In short
Podcast Summary: Consumer VC - Episode with Michael Duda
Episode Overview In this episode of the Consumer VC podcast, host Mike Gelb interviews Michael Duda, Founder and Managing Partner of Bullish, a consumer-focused investment firm. Duda shares insights into the current state of venture capital (VC) with a focus on consumer brands and discusses why consumer investing remains a viable and lucrative path.
Key Themes Discussed
- Consumer Investment Landscape: The podcast opens with a discussion on the evolving perception of consumer investing within the VC community.
- Power-Law Returns: Duda argues that consumer investments can indeed generate power-law returns, particularly if early investments are made at lower valuations.
- Contrasting Views on Marketing and Product: The conversation highlights the superiority of product quality over marketing tactics in building successful consumer brands.
- Role of AI: Duda explores how artificial intelligence (AI) can enhance consumer innovation without overshadowing the importance of human creativity in product development.
- Impact of Economic Changes: The dialogue addresses how the shrinking middle class affects consumer spending and brand building.
Key Takeaways
- Consumer Can Generate Power-Law Returns
- Early Investment Importance: Investing early (at or below a $20 million valuation) can yield significant returns.
- Realistic Return Expectations: While 100x returns are rare, 8-12x returns are achievable and still represent significant wins in the consumer sector.
- Role of Founders vs. Ideas
- Focus on Founders: Bullish prioritizes evaluating the founder’s vision and ambition over the initial product idea, as founders are often the driving force behind successful pivots and adaptations.
- Product Quality Over Marketing
- Great Products Matter: Strong product propositions resonate more with consumers than aggressive marketing strategies.
- Consumer Advocacy: Building a loyal customer base through quality leads to organic word-of-mouth growth.
- Celebrity and Talent-Infused Brands
- Caution with Celebrity Involvement: While celebrity endorsements can boost visibility, true brand success relies on the product's authenticity and the founder's genuine involvement.
- AI's Role in Consumer Innovation
- AI Enhances Efficiency: AI can streamline operations and enhance product development, but its application must resonate with consumer needs.
- Potential for Rapid Market Adaptation: Companies leveraging AI can bring products to market faster and respond to consumer demand more effectively.
- Economic Shifts and Consumer Behavior
- Changing Demographics: The middle class is shrinking, leading to a bifurcation in consumer spending power.
- Emerging Consumer Needs: Founders are increasingly focused on addressing the needs of underrepresented consumer segments, particularly in health and wellness.
Discussion Highlights
Power-Law Returns in Consumer Investment
- Duda contests the notion that consumer investments cannot yield high returns, citing the potential for substantial exits even at lower valuations.
Investment Strategy of Bullish
- Bullish adopts a consumer-first investment strategy, assessing market fit and consumer insights rigorously before making investment decisions.
Economic Realities
- The podcast addresses the implications of economic changes on consumer behavior, emphasizing the need for brands to adapt to a diversifying consumer base.
Founder Ambition as a Key Factor
- The conversation underscores how a founder's ambition and vision can significantly influence a company's trajectory and ability to pivot when necessary.
Conclusion Michael Duda's insights offer a grounded perspective on the potential for consumer investing in venture capital. He emphasizes the importance of strong product propositions, founder-driven strategies, and the adaptability of brands to address changing consumer needs. The episode serves as a reminder that while venture investing can be fraught with challenges, the consumer sector remains ripe with opportunity for those willing to engage thoughtfully with the market.
For more detailed insights and episodes, visit [The Consumer VC](http://www.theconsumervc.com).
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Transcript
Automatic transcript. May contain errors.0:28Consumers are liars. products they own the patients we can romanticize 100x's but there's so people whose jobs will get eliminated in the quest for efficiency the middle class is literally shrinking we are paid to be wrong more than right i just really need to be right 10 to 20 percent of the time to make good returns so i'd say that's the biggest thing that's changed
0:51mike thanks so much for joining me here today how are you i'm fantastic mike how you doing today Good. Third time's a charm. This is your third time on the show. Thanks again for hanging out with me throughout all these years. It's third time, but the world seems to keep changing every time we do this, doesn't it? It's true. It's true. I think when we first started talking, consumer was very out of favor and then we got even more out of favor. And now maybe it's back a little bit. But before we get there, there's been a lot of debate. And this is why actually why consumer has had, has been a bit of a rut from like the overall venture community.
1:33Can consumer drive power law returns or can't it? What's your take and how do you even think and define what power law is? Damn right it, Ken. How about that for an opening soundbite? Damn right it, Ken. Look, it's just, yeah, consumer had been out of favor. Listen, momentum tends is swinging a lot more these days in venture capital, even though when we invest, we're investing for the next, what, eight, 10 or longer years. And with AI being the hot thing, rightfully so, in many ways, it was like a couple of years ago, it was just crypto. Before that, it was the metaverse and all that. So I kind of laugh.
2:11Consumer is just wonderfully boring. Last time I checked, it's a$20 trillion TAM in the US alone, in terms of what the US economy is built on. So consumer is absolutely a power law. Now, the big asterisk there is depending on the size of your fund and when you invest. And at the earliest stages, I mean, we try to get in before a$20 million valuation. If that company sells for$150 or$200 and$250 million, huzzah, you're looking at it 8, 10, 12x. Those are pretty good numbers. Problem is when you raise bigger, bigger funds and you're a generalist and you go from maybe a$50 or$100 million fund to much more, it's tough to invest that early because of the amount of money you deploy.
2:50and that ironically is going against what we're seeing out there in terms of businesses being created but we're seeing a lot more entrepreneurs than ever there the goal isn't to raise venture financing it's to build a viable proposition and product and we know on the other side there's there's a lot of upside if you're able to win over consumer because big corporate america god bless them you know i don't want to name names i'll probably name names later but big corporate america don't they don't have the people in innovation they don't have the dreamers they They can't come up with new products.
3:20They own the patients because they have Wall Street pressures and everything. You know what they do have, Mike? They have$2.8 trillion on their balance sheets to go buy the poppies, the vitamin and waters of the world, the roads of the world. So there is absolutely power law opportunity depending on what your strategy is. And if your strategy is like you're an angel investor or pre-seed, seed stage, up to Series A like we are, there is absolutely power law. So it's a consumer is a wonderful, awesome asset class. It's clearly not for everybody. It's hard. We don't mind that it's hard, but there's absolutely opportunity.
3:58Absolutely. But I think that when people think about power law, I know you said, for example, 8 to 12x, which is incredible. And this is where I think – at the same time, I think when people think about power law and this is where I think venture can get a little bit romanticized, they think about, oh, 100x or 1 ,000x. The Uber, which obviously is consumer, but more thinking about maybe consumer goods and other categories within consumer. But I kind of think venture, because in consumer, that you can't really – can you achieve like 100x return in consumer? I think probably not, but what's your take?
4:46listen is now we're talking about the difference between moonshots maybe and power law in yeah what is okay what does the average venture capital firm return like what what is what is like median i think it's something it's under 2x it's maybe like 1.6 1.7x at most and you have very few that return a 3x plus so we can romanticize 100x's but i think it's like one investment out of every 100 at max will go over 10x or 15x. The great thing about venture capital is as an investor, we get to celebrate the ones that hit it big and just celebrate that because that makes your money many times over. So listen, God bless the other asset class.
5:29I love consumer. That doesn't mean I hate everything else. But somehow venture capital has gotten me completely synonymous with tech. And that doesn't necessarily have to be the case. Venture capital in its purest form, if you go back to the Arthur Rock days to geek out, is to give promising entrepreneurs the funding and nutrients they need to get their startup off the ground. Yet now you have venture capital firms investing in open AI at a half trillion dollar valuation. That's great, but that doesn't seem to be really what venture capital is. So I'm a romantic at heart in that, but it's, you know, I don't think an 8, 10 or 12 X is anything to sneeze at.
6:08But yeah, we all want to write about the 100Xs and the 300Xs, those are so rare. They're achievable, but they're so rare. Well, that's what I think is kind of interesting because they are so rare. And I think that the assumption is every fund has one of them because of how the distribution happens. When you have, maybe if you invest in 10 companies, right, with PowerLaw, maybe you have, I think in traditional venture, you could say that you have one or two of those 10 companies achieve all the returns from the rest of it. And maybe this is traditional tech investing, but maybe seven or eight of those companies go to zero.
6:53And that you have one of these two outliers that can achieve maybe it's a 50X return or a 30X return. And that, of course, funds your entire fund and obviously funds everything in your carry. But at the same time, very, very few funds are actually able to actually be in one of those companies. And what I think is actually pretty interesting about consumer is, and I'm curious about you and your portfolio, how you think about it, is the distribution a bit more even, where it's not just one or two companies that are driving the overall return for your portfolio that it actually is a bit more evenly distributed because because that would be that would be my hunch yeah the the outliers may not look as outliery as others but there's there's certainly out there and listen let's level settle a bit not every fund finds their 100x i mean in fact there's fewer vc funds we as we do this in late 2025 there's less vc funds now i think there's like something like 6 000 just 60 6200 vcs in in the u.s versus like 83 8400 back in 2021 when capitalism was easy.
8:08So yeah, in consumer, and if you follow the playbook I mentioned earlier, if we're expected, like, let's bet on companies before they reach a$20 million valuation. If they sell at$200,$250 million, huzzah, that's a 10x, that's great, but that's not always the case. And every now and then you might get the IPO, or you get the Oura Ring, or you get the Peloton and the Warby Parkers of the world. So they're out there. But it's, yeah, you might have a better chance of return money, but there'd be more stability to it, quite frankly, but as much stability as there can be in venture capital. So yeah, it may be the, there's a lot less zeros, but then there's a lot less likelihood of a hundred or 200 X too.
8:47Yeah. That's part of the strategy. Yeah, exactly. I mean, I don't think, and there's also only one, there's like, it's, I think it's really hard to achieve, or you're probably not ever going to achieve like a lowercase capital fund one, for example, like in consumer, probably you'll never do that. But then again, probably no one will ever do that again. But invest in pure tech, you do have that opportunity, however small of an opportunity, but there is that kind of opportunity that you can do it because you might have one or two companies that truly get to maybe 100x or 200 return. And that's just not the case in consumers.
9:25So I don't know, I think is consumer power laws and not power law. It really kind of depends on your definition of power law, because if it's like 100x or nothing, then no. But at the same time, can you like 3x or 4x a fund, which is really meaningful and really freaking impressive and still extremely hard to do. But can you do that in consumer? Absolutely. Yeah, you absolutely can. And it's, it is hard to do. And it's like, we don't sign up like, oh, we think this is a 3x or 4x. But quite frankly, any fund would be able to like, do backflips if you can do a consistent franchise at three or 4x net.
10:02And, you know, to date, and again, this is to date of this recording, not indication of future returns. It's like, we've not returned anything less than a 3.3x net. So so far, but it's like, it's still a long way to go. And businesses that we weren't, or we were like, in the past, wound up, oh my God, like later. So it's, but consumers, the sentiment I think is turning certainly less negative. I'm positive on it just because the nature of the entrepreneurs we've been seeing of late is super exciting. And they're also realizing again, the goal isn't to raise capital, it's build a viable business.
10:38So, you know, if you win over a consumer, we got to forget, it's the consumer asset class, focus on who your consumer is, whatever product you're doing and win them over? And what are the big incumbents not doing to satisfy her? Or what's the opportunity in a world where there is new technologies and new things and less time and all that? So there is constant innovation that's only going to keep accelerating as our lives get busier, economics get tighter or better, depending on what your lower class, middle class, upper class. But the key thing is have the sound strategy and not be afraid to execute it versus hop onto the new strategy every six or eight months or every other fund.
11:21And I think that's what's been going on with the fund industry and among other reasons. Well, how do you think about overall your fund? What I find really interesting about bullish is I've had on, of course, funds that are much more, well, you do CPG, but I've had on funds that only do CPG, for example. I've had on funds that only do consumer tech. Like when I think of bullish, I think that you're one of the few consumer generalists, I would say, and that as long as you're selling to a consumer, bullish could be interested. How do you think about balancing that, though, from being a consumer generalist?
11:56And you can let me know if I'm thinking about it all wrong. No, I mean, here's what bullish looks like. If you are a U.S.-based B2C, not D2C necessarily, but B2C business model, we're open for business. And we don't care what that looks like. We're agnostic across categories. And we want the end consumer to be the main revenue driver of it. So that's why we don't do media brands where the consumer might spend all the time on, say, meta, but you're actually monetizing the advertisers that go there, right? But a lot of that stuff has been goods over the years. like we're very proud Hugh Chocolate certainly did very well for us God Harry's is a razor and now they're all over the place mammoth brands we've also done stuff that has like a service component or subscription like Peloton is a hardware it's a product you buy but then there's a great subscription we've dabbled in marketplaces you know in the advent of the creator economy and different things it's going to maybe challenge the purity of that but as long as the consumer is the main main engine in terms of revenue model, there could be other elements of it, but that's, that's where we stick to our knitting.
13:05It's like, God bless Peloton is go back to Peloton, which is album one in our trajectory. Peloton had amazing technology and all these things too. But at the end of the day, that didn't matter was what was the benefit for the consumer. And so that's what we really focus on is, is that like not, not, uh, not so much the how that we do care about it. Cause that goes in gross margins, but for the why, and this wonderful nation of 340 million Americans, it's just like, how are you appeasing them? How are you winning them over? And what do they need more than how it's done? Because that can change pretty often, actually.
13:39So do you underwrite differently when it comes to a technology company or a company that has a technology component versus a consumer good, for example? Not necessarily. I mean, where we maybe look at underwriting and look at the future differently is like if there's a four-wall concept that we're going to invest in because that takes real estate and then you have to do a lot of that. I mean, Peloton kind of fell into that, right? Warby Parker wound up doing that almost accidentally after invested, after a pop-up store in Washington Street actually drove a lot of awareness. And so and then they as they built out stores, they realize they're the customer that goes online and buys in their stores more valuable than one that just goes online.
14:25Oh, that's interesting. So I think there's various things. What are the CapEx realities of a business versus like what is the cost of technology and those things? There's always caveats. There's always outliers. Like if you look at the success of a Bobby or whatever, they had to go through a lot. And if you're doing any infant formula, you have to do a lot of FDA and a lot of testing. And there's a lot of legal stuff before you can even go above. So those factor in. But we don't look at it too differently. But we certainly look like what is the amount of capital that's going to have to be raised for this to get what we would like to see as product culture fit.
15:03How do you think about in terms of amount of money raised? because I feel like maybe one of the differences between it in consumer, depending on which part of consumer, but that overraising really can bite you. I mean, don't get me wrong. Overraising just in general can really bite you. But if you're, for example, relying on a strategic to maybe acquire or that's the path that actually is the outcome that makes sense or what have you, Just how do you think of overall in terms of like the overall trajectory of a company when it comes to capital raising once you invest? Yeah, we probably look a little bit differently.
15:46First of all, we listen hard to what the founder wants. You know, it's like we as VCs, like we don't, we have operating experience, sure. But it's like they're the ones trying to educate us into why we should invest in this great opportunity. And so if someone says like, I want to be a trillion dollar brand and take down Procter & Gamble, well, you know, it's going to be a lot of capex. and there's going to be a lot of like money raised to get to that point. And here comes Harry's, here comes Mammoth Brands. Looks like that's happening, said with a smile. And then there's others that just want to do like, want to do that to your point of earlier, if they say like, and we get to this level and after three years we'll sell to General Mills, that means, okay, probably not going to have to raise a lot of money and all that.
16:25But like when you also like, we're going to sell to General Mills in three years. I'm not sure if you're going to really like strike the balance of winning over the consumers that they're going to go for. But a lot of it, we don't have a Pythagorean theorem or a formula on that. A lot of that cues, because if you're a marketplace that's maybe more tech and is going to need a little bit of infrastructure early on versus, okay, we're going to ship heavy water across the country. So different models within B2C will dictate it. But the founder, the founder ambition is a big thing that we look to to drive that.
17:02because we've seen certain categories where people raise way more money than you would think, and then others less. And we've had successes either way. But founders tend to take us on that journey, or we tend to look at that as part of the investment process quite heavily. How do you think about when you're talking to companies, because of course, these are very young companies, and sometimes they're pre-revenue companies. And how do you think about investor in the founder versus the company, and as well as what like a pivots and when a pivot actually makes sense? Or have you ever invested, for example, in a company or a company where you actually weren't, you actually, you thought that the founder would be able to figure it out, that you were kind of just much more bent on the founder rather than the actual product that they were actually going to market with?
17:58Yeah. When you assess that, it is Two sides of the same ball, founder and company. And listen, over the past, Polish has got an interesting trajectory because in the very beginning, it was all pretty much pre-seed and some seed. And then in the pandemic era, post-pandemic, we were able to probably did more seed in series A because consumer was in value. And lately, we have more than enough money to deploy in our fund and we'll be raising our next one next year. I think we're gonna go back to more pre-seed and seed in early stages. So the reason why I say that, If you're investing at the pre-seed level, expect there to be some level of pivot or understanding because you just don't know enough.
18:36You have a thesis. You have a thing. If it's food, it tastes great and consumers love it. I've never heard otherwise, shockingly, right? And so you're going to learn from when you're in the marketplace. If you're already in the marketplace and you have data and you have this, there's probably less surprise parties going on depending on the stage of it. So to us, the founder is so much of it. The founder is so, so much of it. on there as much the idea, partially because it's, you know, that's the jockey who, you know, based on her or her desires, her whim, her passion, like she'll figure out, but along the way, things will get choppy and change.
19:12And, and that's why it's so tough. Think about if you're an entrepreneur, on one level, you're supposed to AB test and fail fast. On the other, you have to be stubborn because you're taking on the status quo. So that's why the, I think the person component of it weighs in quite heavily, probably more so than the category because we're so open on categories. How do you think about the overall insight or consumer insights in general in that I know you obviously have a consumer insights team at Bullish. And so, of course, do you feel like you invest more so maybe top down in that you take an insight and then you've had to figure out what type of company would actually fit well or the best company that actually can extrapolate that insight?
20:01Or do you find that you're a bit more bottoms-up investing? Or is it kind of a combination of both? This episode is brought to you by Glimpse. Glimpse is an AI-powered, end-to-end deductions management service that's focused on recovering revenue from Kehi, UNFI, Amazon, and Target for consumer brands. They centralize deductions with backups. They fully handle disputing on your behalf, the brand's behalf, and streamline the accounting process. For more information, check out tryglimpse.com and let them know that Mike sent you. Sure. So no, and thank you for mentioning our consumer insights team and research.
20:36And we, we spend probably more time in the field, like doing consumer interviews and ethnographies and than I think any other consumer VC firm at our size and AUM, without a doubt. And so when we, like I said earlier, product culture fit is something that we're looking for. And those, to quote Warren Buffett, buy commodities, sell a brand, you'll make a lot of money. That's what we're looking at. What has that? And so we study what's going on in culture more than categories. So it's on our website, like the nine themes we're on now. A lot of them heavily concentrated in health and wellness in different ways.
21:10and we use that as kind of like a lens of where we're doing outbound of what we're looking for but it doesn't like say okay we're going to definitely invest in a yo-yo company to use an example because yo-yos are going to be big or anything like that going back to what i said earlier if the entrepreneur is such a big part of it we still have to weigh that but in terms of outbound sourcing we'll look at certain categories to the cultural lens about where things are going um and that doesn't mean like oh let's go outbound protein because protein is hot and soon fiber but just more like brands or people that have backgrounds that are like a passion for inventing in the space.
21:46So the cultural part, it weighs in. It also weighs in during the diligence process. Like, will people be up to change behavior or what motivates them? You know, I've said many times consumers are liars. So we study what they actually do versus what they say. But we look at it, since the entrepreneur is such a big part of it, It helps us with the outbound and sourcing, but it doesn't, you know, it's not an absolute that we're enslaved into either. If that's the case with the commodities, turning commodities into brands, how do you think about what makes a great product? And how important is a great product versus, you know, great marketing, for example?
22:28A great product is more important than great marketing. And I say that as someone with 20 years experience in the marketing industry, and I love marketing. What we like, and if I were to bend your words, is great propositions. So like Bandit Running is a great product and series of products and the design engineering is great, but they have an uncanny and unbelievable empathy to the running community and serve it, which is what everything says. So it's got to be a strong proposition. If you need marketing, and this is where I think this, especially the Silicon Valley investors got drugged in love, love consumer for bid is because this Facebook thing, oh, let's put 40 % of our revenue towards marketing and just cack, cack, cack, cack.
23:09And then Apple came along and shut that dog off pretty quick. It's like, oh, this is harder. Let's go somewhere else. We like to see brands have the opportunity that grow early stages with spending less money in marketing, that have achieved some level of fandom and have word of mouth and people advocating for it. A lot of repeat purchases. We've identified that insights team that you mentioned identified this cohort we call the pioneers. It's 15 % of America. Sounds small. That's 50 million people. And they could be early adopters or slightly later, but they tend to be stickier customers. And they tend to evangelize or tell other people like, oh, you should try this.
23:47They make a little bit more money. I think the average household income is about$80 ,000 in this group. And that's a lot versus what America is. They index high in living in places like Arizona, Virginia, and Texas. And so we really looked to see, is this something that this group would really like, really go for, and what else is in their lives? Now, you see this, you report on this, we see it too. There's a lot of commodities that you mentioned that are like, okay, I'm going to get a famous creator and do some cool pink packaging and put it out there. Well, that's not necessarily, that might get attention, but that's not necessarily going to work towards commercialization.
24:24So, listen, we're in a wonderful era. I think that we're going to see a whole host of new entrepreneurs. We're already seeing it. They're going to be attacking everyday problems in such a wonderful way. They're not going to need as much capital. What a time to be alive. So, boy, I covered a lot of ground randomly there. how how do you think about i'm glad you brought up creators how do you think about talent-led brands or talent or what it actually makes sense when a talent is involved in a brand um look i know you just invested in if it's fair to say you invested in one um you can tell me if if you think it's talent-led but um with top foods how do you think how do you think overall all, when does it actually make sense?
25:10Do you find, um, when, when talent and brand actually can come together? Yeah. Um, excellent and timely topic. I'd say we'd look at it like, like talent infused or talent wedded, but talent led, I'll be honest with you. It probably scares us more than any, because if the talent we're talking about like celebrities out there, um, celebrities are great shortcuts. Like, okay, you can cut off the attention tax and not spend as much money in meta. You can get a lot of organic press on that side of it. But is that celebrity only doing that one thing or doing a few things? Or is this one of 10 different things that's a deal from like their agent?
25:49And what happens if you don't have a buzzy launch? What happens then? Or what happens when you do have a buzzy launch, but it only led to like a million foreign sales? What do you do next after you can't get that same story over and over? So celebrities or creators can be absolute different makers if there's some level of, dare I say, authenticity as to why they're doing it and what their involvement is. In the case of Cobb Foods, which we are extremely excited about, Jessica is an amazing founder, turnaround CEO, passionate and paranoid. She created something because her two sons had an allergy to corn.
26:25And so she didn't want them to suffer on snacking. And so she came up with something, sorghum, which we went down the rabbit hole of sorghum-based snacks that actually taste pretty good. And they're healthier for you when you look at the nutritional profile. She recruited, I said that, Novak Djokovic, famous tennis player. Well, he's a celebrity. He's listed as a co-founder. They're not equal on the cap table. He also put in a sizable sum of his own money on it too. So he is a, I'll say, celebrity that's involved with the brand and pretty, but he's also got significant skin in the game. And so that's not the reason why we did it.
27:01Because we like the proposition if he was involved or not because of what we believe in Jessica. But it could be very helpful if used the right way. And you've seen this too. You see too many companies that, look, we have famous person X and we'll go after this business. And then they'll cite like Mr. Beast as an example of that. Well, you don't have too many Mr. Beast, right? So it could be a shortcut. It could be helpful. But at the end of the day, if the consumers are going to part way of their money, maybe they'll try something once. but the product and proposition better be good or else they won't go back i appreciate that thanks for uh no thanks for what do you think pressure tests come on mike what in terms of what or challenge that perry i mean listen i agree i think i think that um you know i like your point i i like your point that the celebrity actually invested, that it's actually their own money that they actually put in from Novak.
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28:04And also that this was a passion point. And I mean, Novak's so famous for going gluten-free, which was probably very challenging for him because his parents owned a pizza parlor. So that was, so I'm sure that was probably pretty hard to do. I know, I don't think I'd be able to do that for sure. If my parents owned a pizza parlor, but, but, you know, but, but, but the point is that it's pretty organic in terms of, in terms of why like his involvement and passion, you know, for the brand. And I think that that is where it makes, that's where it makes sense at, you know, and, and at the same time too, you know, Novak is not really maybe a young buck anymore.
28:49He might have, have some time on his hands too, to help to actually devote to actually growing and being part of the brand. And that's also, I think it's really hard. I'm kind of curious. If a brand, if you have talent in maybe a same format with what Djokovic has done with Cobb in that they invested their own money, they're part of the brand, they're maybe listed as a co-founder and they're part of the brand, but they're in the height of their careers, right? They're very, very busy in the height of the years. Does that at all, does that make you nervous at all or not really? You have to weigh that in.
29:38It's a very astute observation because we've seen celebrity athletes, like there's one in market that has an energy drink and this person was one of the fastest people in the world 10 years ago, 15 years ago. It's like, okay, energy drink, great. But when you're retired and not competing, I'm not quite sure how awesome that's going to be there. So there's a borrowed equity, certainly, versus others. Like when you see Tom Holland with Biro, right? Non-alcoholic. I don't think he drinks and everything. And he's an actor. Is he at the top of the game? He can go in there. But listen, Novak, his best tennis is probably behind him.
30:17Um, you know, just, just if you look at the data of like, we all age and that side of it, but regardless of that, he is like, unless he starts, uh, slipping off his game and starting like Doritos and donuts as part of his regimen, then, then I think we're okay. Um, on that part of it. And again, from the brand and the go to market proposition, uh, he's an ally, but it's like, it's not the crux where it lives and dies based on, on how well he does on the court or what he does on and off the court too. But it's that was a lucky strike extra in the case. But it is you have to factor in, does this make sense?
30:51Like Shakira launches a new haircare line. That kind of makes sense. That's interesting. She's not doing a lot. Then you see others like it seems like, you know, Dwayne The Rock Johnson has got so many enterprises and businesses. So it's like if he launches the next thing. okay i can see the story behind it but is is that the reason it's going to succeed is because of him maybe but you know when there's a sincerity of involvement that weighs in heavily versus just the involvement itself yeah it's almost like are you just licensing out your name or are you actually kind of part of this yeah um well said cool um why why the shift back to pre-seed it's not shit we've always been open for it we were just seeing less pre-seed over a period of time or less pre-seed that we just loved.
31:35And because of the, dare I say, punitive funding environment that I think it was for entrepreneurs, we were seeing things at the seed or series A that were more mature than what they had been. Good sound businesses with strong upside and great economics for us to get involved in around that$20 million valuation. So it's almost like the marketplace gave us more of an advantage that we could actually study the behavior of good investment opportunities that were still probably priced lower than they would be if this were 2021 or 2022. But to go back to the power law element of it too, it's just, we're seeing a crop up of like venture studios and things from scratch.
32:14And quite frankly, to go to the ultimate power law, the earlier you can get in, the better from evaluation. But it's also, if you really love the people and what they're doing behind the proposition, not to say that's the ultimate de-risk, but because we're so people and founder driven it's like that goes a long way so it's like if someone's attacking a category that just needed um there has been that much and i think we have a good track record of identifying that given we invested in mattresses and razors and chocolate and um stay-at-home fitness well before they became trends it's just we think that can work well to precedence seed um with so many different advantages like years ago when we first started doing this 13, 14 years ago, Techstars was just kind of like coming on the scene a little bit.
32:59And Yicometer was a thing. Well, now there's so many other elements like you have Union Kitchen in Washington, DC that really helps founders in food. So there's just more, you know, the curriculum for entrepreneurship is, is, is gone way, way up to help founders. So we're still open for pre-seed and series a wherever but it's like we are not uh pre-seed is kind of like where our uh original dna is and it just we're seeing more opportunities that we're excited about um you know cobs to to point this is that they have zero revenue right now but it's uh cobb foods.com if you haven't heard it you know uh be out there uh pre-revenue is the time of this the taping um but it's just like jessica's undeniable we like the cultural elements of like why she's doing it and listen And one day she could be building the healthy Frito-Lay.
33:50And that's very enticing. Yeah, that is. How do you define pre-C today? I know that in the case of Cobb, they were kind of pre-revenue. Do you define it just as pre-revenue companies? Is there kind of a threshold when it comes to valuation or anything like that? No, not about valuation. Pre-revenue, pre-launch. Pre-launch. Okay, got it. um and and in terms of like well how i would say at the pc level how far along does a company need to be i mean um obviously the pre-launch pre-revenue but but from that like would you even invest in like almost like idea like phase more like more like a incubation or or not really oh we would love to do more incubations we would love especially because our marketing practice and creative practice.
34:40I think the things we look at, if it's pre-seed and just an idea. So the romantic of me is, yes, we'll do it. But if you're going, I'm just making this up, a new vacuum cleaner, it's an idea. Okay, to make that idea into reality, and it might take you two or three years to launch, that's kind of tough for a fund to invest money in and have that money sitting, knowing it's not going to go anywhere, maybe more rounds before it can launch. So it's like you plant a tulip bulb in the ground. How long would we have to wait for it to come up? So that does factor in. And that's one of the reasons that and the interest rate changes, why hardware businesses have just been like tougher to get funding at the earliest stages.
35:16So it's like we'll do pre-see, but how long does this need to come to market and where are we in our fund cycle? But we're not afraid to to to back at that stage. It's just like we need to have a realistic timing when that might be. And listen, there was a period of time when tariff palooza started in mid 2025 that were like, wait a minute, gross margins in all these businesses might be completely different tomorrow based on the tariff here, tariff there. And so that made it more difficult to assess companies for at least two months. And you could argue that's still ongoing, right? But that factors a lot.
35:50What is the time needed from this idea where it is now to actually be able to be out there, to be enjoyed, bought, tried by consumers? That timeline does matter. That's helpful. That's helpful. Yeah. I mean, I remember – one of the more interesting propositions I've had on the show is what Squared Circles, if you know them. Yes. Um, and in terms of they're actually like partnering with, with IP holders and actually then, then commercializing, um, IP. So you're actually have sped up that, wait, you're in market for one or two, like, like you're, you're, you're still doing, uh, uh, private development for like one or two years that, that no longer, I mean, in theory, no longer kind of exists, which is pretty cool.
36:37Um, they're kind of going straight to commercialization. Um, how, um, what's your view overall on, uh, on AI? Right now, it seems like if you're investing in technology, it almost seems like it has to be an AI company or rather the valuation gaps from AI versus non-AI are significant. I know that you've made a software marketplace investment that doesn't actually have any or doesn't seem like it has any kind of AI features, at least on the surface. What's your overall view in terms of when AI makes sense versus not? Oh, on the last part, I think AI makes sense across the board, period. No matter what business you are, if you're Goldman Sachs to Adobe to Pepsi to everything else, it's just as an investor at this stage, it's like, okay, what is the role of AI?
37:36And as a consumer investor, what does this matter to the consumer that you're going after? So if we've seen a bunch of new AI-driven travel agencies, okay, that's great. That cost is there and you got AI in there, so your valuation's going up. But what is the end benefit to the consumer? And that's really what we care about the most. How is that going to help the end benefit of the consumer more than that? And we've not seen as much as we would have thought by now on that. And maybe we're not sourcing right. Shame on me. Or this evolution is going to play out because so much of the AI and the company's getting it.
38:07It's really the technology and some of the early day applications of it. The other thing that is fascinating here is to see the adoption of big companies in AI. Like the number one adopter of AI in terms of their operations in the first two quarters of 2025, actually last quarter of 2024, were companies of 250 people on up. And they were doing things like with warehousing and warehouses and operations, logistics, customer service, but they were doing it. And with past technologies, it's just usually compliance or legal is scared, whatever. It's like, no, this stuff's going to been adopted. Like I mentioned Adobe earlier.
38:43Adobe is using AI in an absolutely astonishing way. It is great. Since we have creative services on that side, we've used Adobe and they're using AI to make their product proposition and they're stable actually better for us on that. AI is awesome. Now, as a consumer investor in B2C, we're not going to invest in AI proposition for the sake of it. We have one that is still, it was at the pre-seed level. And it was interesting. We invest along with two very prominent Silicon Valley firms. What is B2C? It'll be coming out in 2026 in a way. And we think this thing could be basically a healthcare supplement company that, well, we know this.
39:25They can bring things to market in 100 to 120 days, where the incumbents now takes them up to three years, minimum of two and a half years, but two and a half to three years to come to market. So what we love about that is they're able to listen to what's going on in the consumer, what's needed, what's being asked for, what's hot, and spin up new products and propositions using AI in still an FDA-regulated area, and test them in the market to see what works and what doesn't work fairly quickly and try new combinations. There's rapid prototyping. So that's under the engine. So that's kind of B2B.
39:57But ultimately, the success is going to be based on consumer adoption of the brands they're going to launch. And so that's why it's so exciting. And, you know, I'm pro-humans. I like us as human beings and all that stuff. But listen, Waymo might be a better proposition than Uber, right? So it's like, you know, it's hard not to talk about AI and keep it so singular. But AI is just so generationally amazing. I think it's going to enable also a lot of companies to grow and scale without SG &A. We're seeing companies now run by one or two people that are reaching$2.5 million,$3 million, not in the fictitious world of ARR, but real revenue.
40:35And so that's why as a consumer investor that stays early, we're going to see disruptions come without spending a lot of money. I mean, Bubble Beauty is not an AI case study. Bubble Beauty raised$10.3 million. they've been over the$100 million in revenue mark for the past couple of years and profitable. That's proof of concept. You can build consumer propositions without throwing the coal mine of money at it. Now, Shai's an exceptional entrepreneur. I think we're going to see many of those stories. Equally, we're going to see maybe more Davids out there, right? I mean, here, I got a little surprise for you, David.
41:07I'm a fan. Where David pulled a little bit out of the playbook of Harry's, it's like, let's buy the plant that does this. Neither one is right. Neither one is wrong. So it's just the audacity of what it is versus be able to do a viable company. And that's the thing is we look for absolutes. But AI is going to enable, you know, if the World Wide Web was it brought you information, AI is going to bring you expertise and a certain speed to market. So this is an awesome time. And I say that also tries to close my eyes a little bit because the amount of corporate layoffs and jobs are going to be eliminated.
41:40It takes a while to repurpose certain things. So it's going to be a really interesting time for the workforce in America. what's going to happen, but it's happening. Make no mistake, it's happening. So I think we're going to really, you've heard me say this many times, every category seems to be barbelling. You're either Verizon and AT &T or you're like number 10 player. You're either a jet ski or an aircraft carrier. There's not a lot of stuff in between. And with the amount of companies that are being created now, in 2023, there were 5.6 million companies that were filed for. that's double what it was in 2016.
42:16And the U.S. population only grew 4 % or 5%. And there's some side hustle and there's that, but there's people that might get laid off in an Amazon or PepsiCo or Procter that are going to start their own corporate America. And don't necessarily know what venture funding is, whatever, right? But AI can help them with that, along with all the other resources. So as an early stage investor, I love AI because it's an advantage entrepreneur to embrace this stuff. But as a citizen and someone who cares about the economy and everything, I think there's going to be a lot of good people whose jobs will get eliminated in the quest for efficiency.
42:52So, yeah. This episode is brought to you by Glimpse. Glimpse is an AI-powered, end-to-end deductions management service that's focused on recovering revenue from KEHI, UNFI, Amazon, and Target for consumer brands. They centralize deductions with backups. They fully handle disputing on your behalf, the brand's behalf, and streamline the accounting process. For more information, check out tryglimpse.com and let them know that Mike sent you. How do you think then at the same time about, and maybe this is too deep of a question, but maybe the future in terms of like the consumers that we're actually selling to, right?
43:32Because you might actually have a lot of people that are great people, had great jobs, were layoffs, maybe actually weren't able to because of AI. Maybe are going to have a lot of hard time in terms of finding their next role or anything like that. Because what they did was maybe eliminated essentially by AI. Does this change at all in terms of how you think in terms of maybe products or even just from a disposable income level, for example, that people are having in terms of what types of products and services would actually make the most sense for them? This is an area where I think about a lot, and maybe as a father or a person more than an investor, but the investor side is, this doesn't go away.
44:23In 1985, 1990, 62 % of households were middle class. Today, it's 51%. The middle class is literally shrinking. More people are falling into both buckets and more people falling in the lower bucket of like the lower income tier. When you look at who's spending now, like I'm very proudly say America is a$20 trillion TAM and growing in consumer. I think the wealthiest 10 % of households in this country is powering 48 % of the spend. And you have the bottom 22 % to 25 % powering 20%. And so when you look like who you're serving, very few things are up for grabs for the 340 million people out there.
45:03It's like what you're going after and who you're trying to serve. There is going to be a need for better solutions and value things at a lower level, which is hard to get when you're starting out because usually scale gets that. But that's why we're more attuned to like founders are taking us through like the consumer that they're trying to serve. And I think we hear an 18 to 49 year old and we've never met an 18 to 49 year old. The very specific need state based on whether it's a toothpaste, where it's a marketplace, whatever. But America is absolutely becoming have and have nots. And it's hard to look at just consumer.
45:39We never think we're the consumer. That's why we love businesses that aren't on the lovely coast that you and I are in right now, but real America. But that is factoring a lot in terms of what's going on in general. And some of the cultural stuff we are avidly studying. And that's why we've really glommed on to this pioneer base, because it's not the richest people out there, but they're some of the most influential. And they can't be bought. But that, you know, as a society, you're right with all the people going away by AI. I don't know much of a data center going up in a 2 ,500 person town in Texas is going to, is that going to kill urban, urban nature?
46:15I don't think so, but that factors in. So a lot of stuff's going on in society right now. And, and there's no reason to think it's going to slow down. It's you know, they have and have nots. It's just widening. And that's just, that's unsettling in many ways. Yes, I agree. Very, very unsettling. I also think about it quite a bit. I guess back to investing with the kind of company. Let's lighten up a little bit. And I just got to talk about it. Well, actually, yeah. I was still going to say – I'm actually still going to say down in the dumps. But because America is like – because as you've described it, it's becoming more the land of the haves and the have-nots.
47:02Does that change at all in terms of products or services in terms of that you find interesting that you would invest in today versus maybe previously? No, I mean, I think we're aware of that. And again, we're studying the cultural trends, not to beat that one to death. But it's really the founders that bring it to us. I will say the founders have changed a lot. If I were to stereotype the founders we see mostly now versus before. We're operating out of our 2023 fund. And the average entrepreneur in our current fund is six, just about six and a half years older than the average age of the entrepreneur from our 2017 fund.
47:39So we're seeing older, more experienced founders launch companies. And maybe just, I freaked out all the 24-year-olds. I don't know. We do have a couple of those in there. But we're seeing a different entrepreneur now. We're seeing a lot of people that were in corporate America that want to do their own startup. We're seeing people, and I say normal areas. I mean, this fund, our first fund was all New York, New York, New York, San Francisco, LA. This fund has Scottsdale, Arizona. This fund has Houston, Minneapolis. So it's really interesting. I think Shark Tank becoming America's game show has probably helped with that.
48:15And why not me? And with all the access between what Google and Amazon will do to give you free stuff. And listen, if you have strong Wi-Fi, you can start a business from almost anywhere. and then gets into co-man and packaging and all that those things so i i'd say it's just america which has got an entrepreneurial dna and it's very fiber um is unleashing that right now so it's not so much like what we look for in categories are different like we weren't all hot in cannabis five or six years ago now cannabis funds seem to be dead um i will say things are trending a lot towards the health and wellness just across the board better for you food that actually tastes good as we've talked about.
48:54Women's health. We're seeing really passionate, very impressive founders attacking women's health, whether it's menopause or postpartum and those things. And we didn't have those founders before, or we didn't see them as much. So for all the blah, blah, blah, talk about the shrinking middle class, there's a lot more founders that are hell-bent and passionate about solving real problems that can make investors like us a lot of money. And yet, we don't take ourselves too seriously. That could be a chocolate bar, that could be a bike, that could be something there. But we're seeing more and more normal people that aren't like, that aren't worshipping the venture capital world, the venture capital process.
49:31And that's a good thing to a large degree. Trying to figure out how they can help build a viable company that just becomes the new status quo. How do you think about what's, sorry, go for it. No, no. Go for it. Did I interrupt you? No, no, you cut me off. I've been media trained, but I stopped the short pithy answers like a while ago, I apologize to you and your editors. So no, keep going, keep going. Good. What else? Are you good? Are you sure? Yeah. I, sorry. Sorry that I cut you off. No, I was at the end. Okay. Um, so you mentioned how there's, you're seeing companies that are, that are getting into, you know, two, 3 million, for example, and only have one employee or two employees from, um, or just one, nine employees, one or two people.
50:17When, when do you think, do you think it's harder now to determine what's actually venture backable versus what's not venture backable? That's a great question. Um, in some ways, yes, but in some ways, no, but part of it going back to, it's hard to be a bit of a drum, but try to be simple and focused every now and then, um, what's the founder ambition and, and what, what kind of company does she want to build first and foremost? Um, the thing I hate, and I would love you or anyone out there listening. I hate calling a business a lifestyle business. Oh, that's a nice lifestyle business. Well, if it's, you know, only going to be five, six or seven millionaires, not going to grow.
50:55That's like, that's a viable business. Founders work their asses off to build strong businesses and to make their means and everything. So to call something lifestyle business, I hate, but some businesses aren't built for that. And I do try to, you know, tell some entrepreneurs and I could be way wrong and nothing would make me happier. It's like, that's a nice business, but like that business model doesn't fit my business model. And even though we're long patient capital, it's like I got to return a fund in eight to 10 years. So something is growing nicely. Like we saw a carpet business and I really liked this founder and it's been at for a few years and it is growing.
51:28It's whatever. It's never going to be an escalated business. I don't think so. And things can always change. And she's done a really good business. And I think it's a good business if you're an angel investor or just believe in it. But like, I also have to look into the power laws we mentioned earlier. Because we need some 10Xs to pay for our zeros. And so that's where I go. I don't think it's venture-backed for us, but it's certainly investable. So I'm playing a little bit with worlds. There's some really good companies that'll make money, and I believe in that person. But I don't think it's – the upside isn't there, and there's still more downside.
52:02So it's – that's why to see some investment on a state level and different groups going – there's different forms of capital. I think VC funds less than 0.4 % of all businesses that start scaling. So there's opportunity out there, but that doesn't make it a bad business.
52:23That makes sense. That makes a lot of sense. How, gosh, I had something else, but this has been, oh, my final question for you. what is what's one thing that you've what do you think that since you've been in venture what's one thing that you've changed your mind about the most wow what a great question boy i should ask for questions in advance um no i should just give you the question in advance my apologies that's my dad study them anyway i say that that's a cop-out what changed my mind the most um it's a cop-out one but uh when we first got i first started in venture i was trying to so hard to be a venture capital investor and and thank you first round capital it's been said over and over like first round capital was so patient with me and mentored me from starting up this thing and whatever and yet um i was realizing i was seeing the world a bit differently than they were.
53:23And so I think what changed my world is FOMO can be real, but less so. It's just like, I don't lose sleep at night as long as we see a deal and pass. It's the deals that we don't see. And I think the biggest thing I learned is not to think like everyone else, not for the sake of it, but just being comfortable with what we know and feel good about versus what we not. And I tried so hard to study the things and all that stuff. And we are a demand side of a marketing background. And I thought I was playing from behind, but realized, wait a minute, what we don't know is an asset. It's naivete on it.
53:57And what we do know is like consumer adoption and all these other things. We think about it differently, which is weird, but that's how you're programmed in the marketing world is to figure out who your best consumers and customers are, how they think and what they really do, and then build appropriately around them. And we've taken that. So by the way, I'm not saying every VC sucks and we're great. No, not at all. It's just I've become OK with like if so-and-so doesn't think so, that's all right. And we don't we rarely it's hard to touch teach like younger investors because it's a form of validation.
54:29But if like clown capital does a deal, it's clown capital that could help with investors and LPs why you did it. But I feel great enough about our people, our processes, how we see things that, you know, in a business that we can we are paid to be wrong more than right. 68 % of venture businesses fail. I just really need to be right 10 to 20 % of the time to make good returns. So it's a conviction of being not necessarily contrarian, but to have the point of view that makes sense and where you feel good about. So I'd say that's the biggest thing that's changed. Love that. Love that. Love that.
55:05That's great. That's great. That's great. Mike, thanks so much for your time. I really appreciate it. This has been so much fun. And Mike, to kind of pile on an answer, It's like one of the great things that's been shifting over the course of the doing this for 13 or 14 years is you existed, but Consumer VC didn't exist five years ago. It barely did. And so as much as to talk about, you know, Shark Tank being America's game show, what you're doing here is giving access point to a lot of entrepreneurs like who can empathize with the way you do it. Then someone who's just talking venture, venture, venture and markups and everything.
55:42It's like you're doing stuff that is talking about building real businesses. And so when you listen to get access to podcasts like the Ithaca Hummus founder, who is sensational and he hates venture capitalists, was awesome and motivating to me. And I'm a venture capitalist. So, you know, you have you've I really think you've done this is you're you're going to help usher in some smarter entrepreneurship and capitalism because there is a big gulf between zero and appearing on how I built this. And I think ConsumerBC is really doing this. And I've seen it in Austin. I've been a passionate listener of your show.
56:18And that's what makes consumer investing great. But also you're helping out. And that's a big change. I think it's a big change. So you've added to the change more than you realize. Well, that's very kind. Thank you. Thank you so much for being an early supporter, early supporter of ConsumerBC. Mike, thanks so much for coming on the show. I really appreciate it. Thank you. And there you have it. Thanks so much for listening. Thank you, Mike, so much for coming on the show. Thank you, Glimpse, so much for sponsoring. Again, if you need a management deduction service, if you're a brand that's in retail, check out tryglimpse.com.
56:49Thanks for listening. Let me know what you think. And of course, subscribe to the newsletter at theconsumervc.com. Thank you.
From the publisher
Glimpse is the all-in-one, AI-powered deductions management platform for CPG brands—automating deduction capture, classification, disputes, and accounting. Recover more revenue while saving time – https://www.tryglimpse.com
In this episode, Mike chats with Michael Duda, Founder and Managing Partner of Bullish, the consumer-focused investment firm behind brands like Peloton, Warby Parker, Harry’s, Hims, and more. Michael has spent over a decade backing consumer companies that quietly compound value while the rest of venture chases hype cycles.
Michael breaks down why consumer has fallen out of favor in VC, why most people misunderstand power-law returns, and why an 8–12x outcome in consumer can still be a massive win. He also shares how Bullish evaluates founders, why product matters more than marketing, how celebrity brands actually work (and usually don’t), and where AI fits into consumer without turning every company into an “AI startup.”
You’ll learn:
✅ Why consumer can generate power-law returns (if you invest early enough)
✅ The difference between moonshots and real venture outcomes
✅ Why most founders raise too much capital—and regret it
✅ How Bullish underwrites founders vs. ideas at pre-seed and seed
✅ Why great products beat great marketing every time
✅ When celebrity involvement actually helps a brand
✅ How AI is speeding up consumer innovation without replacing taste or judgment
✅ Why the shrinking middle class is changing who brands are really built for
✅ What Michael has changed his mind about after 15+ years in venture
👉 If you’re building or investing in consumer—and tired of hype-driven narratives—this episode is a grounded look at what actually works in venture-backed consumer businesses.
Timestamps
00:00 Intro
01:00 Can Consumer Produce Power-Law Returns?
04:45 Why 100x Outcomes Are Rare in Consumer
08:00 Stability vs Moonshots in Venture
12:00 Bullish’s Consumer-First Investment Strategy
15:30 How Much Capital Is Too Much Capital
18:00 Founder vs Idea: What Matters More
21:00 How Bullish Uses Consumer Insights
24:30 Product vs Marketing (and Why Marketing Fails)
27:30 Celebrity & Creator-Led Brands Explained
31:30 Why Bullish Is Shifting Back to Pre-Seed
36:00 When Pre-Launch Investing Makes Sense
39:00 AI’s Real Impact on Consumer Businesses
44:10 The Shrinking Middle Class & Consumer Spending
48:30 How Founder Profiles Are Changing
52:30 What Michael Has Changed His Mind About
55:00 Final Thoughts on Consumer VC
📬 Subscribe for more founder stories & scaling insights:
👉 The Consumer VC Newsletter – https://www.theconsumervc.com/
Follow Mike Gelb:Twitter / IG / TikTok → @mikegelb / @consumervc