Let's talk about why venture capitalists have been giving consumer brands the cold shoulder lately. You know those cool direct-to-consumer brands that flood your Instagram feed? Turns out, they're not exactly VCs' favorite investment these days.

The Brutal Truth About Consumer Brands

Here's the thing about consumer products: they're kind of like trying to catch lightning in a bottle. One day you’re on top of the world and it seems like consumers can’t get enough of the matte colored products you undoubtedly sell (looking at you, AllBirds, Away, Everlane, Casper, Glossier, Dollar Shave Club). But the next day, the market has turned and the faucet of funding has gone dry.

The numbers are pretty wild: VC funding for direct-to-consumer brands dropped a jaw-dropping 92% from 2021 peaks (As of November ‘24) . That's not a typo – I’m talking about nearly all the money vanishing.

Why VCs Are Getting Cold Feet

Just like the trends consumers follow - investors herd to popular investment categories that are strong in whatever KPI has captured the moment. And most consumer companies don’t have those metrics on their side -

1. Consumer loyalty? About as stable as a New Year's resolutions

2. Competitive advantage? That cool brand can be copied faster than they can say "trademark"

3. Technology moats? Next to none, and slapping an app on your toothbrush doesn't count

Even those clever companies that tried to play it smart by buying up Amazon brands (I see you, Thrasio) found out that aggregating struggling businesses doesn't magically make them successful.

The B2B Plot Twist

But here's where it gets interesting: while consumer brands are struggling to get funding, the companies that help these brands run their business are doing just fine. Turns out, selling shovels during a gold rush is still a solid strategy in 2024.

Shopify, WooCommerce, BigCommerce, Faire etc.

These companies have cemented there place in the value chain - they don’t just “provide the shovel”, they provide distribution, advertising, tech environments, and are constantly innovating.

Consumer brands could learn a thing or two from this - what worked yesterday won’t work tomorrow. And releasing a new color-way is not innovation. If your stuck in your ways, and your product category can’t change with the consumer then current success won’t matter. Tomorrow will always be another day.

Is There Hope? ( Kind of)

Before you write off consumer startups completely, remember this: betting against American shoppers' love for the next big thing has historically been a losing game. We're talking about the same people who made Pet Rocks and Stanley Tumblers a thing – never underestimate their spending power.

So what's different now? VCs aren't just throwing money at pretty Instagram ads anymore. They're looking for brands that:

• Actually solve real problems (shocking).

• Build genuine communities.

• Have a genuine differentiation, in tech or partnership.

• Have a clear path to profitability - and then actually achieve it.

To be a consumer brand that succeeds in 2024, investors are going to want to see you building from fundamentals and creating a product for a community who need what you’re selling on a regular basis. The jig is up for products with markets that get saturated and resold - you’ll need to know why your products will sell and your consumers will continue to buy over and over again.

The Bottom Line

The days of VCs funding every brand with a slick DTC website and a sustainability pledge are over. But that might not be such a bad thing. The next wave of consumer brands will need to be smarter, leaner, and actually, you know, make money.

For now, the consumer startup world is like a really intense game of natural selection. Only the truly innovative (and financially savvy) will survive. But hey, that's probably better than the alternative of funding another fancy water bottle company that nobody asked for.

So if you're building a consumer brand in 2024, remember: VCs aren't just looking for the next viral hit – they're looking for businesses that can weather the storm and still come out profitable on the other side. Novel concept.