2 min read Investing in CPG The CPG space is a solid one to invest in, especially in a post-COVID era.
There are specific cues that make startups stand out to investors.
You should make sure that any company you are considering investing in has a competitive edge and strong customer engagement. And you, as an investor, are going to need the patience to succeed in this sector.
Competitive Edge
Investors want a considerable market size in the future, and they want to see a competitive edge. If you have a massive market it probably means there are people in it already.
Ideally, you want to find a company entering a market that will be meaningful enough with high growth rates that aren’t over-saturated. An example of this is nonalcoholic beer. It isn’t as saturated as the IPA sector, but it’s meaningful and on the rise.
Customer Engagement
You can measure customer engagement in a variety of ways.
Engagement can happen on the company’s social channels, through different marketing activations, and through other methods being used to reach customers outside of digital channels.
Omni Distribution
Investors should look for companies with omnichannel forms of distribution.
Single-channel and single customer models lead to too much concentration. Also, more channels require more brand awareness opportunities.
Getting distribution is hard for the CPG producer. The big firms block out the small firms.
Look for companies that have found creative ways to bring the product to market.
CPG Takes Time
Everything in CPG takes longer than you expect. When you’re investing in a CPG company, you have to be patient.
Unlike software, the startup cannot go from one to one billion users overnight. It takes a long time to bring the product to market.
The company has to prepare its packaging, get production up and running, be ready to ship, acquire distribution, be able to refill orders, and more.
As an investor, you have to come in knowing that it’s a longer cycle and it’s a different risk profile. Once the consumers are in that buying cycle, however, it’s a beautiful thing to see it.
Read more in the TEN Capital eGuide: https://www.startupfundingespresso.com/trends-in-cpg/
Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group
