🌀 NATALIE SPORTELLI // BULLISH DIRECTOR

0:00I'm Sam Rose, and this is Commerce is Chaos, the podcast for consumer brand founders who know that building a business is messier than the highlight reel shows. Your supplier just missed their deadline, your top product is out of stock, and your competitors somehow just launched the same thing at half the price. Sound familiar? Every week, we dive into the real problems that keep founders up at night, from inventory disasters to supply chain nightmares, because surviving the chaos is what separates brands that fail from brands that scale. All right, well, I'll kick us off here. Natalie, you're director at Bullish, which is super unique because you're both early stage consumer VC, which I love, and a creative agency, which I also love.

0:39You've got incredible portfolio companies, Warby Parker, Sunday Lawn Bubble, Holly Hare, Holly Hare. Holly. That's kind of right. And you're not just providing capital, you're providing hands-on operational support, which is so wonderful because it's the thing, you know, yes, we need capital as early stage consumer brands, but really you need to know like how to spend it. It's so easy to do it wrong. And I was reading your background, which is so incredibly impressive too. Journalism at Forbes, and then you were on platform at Layer Hippo, head of content, thing testing, of course. So I'm curious, given all of that background, what's the framework that you've sort of developed for yourself in evaluating which brands you're going to approach as investment opportunities?

1:25Natalie Sportelli:Yeah, you know, it's so interesting because I kind of have just been in consumer my whole life. Looking back at it, because when I was at Forbes, I was working on the food and drink list, which involved a lot of CPG food and Bev brands. I went to Sir Kensington's and wrote about them. We put Siete, which was a huge, incredible exit this year with an amazing founder story on the under 30 list. So I kind of was hovering around that area for a while. And then Lear Hippo had some really incredible consumer investments. and then thing testing with thousands of brands launching every day. So I feel like when I came to bullish, I had like a pretty decent understanding of brands that have been around a long time and also what waves have kind of occurred and then what's kind of remaining or new.

2:09Natalie Sportelli:So for example, like at thing testing, there was vacations launch. And so there was kind of this wave of sun care brands. And now there's some launching still today, But then also like vacations kind of emerged as like the early success and winner. So I think my career background and like whole journey have really informed like what things are hypes, like hype cycles, what things are kind of steady state and like what kinds of things persist in culture beyond that. Because you could be doing like a novel innovation, like a Graza packaging. You could do like a novel ingredient, like a cassava flower for Siete.

2:44Natalie Sportelli:But like people are going to make your product successful. So I think the thorough line has been like, what are some brands that are really understanding like where culture is going versus saying like, oh, here's like another nice looking product when there's already, you know, some competitors or like a kind of a Me Too era of everyone jumping on trends. So being able to discern like what are culture leading brands versus brands that aren't going to kind of break out in the same way is a little bit of like a framework that I think about. And how often do you see the brand that ends up being the culture leading brand being kind of the very, very front end of the trend versus like, you know, some number of months or even a year later?

3:26Like is the second to market on a trend sometimes the winner?

3:29Natalie Sportelli:It's so funny that you say that because I was passing Biltong jerky. You know this jerky? Yes. And yeah, okay. In a bodega. If I said it wrong, I'm sorry. No, no, you said it right. Biltong just always makes me laugh. Okay. And it's interesting because I read Andy Dunn's Burn Rate a couple of years ago and he had tried to do this at that time years and years ago. And so he tried to make the same type of product. And so when I passed it, it was just so interesting to me because it's like some things aren't like people are too early or like people aren't ready yet to embrace an ingredient or a new product.

4:05Natalie Sportelli:So I think often like you could be the second or third or later to market and have tweaked or addressed like an education gap that then makes the brand successful because consumers are ready for it. I think that this could happen and like all over in terms of categories. You could kind of be like pushing something, but people don't like super care about that. And then years later, it's like, oh, my God, microplastics. And then then it becomes like a cultural momentum that helps like a number two, three, four, five brand be successful. And do you bring that insight to the table when you're choosing to invest in something that is like maybe the very first?

4:42Like if they are the very first and so there's this education gap that they're going to have to lead and carry the consumer over, how do you detect whether or not, or to the extent that you can, whether or not they're going to be able to help that consumer bridge that gap versus like, hmm, this might need some time?

5:01Natalie Sportelli:Yeah, I think having like enough one-to-one conversations with your customer base is super important. And like being able to collect data and like seeing what people are talking about on Reddit or Quora or like TikTok comments. And like there are some cultural signals where you could kind of feel like, okay, here are all the reasons that these things happen at the same time. there are also things like with legislation that might change like you know we're still tbd on like the farm bill being voted on again so liketh hemp drive thc was kind of like a tbd category right now so i think like there are signals whether like culturally politically socially economically that can like tell you that people might be ready but you could also just like talk to people in order to see society ready for this type of thing like are we ready to embrace this type of product or is this like not the right time?

5:46Natalie Sportelli:And then sometimes like a product can come along like 10 years later and then it is the right time because there's like a broader understanding of gluten intolerance or buckwheat and its benefits and stuff like that. That's so interesting. I mean, yeah, like knowing when as an investor to sort of like make that bet versus hold. And of course, as an investor, you're looking for asymmetry. You're looking to see something before anybody else and make that asymmetric bet that's going to give you like the outsized return that you need and probably cover the bets that haven't worked out. And we know there's going to be a bunch of those too.

6:19So having like the right detector for that. And I know you can frame some of it. I'm guessing based on your experience and hearing you talk that some of it's just gut too, right? Like it seems like you've got a really good picker.

6:32Natalie Sportelli:It's so hard in consumer though, because you might see something and then it's maybe not that exciting to you, but it's exciting to so many more people and then it just totally takes off and it's an anti-portfolio ad. But I get really excited when I see things that are totally surprising and it's either because they're completely in that new thing, like no one has ever done this before, or it's like, oh yeah, why isn't that better? So this one company I was just talking to, people just accept this one way for this type of service business to be and then they're trying to create an entirely better experience.

7:06Natalie Sportelli:And it's like, well, yeah, why actually haven't that been fixed? And then you learn all about the systems for like why it hasn't been improved, you know? So like totally not new innovations and then people like revitalizing or changing like really bad consumer experiences, like those types of companies that surprise me get really, get me really excited because I'm, you know, it's totally like a net new innovation. And those are my favorite, I think, to talk to. Yeah. Yeah. I think one of the things that I often look for is like, that's so obvious, right? Whatever that is, why hasn't anyone done it before?

7:37And then if you have a founder who's like, well, well, here's maybe the why I had that experience as a founder too. I'm like, you know, I stumbled upon what I thought was like the most obvious thing in the universe. Turns out we were one of the market, you know, kind of like the trend leaders petition flooded in after the fact, which I was grateful for because everybody had like a better kitchen. But, but yeah, I think asking that question and, and then boldly saying, okay, well, like those reasons for not doing it aren't good enough. So we're going to do it anyway. But that takes capital and it takes execution, which brings me to the next thing I want to talk to you about, which is that you guys do both.

8:15And I love this dual model of both capital and creative services. Outline for us how that works for you all. And then what I'd love to get us into is sort of how you structure those relationships with your portfolio companies and also with your decision-making process around like investing first versus agency first. So take it way.

8:32Natalie Sportelli:Yeah. So bullish is a really interesting model that I think people understand the value, like in the last couple of years, like the value add VC conversation has totally risen and everyone has that expectation around what those services are, but we're real practitioners. Everyone at bullish, we joke that we're all liberal arts majors, which I am. I was an English major and a history minor, which I love to talk about all the time. And I think the understanding of like consumer and the demand side and marketing and the value of marketing. We like to talk about blending capital, consulting, and creative into our whole model.

9:07Natalie Sportelli:But the venture fund is its own fund. We're operating out of fund two. We've made some really cool investments over the years. And this portfolio of Bandit Running, which is a performance running apparel brand. I don't know if you see run clubs going all over the place in New York. If you can't escape the West Side Highway kind of area of running also bubble which is like a gen z skincare brand so on the fun side you know we look for early stage consumer investment opportunities that are pre-seed series a and b2c us-based businesses which means the portfolio is super broad and varied which is really fun because we can be totally surprised by something that we get excited by the agency will work with big external clients like Pepsi, Walmart, Nike on things from consulting creative efforts.

9:54Natalie Sportelli:We'll work with Berkshire Hathaway portfolio companies or private equity portfolio companies because they need a marketing turnaround or transformation. So we can come in, do a rebrand, do an ad campaign, do product photography, all sorts of things for big clients. And then our capabilities also extend to the portfolio, but that's not required that you use the agency. It's kind of like discussed and it's mutually agreed upon. For example, one company needs new retail packaging, we can do that. So there's a lot of value alignment when your investor can also do this service for you. And it's at a rate that everyone is happy with because we're all value aligned.

10:33Natalie Sportelli:And it just kind of brings a layer of trust that we hope we're all going towards the same goal, which is making this company successful. The packaging rebrands, the customer research are all relevant on the portfolio side. But I think being that first call if they need an agency is what we were hoping for there. But we've also done extensive work for some of our portfolio companies from field marketing playbooks to wrapping vans, which is really fun. I don't know how they do their dimensions of that. I was like, so how big is it? How small is it? How do you go over the wheels? I mean, I'm very impressed by that whole side.

11:12Natalie Sportelli:But yeah, we work kind of across the board. And it's fun to be able to tag into things. But yeah, I think that model really shows that we care about the value that we're bringing and have real tactical practitioners like in the house. Yeah. And if you can share, are you sometimes exchanging those agency services for a position in the business, aka as an investment? Or is it sort of like, we'll invest with you or we'll be an agency for you, but there's a dividing line there. And if it's agency services, that's more like a traditional cash agency model. Yeah. So we have a, it's really bespoke, but we will always be, we will be investing in the company and then it'll be decided at that point, the agency involvement and what terms that looks like.

11:59Very cool. I am guessing that there are a bunch of consumer founders listening to us talking right now and wondering for more context for how they might work with an investor like Bullish. Can you share a little bit about your investment criteria, like aside from sort of like being on trend, which we talked about, what else are you looking for in a business, either like size or stage? I know that you said that you're multi-category, which is wonderful. What's kind of your checklist for who you want to be talking to?

12:30Natalie Sportelli:Yeah. I think from a numbers perspective, early stage consumer brands, I mean, I feel that we talk to a huge number of pre-seed companies, but our sweet spot has historically been in leading seed rounds. But given that our initial check is usually one to two million, the round sizes and names and vernacular have been really all over the place. All over the map. This is a bridge. This is a note. This is a seed extension. This is series. It's all just different types. I think we just really want to focus in on our ownership because I think more than ever, consumer is a little bit of a numbers game.

13:06Natalie Sportelli:Getting in a certain valuation with like a certain exit window that you're optimizing for, I think is just really important. And then also not raising too much money. So I think from the earliest days, there's kind of the qualitative and quantitative component from like a quantitative component, like knowing what your monetization and business model look like, having a sense of how you're going to scale and grow and how much capital you need. I think it's really easy to say, oh, we'll raise like one more around and be done, but you have no idea. Sometimes you have to move things up because you have big launches.

13:42Natalie Sportelli:There's also just such a huge variable in consumer, which my heart goes out to founders about because one morning you wake up and there's a tariff on your product and it totally shakes up your business. It's such a volatile place. And then COVID, oh, everyone's home now. There's just so many things. So from evaluating super early on, just how solid is this business? Is this in an area where there is significant product difference? You're creating like an easier journey for consumers to find you and advocate for you. Are you going into an area that has low NPS? How are you using a distribution arbitrage opportunity?

14:18Natalie Sportelli:It's really interesting. I think about this a lot, like the arbitrage supply chain unlock or the arbitrage of a distribution unlock. And like in the, in the past it was digital ads. So like, what are people doing now? Is it TikTok shops? Like what's the cheap fast way? You know, it's like a get rich quick, but like for consumers to find you and you to sell them. And then once you have those people, like, is this, is this company I'm talking to have a clear way they're going to over-serve their customer and retain them and like build this like, you know, rabid community of people that will advocate and create less capital needs for marketing.

14:56Natalie Sportelli:I get really scared when I see a company wanting to put a ton of money towards meta ads. That's not something that I personally love. Anti-criteria. Anti-criteria. And then on the qualitative side, I think the one thing I saw at Lyra Hippo was the founder is everything. If the founder can't get you excited or show you the way or bring you on board or doesn't follow up. It must be constantly a trial and exhausting to have to pitch the same idea over and over. But businesses can go any number of directions, but they're people-led. So we love to see chip on the shoulder entrepreneurs who have something to prove and they want to prove that by building a really big business and making a ton of money.

15:42Natalie Sportelli:So yeah, I mean, there's just a ton of things I can say about what to look for. But if I can see something that's totally new and novel and exciting. And I think the founder is like super quirky and like passionate and has tried literally every brand in their category and can tell me about it. I get excited about that. I love this. Okay. This is absolute gold. So I'm going to, I'm going to run it back for us. Okay. You're looking at this through both a qualitative and quantitative lens. You're looking for on the quantitative side, a business or especially like a founder that, that knows the model and is financially fluent, which is sort of like, one of my drums that I beat all the time.

16:21You're looking for something that takes advantage of trends and creates arbitrage out of that and that maybe makes the consumer journey a part of that arbitrage that they can create. And you're looking for kind of like lower cost or cost-optimized acquisition opportunities or channels and communities. Right now, one of the best ways to do that. And what I love that you pointed out in that is that you're looking for products that are a trend, but you're also looking for a go-to-market strategy that's on trend because the opportunity to arbitrage your cost of customer acquisition will follow a similar curve.

16:59And if you're too early on the adoption curve for a go-to-market strategy, then it's like, well, maybe there's not the help that you need. Or maybe for TikTok Shop, for example, like they were testing, TikTok shop was testing on itself for a long time. And that made it really hard as a user of it to be like, okay, well, this is tried and true, but also early. So you're looking for something that's tried and true early. Okay. That's what I got on the quant side. On the qualitative side, I got founder, founder, founder, and you're looking for someone who maybe has like a bone to pick with the world and who is good at telling their story and getting people to follow them.

17:33And then, and then of course, I think that kind of loops back into the quantitative piece of just like being financially fluent. Did I capture, I was taking notes like, did I capture it?

17:44Natalie Sportelli:You did such a good job. If I had to repeat what I said, I would have no idea what I said. Well, the good thing is we have it recorded. So I can go back and say all of the attribution. I think one other big piece is like we're looking at brands. Brands are different from products because brands want to create a loyalty or an affinity and like build something that represents something and stands for something and creates an identity and experience, right? So I've seen plenty of companies that are products and they can be great products, but they're not brands and there may not be the ambition there to create a brand.

18:22Natalie Sportelli:It's a product, you know? So that could be really tough. because you could have like an incredible lifestyle business selling a product, but is this going to be like a category defining brand? Maybe, maybe not. And that's also, I think you can appreciate this too. It's like, when do you bring in venture? When do you raise debt? Like when do you get like enough money to kind of get things going and get moving? So all of those things are on the table with early stage consumer. Yeah. And I, and I think one thing that you touched on that people would really value hearing is, if I'm a founder that has just one product, how can I be a brand with that one product?

18:59Do you have a way that you look at that?

19:01Natalie Sportelli:Well, I mean, I don't know why I keep talking about, I mean, vacation's great products. I have it. I use it all the time. But how they've thought about leaning on the fragrance, for example, like in building out perfume. So I think, and also Hero Cosmetics with their pimple patch, right? So I think having like a buzzy initial product and I have my Graza, you know, olive oil over there deciding like, how do you build a universe around these products to build out like what else do people need if they're using this? You know, if they really love this experience of the product, what else would they love?

19:33Natalie Sportelli:So I love also looking at decks where they center around maybe one ingredient and then it totally surprises me what else they want to do with this ingredient, you know, because yeah, I guess I can go in that too. And then it can go in there and it can go in there. So I think just like really talking to your customers about how they're using your product and like what other things do they want to reach for if you've already kind of been able to get them in the door so you can like upsell cross-sell and bring them back in and that's a big piece of retention so it's totally fine to have like incredible hero products but like use that to jump off and get people super excited about what you want to sell them next yeah um yeah i think i think thinking big in terms of storytelling selling is kind of one of those unlocks for single brand, or sorry, for single product founders of a brand.

20:21And looking at the whole thing, the whole kind of entity of the brand as an experience and a relationship with your customers. And you don't want the relationship to die after like a single purchase. So, well, what else are you going to say? And you can't ignore that piece of it, which I think is a trend that I see all too often is like, okay, great. We made a killer product. And where is everybody?

20:44Natalie Sportelli:Right, right. Where are you? Totally. I actually think condiments are a really good example of this because if you were leaning into no-seed oil dressing, you have a huge opportunity to build out different flavors and different ways to use that. I have partake cookies over there. How do you transpose ideas and feedback into new things? And as a consumer, like getting really excited about a brand I already love launching a new product, I think is a great feeling because you're like, oh, wow, like, duh, I'd love to like include that kind of in my purchases. So, yeah, I think with ThinkTesting, we saw so many product launches, too.

21:23Natalie Sportelli:It's just like cool to see how many people go to market with new creative ideas to like capture attention, given that, you know, you don't have infinite money to spend on that every time. Yeah. I have a couple more investment-focused questions for you. I promise I'll move on to other stuff. Is there a quantitative level of traction that you're looking for when a brand comes to you? And if you have one, what makes it right for bullish? Any numbers that you can give people listening that are like, oh, okay, this is the right phone call for me to make right now? Yeah, you know, it's I think early stage investors have a really hard time answering this if they don't have a definitive number because everyone wants to see everything and tend to be as early as possible.

22:11Natalie Sportelli:But we've invested pre-launch. We've invested at Series A. We've invested. We follow on after that. I think there isn't a set like bottom for revenue, but being able to have like a strong model, I think even if it kind of is made up, honestly, at early stage consumer, you have literally no idea sometimes if you're not, you know, in food CPG and like are able to predict some of these numbers out. For example, we've seen a lot of like pre-launch four wall recently and the stuff, right? Because, you know, you can't get occupancy numbers out the door and like understand what AOV looks like. I think like a clear understanding of how you'll be growing with that seed round or with the round that you're currently raising is really helpful.