customers are actually putting up their hand and saying, hey, this happened, you've got to believe that there's probably another 20% at least that may not go through the trouble. Like, I'm probably that consumer where if it shows up to my home unusable, like, I'm too busy with my life in my day to day, like, I, you'll just never see me again.

You'll never see me again. And the thing about consumers and consumer experience is you're going to rave about a great consumer experience, and similarly, you will tell everyone you know about a consumer experience that's really shitty. Am I allowed to say that word? I don't know. You will.

You will. That's just how we work as humans. You remember the best, you remember the worst, right? And that was just so telling to me because, you know, they had an opportunity in that moment to get ahead of something and to be proactive and to reach out. I mean, it wasn't even a ton of orders yet.

There were some, let's call it half a million dollars in sales. You could have very proactively reached out to a subset of consumers that you knew were probably affected by an issue. That was your response that you failed on and that you're fixing, and you just chose, you're choosing not to. And that tells me that the consumer isn't at your core, and that tells me a lot about your core values as a business, as a founder. And these are things that I do look for, and I think that anybody that knows consumer well enough should look for them, too, because the problems aren't going to go away.

You know, like, it's like I said, you could be a billion dollars in revenue and you'll have a product quality issue, but it's how you deal with those challenges and it sets the tone for the culture of your firm. Totally. I mean, um, yeah, I mean, uh, uh, certainly, um, not just kind of deal with it on, like, an individual basis and, like, make it right, but actually say, okay, there's actually something really wrong here with our manufacturing or there's really something with our fortune, which, by the way, I mean, manufacturing is freaking hard, right? Like building, building physical inventory based businesses. Like, it's freaking, freaking hard.

Mike Gallup
And I do think, and I do think that consumers, if they love your product and maybe if the product doesn't, you know, if you buy it again and maybe it's not quite right of what it used to be. I do think if you came out as a company, like, hey, like, we're a young company, right? We're, we're trying to fix this. We've seen actually so many orders that this is becoming concerning. Like, it's no longer a rounding error, right, that we want to make this right.

And you kind of go, you go a bit public with it, then at the same time, you know, that actually could inspire even more loyalty in, in some ways, right? So, um, uh, that people, you know, it's. It's that transparency, it's that honesty that, um, uh, that, like, this is the position that your company is in, but at the same time, you know, also being honest that, you know, you're also a startup. Right? So you're also a very young company.

Manica Blain
Retention is so hard. I think people are focusing more on more and more on it today. But in that first instance, where there is what you consider a high probability of a poor experience, if you can't get ahead of that right away, don't even try and retention style, win them back in six months. Like, they're done. Right?

Like it, like, for the most part. Right. It's. That's. That's my view.

That's what I've seen anyway. Yeah, yeah. I mean. I mean, you can convince someone to buy something once, right? But buying it the second time, if it's not a great experience, they're probably not gonna buy it the second time.

Mike Gallup
Right? So. So, you know, that first impression is huge. If that first impression doesn't go right, you need to get ahead of it. And the irony is you've spent so much money on that first, you know, in the era that we live in right now, knowing what we know about, you know, acquisition, like, it's.

Manica Blain
It's hard to acquire that customer. And so, yeah, if you have an opportunity to make things right really early on, I don't see why you wouldn't take your shot. Totally, totally. Also, like, you know, just, you've had such an incredible experience on. On the investment side.

Mike Gallup
I know. Now you're top adventure and active angel. Is that fair? Is it, like on brand? Yeah, no, exactly.

Exactly. And like, a very active angel. What have you learned as well from investing with others? Investing with others, too. I know that you obviously co invested with other people, and you've also seen funds and partnership dynamics.

What have you learned about maybe co partner dynamics? And when it comes to actually starting to fund for those that are actually interested in starting to fund, how to actually choose the right co founder or pick the right people they actually should want to work with? Yeah, it's such a great question. And, I mean, here's what I've learned. I've learned that at the outset of any formal business relationship, including, but not limited to, but especially in regards to starting a GP, like starting a fund, you just need to have really clear roles, responsibilities, lanes, you know, you need to have a proper framework of how to deal with, you know, differing opinions and adversity.

Manica Blain
Right. And I think having that framework set up early on, having those clear roles, responsibilities, I think is crucially important. I mean, when I was raising my first fund with three other partners, I wish we had more of those conversations, you know, and expectations early on and that framework early on and, yeah. How you deal with conflict of interest, you know, that sort of thing. Like, I think those are all really important conversations to have.

They're not fun conversations. They're not. Right. Like, it's like a prenup, essentially. When is that ever fun?

Right. But I think they're really important. I think they're really important. I mean, the reality is a lot of people come together to start funds, and it's like, I've known them for years, and we've had this working relationship, and we've been at this company together for ten years, and then we've stayed in touch and this and that, and that's great. But you've never come together to, you know, raise other people's money.

Right. Third party capital to invest in potentially what is a very unique strategy. Right. So it's the first time that you're doing this, and I think, yeah, that would be my advice, just setting all that up. Having those tough conversations are like, what's.

Mike Gallup
The end goal for top, not ventures? Is it, is it, is it eventually going to. Are you eventually. Is it, is it always going to be investing off the balance sheet and angel investing? Is it, are you going to, are you going to be thinking about bringing up, bringing out lP's and, and also, and also bringing out partners?

Not that you need to bring on partners if you have LP's, but what, what do you believe is kind of like the end goal with, with topknot? You know? What's so funny? I talk about this a lot. You know, most people start their investing journeys, and they start as angel investors, and then they'll maybe work for, like, a small firm, and then they'll work for, like, a really big firm, and then they'll, like, you know, then they'll have their own firm.

Manica Blain
Like, you know, they'll sort of do that. Whereas, like, my life has been the opposite where I started my career, like, investment banking, like, advising big companies on how to buy other companies and, you know, a lot of ebony, and then I. And then I was in private equity for five years where it was, like, big, huge companies, like, big acquisitions. Right? And then, and then I started my own venture capital firm with three other partners, and then I worked for family office and then venture partner role.

And now. And now I'm. I'm like, I'm not at the end of my career. I'm only 42. But, you know, now I've sort of landed angel vesting.

And first of all, I'm having the most fun I've ever had. That's like, one thing that's just true. And I'm having the most impact I've ever had, which is the second piece of it that gets me really excited about what I'm doing now. And I'm getting to finally kind of come into my own and trust that instinct that I've developed over the last two decades. And, you know, I'm not having to convince three people across the table or a partner in the, like, I'm sort of getting to make my own decisions and, and certainly, like, I have many friends in the consumer investing business that have their own funds and are doing great, and I'll often text with them, ask them questions.

So I'm collaborative still in nature in that regard, but I'm getting to make my own decisions, and that's, that's, I'm really enjoying that, to be honest. And will I ever raise another fund? I may, I may not. You know, I think that I was fortunate in the sense that I got to, I worked really hard at it, too, but I was able to return back a bunch of capital to my investors, so I was able to close out my fund and actually give back DPI. Right.

We talked about this. Like, I'm one of the few funds out there that raised a fund in the last decade and that actually, like, gave back all the money and a bit of a profit. Like, you know, so, like, I've done that. So I fortunately have great relationships with many of the LP's and investors that were in my prior fund. And many of them ask me often enough because I'll bring them into deals that I do.

They'll be like, what? Are you actually just raising a fund so I can just write you sign a sub doc and make it easy, make it easy for me. And I'm like, with all due respect, I will never be beholden to investors again. With all due respect. Thank you for the vote of confidence, but I just, it's a lot of responsibility, Mike.

At the end of the day, when you are raising a fund, when you are deploying other people's capital, it's an incredible responsibility and I've lived through it and I've done it and I'm grateful for the experience, and maybe I will do it again. But for now, I'm kind of having fun where quite frankly, like I said, most people start their investing careers in this little pool that I'm in and I'm having a lot of fun. Yeah, I think, you know, I mean, I remember talking to an investor and asking how, how this person's weekend was, and it was, you know, on Sunday, it was all day chime with LP, you know, so I'm just saying that, you know, you, you also have that, too. So it's, it's, you know, and because sometimes I think that, you know, VC funds, incredible vehicles, incredible, create such, you know, incredible value and, you know, especially, you know, the world that we both care about on the consumer side of things. But at the same time, I think it's sometimes also all the things that you kind of think about with consumer funds.

Mike Gallup
The fun stuff like deploying capital and stuff like that. There's also all the back end stuff to deal with, too, with the LP's and that too. And also the partner dynamics as well, or the actual building the actual fund from scratch, which is incredible, but it's just also something I think about if you were to start a fund, too. Totally. I mean, I had this conversation with, with someone the other day, another investor who has his own fund now, he's on fun, too, and he joked about it.

Manica Blain
He's like, whenever I have somebody that comes to me and asks me about investing, they really want to invest. They want to go build their own firm. I just tell them, no, no, just go be a part of another fund and invest if you want. Like, because when you develop your own firm, like, your job isn't just investing anymore. That's like a small part of your job now.

You're really, you're managing other people's money now and your relationships and your, your customers, actually, your customer is actually your own LP's and your own investors. Whereas, like, for me, like, I don't, I don't have that anymore and I don't, I don't really miss it, I should say. I love all my investors. Honestly, I've been so fortunate, right? Like, I do deals now.

Like, I'll participate in deals anywhere from, like a million on the smallest side, up to $8 million has been my largest deal that I've supported and helped. And, like, honestly, like, I'm able to call on those relationships, you know, whether they be through funds that I've interacted with or whether, you know, funds that I have relationships with. All the new funds that I'm developing relationships with, but also, you know, just the LP's that were in my fund will often show up as co investors in companies that I'm investing in and leading rounds for now. And so I'm so grateful for those relationships, I am. But but yeah, I think I'm going to keep doing what I'm doing right now for a while.

Mike Gallup
Cool. And just quickly, you know, napkin math, in terms of what, what your kind of expectations are when you kind of underwrite into a company, in terms of how much typically is your average text check size, when do you, when do you want to, how long do you think duration that you're actually in the company for and what is the desired kind of return or the hope that the return will be from that investment? Yeah. Yeah. So great question.

Manica Blain
So my initial entry point, I mean, it's changing, but yeah, typically anywhere from like ten to 30, then flexing up to 50 to 100k. Like, if it's like, in follow ons, like including, you know, like the next round, if I can get it. I'm just a small investor, but when I think about underwriting and investment, I mean, it's consumer, right? I think I'm underwriting for, you know, a five to ten x is the sort of the range. And in aggregate, I know I'm going to have losses as well.

You know, that's inevitable. The nice thing about consumer, from a loss ratio perspective, especially if you can play a more hands on role, it's typically less than the average tech, you know, but I'm still even just my own. Like, I have my own little fund model. Like, I'm still kind of underwriting for, you know, anywhere from, like on the low end, 20% to 30%, but up to 50% loss ratio is what I'm forecasting for my own. Like, it's just gonna happen, right?

So, yeah, it's. I'm hoping for my own portfolio. I'm giving you a lot of math here, but I'm hoping for my own portfolio. If I end up doing between, you know, sort of three to four x, like, that's a great return for a portfolio, in my opinion, in consumer early stage. Totally, totally.

Mike Gallup
I. I agree. I agree. My final question to you. What is one book that inspires you personally and one book that inspires you professionally?

Manica Blain
Let's see. I'm a big fan of audiobooks, so recently I have to almost open it up and check it. My all time, one of my favorite professional ones, I'll start with that one, is the hard thing about hard things, which I will actually like. I'll listen to chapters of that again. And I just, I know it's an old school book, but I just find it, like, super, super insightful and real and true.

So that's, that would be the professional one. The personal one, I'm really into, like, biographies and stuff I'm really into hearing, so I don't know if that's also professional. But I recently, Kara swisher, I heard her audiobook and I just found it. I found it fascinating. It was her sort of biography, and I think it came out a couple months ago.

So that's probably been the latest one that I read. I'm trying to remember the name of it, but it was, I mean, I got through it within, like, a few days. I go for walks with my dog and put my Airpods in, and I just found her perspective really fascinating as someone that's covered, you know, the emerging text scene as a reporter. And her insights were interesting and very entertaining. And, you know, the gossip on the various players, you know, everyone from Steve Jobs to Elon Musk.

And so I found that really entertaining. That would probably be like my personal bucket and something that I've read recently or listened to recently, I should say. That's awesome. Thanks so much for these. This is, this is great.

Mike Gallup
I actually have one more final, final question for you. I know you're canadian, and I know that you invest in american companies. You also invest in a lot of canadian companies. Make the case, why is Canada such an incredible place when it comes to investing in beauty and personal care companies? We got to try so much harder.

Manica Blain
That's the thing about canadian. No, but it's true. We're a 10th of your size. But if you think about it as an emerging brand, we're having to control, spend on two geographies out of the gates. That's an interesting one.

We're very disciplined. I think from that perspective, measured in our approach, I think what can hurt us, in my opinion, has really helped a lot of founders, which is like the canadian conservatism. Like, you know, we're more conservative for the most part, just a little bit, especially when it comes to risk taking. And I don't know if that's always a bad thing from an entrepreneur standpoint. I mean, when I think about my portfolio of beauty brands, like, yeah, like bloom, Everest, Sahajin, Blanca.

Yeah. So, like, I mean, it's, it's. I'm really happy with my canadian beauty founders anyway. Like, they. Yeah, like, I think.

I think we have to be. I think we have to work harder, and I think that's not a bad thing. Right? We're not in New York. We're not in LA.

We're not in the epicenter. Right. It's like we're kind of a little bit of the underdog sometimes, but we work really hard for our wins. And, yeah, I think we're good people. Not just saying this.

Mike Gallup
Every canadian I met have just been, like, the nicest people, including you. Yeah. Love, love Canadians. And also, I'm also a big ice hockey fan, so that also probably helps. Manika, thank you so much for your time.

This has been so much fun. You're so welcome. Thank you so much for having me, Mike. And there you have it. It was a pleasure having manica on the show.

Manica, thanks again for coming on. If you're loving the show, please consider subscribing to the newsletter@theconsumerbc.com. you'll receive all the latest fundraising updates in the world of consumer, and you'll be the first to know when a new episode drops. Thanks for listening.

Unlocking the Potential of Beauty and Personal Care Brands With Manica Blain

Primary Topic

Episode Summary

Main Takeaways

Episode Chapters

1: Investment Philosophy

2: Case Studies

3: Market Dynamics

Actionable Advice

About This Episode

People

Companies

Books

Guest Name(s):

Content Warnings:

Transcript