#359 - Inside Bullish: Lessons from Backing Major DTC Winners (Peloton, Harry’s, Warby Parker)

0:05This is D2C Pod, where the worlds of creators, consumer goods, and brands collide. We get behind the wheel to show you how today's biggest products and ideas are made, launched, and scaled. If it's shaping the future of commerce and culture, you'll hear it here first. Catch new episodes weekly on Spotify, Apple Podcasts, or d2cpod.com. Be sure to check out our newsletter for weekly breakdowns and recaps linked in the show notes. And now, let's get into the pod.

0:36What is going on DTC pod today we are joined by Brent Vartan who is one of the two managing partners of bullish. I'm really excited for this convo today because you know we obviously cover a lot behind the scenes with founders and how they're building their brands but today's conversation is going to take a slightly different approach. We're going to be talking with Brent from the venture and brand kind of marketing side of things. So Bullish has a really interesting model. They're one part branding agency, one part venture sort of fund. And with all the things that have been going on in the consumer landscape, I just thought we would have to have Brent on for a chat.

1:17So Brent, without any further ado, why don't you give me a little background about yourself and what you guys do at Bullish, and then we'll get into things.

1:25Brent Vartan:Awesome. Thanks, Wayne. It's great to be here. Thanks for having us on and a chance to chat. Love this subject. Love what you guys are doing. I think DTC in general is one of the things where I think a lot of people think it is one thing. And it can be lots of things. And it's got its fans. It's got its detractors. It's a great space. I love it. You guys are specializing in this stuff. um yeah i'm brent i'm one of the co-founders and managing partners of bullish and uh i got my start uh the joke is that i started in media it's true but it's a it's a long joke but in media and advertising in 99 um at like the last great day technology influx influx or change or inflection point uh at the dot-com era but i started an advertising agency in san francisco and very quickly discovered the the uh discipline called brand planning which was uh disappointed advertising invented in the uk and brought over i think it's like 40 or 50 i should know this 40 50 years old um it's an awesome discipline and you're really all you do is you learn how to do research qualitative and quantitative research and you get given problems by big huge fortune 50 companies and your job is to figure out uh really what's the right needle to thread between where consumer and culture is and where commerce and the company is and how to point creativity into it so i did that for years and years and years and years uh and moved to a couple agencies uh bvdo being one of them one of the biggest worked on all kinds of brands fortune 50 brands and then met Mike, my co-founder at Deutsch and had a great run there for about eight years.

3:13Brent Vartan:And that's where the infection for bullish really started. It was 2008 and Mike had an idea about moving, moving the agency further upstream and all the applications that would follow for that. And I love that idea. So I started to hang out with Mike a lot. And yeah, I think one thing I probably should have mentioned in the intro, but you know, you guys aren't just another agency or VC. You guys have been involved with some of the biggest brands in the consumer space. So do you want to shout out what some of the companies you guys have done and been involved with are? We were first money investors in Peloton and Warby Parker and Casper and Harry's and Care of and Hugh Chocolate and Nom Nom Foods.

4:01Brent Vartan:Those are some of our best investments. We are still active investors in some of those. We've exited some of those. We're investors in Bubble. We're investors in Bandit Running. We're an investor in Sunday Lawn and we're investors in Daisy, which is a super, you know, it's an integrator of super high-end technology systems in people's homes and spaces. Uh, yeah, we, we were, um, pretty fortunate to be in the right place at the right time when, when DTC was coming to life in 2008, 2009, 2010, and some very nice people and in the traditional venture venture world brought us into some deals, um, because they thought we could add some value and, uh, turns out we didn't disappoint.

4:50And so what did, what did that look like? Right? Because like you said, you guys do have a unique sort of value prop where you guys are, you know, part, you know, branding agency. You've got an understanding of like the market where things are going, planning, all of that sort of stuff. And you've got the capital. So how would you characterize your guys like as a fund? How do you guys think about things? What's your sort of like differentiator? and how were you able to, you know, add value in the space to so many, like, of the marquee sort of names?

5:22Brent Vartan:Yeah. Well, I think it's safe to say that Bullish is the only consumer venture investment firm that's built by marketing practitioners. So we're the only consumer-only venture firm that has, like, marketing practitioners that are still active practitioners. um, in, in at the gestational stage of this stuff. And what, what that gives us is a distinct, distinct set of expertise, but, um, because of our business model, it's, it's actual, um, capabilities that, that can be turned on. But what we're trying to do is we are, we are really trying to help these businesses become really strong brands. And not a lot of people are, uh, thinking that way, have, you know, a couple of decades of experience building brand value and are able to kind of one, put their money where their mouth is to actually pick up a pencil and three, follow it through and kind of be in the rowboat with you on those things.

6:34Brent Vartan:So that that's been really valuable to lots of different people and some it's been valuable to harry's when we sat with them and you know jeff and annie started the company inside of our company for the first first year me in the same space and we had weekly office hours with them and started shaping the brand strategy for what would be not just the launch of a shaving brand but the guys wanted to talk about how they build a hundred year business um in packaged goods and And those whiteboards still are there today. I just got a note from the guys when they released their latest blade and razor.

7:14Brent Vartan:And it actually made me very, very emotional because they were referencing back to some stuff we did 12 years ago. Warmed my heart. And it's that kind of foundational strategy work that really can make a big difference, apparently. The Nom Nom, we've helped Nom Nom where we did some of that strategy work for them too. And then they went off for about 18 months and then they were raising some more money. And the new investors coming in, we're all talking about, as were we, as were they, about the brand is an unrealized opportunity for them. So we came in, Nate and the rest of his co-founders came in and they tapped the agency because they knew we were totally invested in the outcome to do a complete brand overhaul.

8:02Brent Vartan:We changed the company name from Nom Nom Now to Nom Nom. We made the brand pivot away from all the care and love that's in the category because everybody was there back to this product point of difference, which was ours, which was about these great recipes that may turn adult dogs into puppies again. And we talked about living life at 11. So we changed the whole visual identity system to represent that vitality and that energy. And the minute we released that, sales went up 17%. Nothing changed except the brand sales went up 17%. And then we went back and then we got called back in to do some work for some top level advertising, kind of top of funnel stuff.

8:39Brent Vartan:So it's those kinds of things that have been really, really valuable that are about the difference between having this venture firm that is built by marketing practitioners that over the years have had way more successes than failures and have learned a lot and can give a lot. Then we're able to start really putting into practice the idea of not just building a strong business, but building a really strong brand. Yeah. And that's one of the reasons I was super excited for this convo is because there's a lot of, you know, really good VCs and investors who can see things from the investment side.

9:16But, you know, when it actually comes to getting their hands dirty and understanding what it takes to scale, what it takes to brand, what it takes to position, like they've got sort of, they've got their own insights and opinions, but like they haven't really maybe done it themselves. So I think that's something that's really cool that, you know, you guys are able to do. One question that I had about some of these brands and when you guys got involved, what was like the status? Like what stage were they at in terms of, you know, I know you had said sometimes you guys were first money and other times maybe you followed along a little bit later.

9:47But overall, like at what stage does a brand come to you? Right. Is it or is it when, you know, they've got an idea, they've got serious revenue traction, they've got a little bit of revenue traction. uh there you know like where is it that you guys think you can add the most value and you guys are the best fit and you know where did that happen for some of the the big wins that you guys have

10:09Brent Vartan:had in your portfolio yeah for all for all the wins and i'll i could maybe touch something that for all the wins it's it's when we got in at first money that's a big part of our thesis of thesis of our fund uh is to go very very very very very early in consumer venture and there's a big distinction between the consumer venture that we do and the consumer venture that silicon valley does and the consumer venture that you know get covered is covered us up the consumer venture that we and i are talking about is really dtc and that's that kind of stuff but um it's always it's always early so the it's the first check or the second check um in the first round and that that is where we can add the most value um the the point being is because at that point we are talking about brand strategy and we are talking about brand strategy as a growth mechanism.

10:58Brent Vartan:And when, when we sit down and we start talking about those, those things, we start talking about what's your man on the moon by the end of decade and what, what is it? We can't give that to you, but we'll help you bring it out of yourselves. And it's essentially an objective. Um, it's a big visual, emotional objective. And that's what we're trying to do, um, in five years or seven years or whatnot. So what are we going to do to get that from A to B? And then how do we go to market in an interesting way that isn't just dependent on trying to work the CAC machine. So that's a really important thing with helping the brands go to market in a much more holistic way, thinking about, okay, what are all my behaviors and how do they all work together?

11:39Brent Vartan:Not just about targeting. And that's a big, big differentiator on that stuff. So it's coming very, very early and we can help set a larger, more sophisticated playbook for going to market that has a series of tactics, not just one or two things. And that's where we want to play. Our first checks now are somewhere between half a million and a million five in rounds that are two to three million bucks. We will go earlier in some occasions. We're not really worried about revenue. um really aren't uh the we're kind of just worried a little bit about proof of concept not even product market fit however someone's definition is it's just is this a good concept and i think that's the thing i'll i'll cap this in a second but i think that's this thing that is um really important about going really early in consumer is and i say this humbly we've spent decades looking at ideas at their at their tiniest stages and that's what a business is it's an idea um and seeing how it can play out is a skill that you um can absolutely learn but it does take some repetition and i think that's the way we look at these businesses is they're wonderful ideas and i think we humbly have a set of techniques and tools and expertise to try and play it out and to see if this is what culture wants and how this could go and how it could be really, really different.

13:20Yeah. And I think another thing that's interesting, it's like when you mentioned the brands that you guys have been involved with, it feels like from at least from the consumer's perspective, that there is like this thread that like, you know, kind of connects them. They seem like they're in spaces that are like really big markets and the brands themselves are very, you know, very different. They're mixing things up versus what the status quo is, but they're doing it in a very like professional way, I'd say in a very like smart way, as opposed to just like, we're going to be different for being for the sake of being different.

13:50You get what I'm saying? So are there are there any things that you would say like, you know, when you saw some of these brands come to you early, like what did that sort of that strategy and that roadmap and that planning sort of look like? And I'd love if maybe you could pick one of the stories and we can just kind of walk through what it looked like for like seeing that brand come to you in terms of, like you said, super early. Right. And then what does that growth journey look like? Because a lot of times when, you know, people really, I mean, now things get faster and faster where maybe a brand can, you know, grow up in like a year or two, but like, you know, for most successful brands, it takes a couple of years to like really reach like peak household saturation, name recognition, all that sort of stuff.

14:37Yeah. If you could just like, walk us through that timeline and that experience of how you'd seen one. I'd love to kind of just get that, you know, that perspective.

14:47Brent Vartan:Sure. Um, I love that question. I think part of what's in that question is, uh, uh, an understanding around what, what we think is really like a strong brand and like what we would call a household name. I think when you, when you look at it still, getting big kind of household name awareness is extremely hard it takes time you might be able to spend into it but people will forget so like if I think you'd be shocked to see like if we run numbers on awareness and for some of our oldest brands that should be the most popular they're still pretty low you know like so I think what we start talking about when we think about a really strong brand and maybe this gets into our definition of product market fit and I'll get to some examples of that, that, which is just, you know, for us, it's, it's, we're way more oriented towards customer lifetime value and we're way more oriented towards repeat and we're way more oriented towards MPS and we're way more oriented towards our own metric.

15:47Brent Vartan:We call it a markability index. Um, and what, what we like is when you have a really rabid customer base and they're working for you on your behalf. That means you have so many things going right for you. um it means that you have an incredible product it means that you have exceptional service exceptional service means you're incredibly responsive um and with the next product you make with the way you market another thing with the way you respond to a problem and that stuff's that stuff's really great so some of the stuff that we start with that we see um some some examples of how we know, oh, how do we get to that kind of point?

16:30Brent Vartan:I think when we look at a company like Sunday Lawn, for example, Sunday Lawn comes in, you have an amazing founder and culture. I've talked about him a lot. But you start to see that he's working on something from a product standpoint. He's got a great mind for culture. And he sees this tailwind, which is that people are moving out of cities and they're bringing millennials are kind of biologies taking over and they're bringing their kind of metro dynamics into the suburbs and they're like why can't it be better um and then this is pre-covid and you see this kind of you already see this migration into into secondary cities tertiary cities and things like that and he starts to find a better way to to take care of lawns and it starts with an like a very high friction process of doing that stuff and he proves that that can be done that you can do a process and you can make a product that's like not toxic like crazy toxic for your lawns and stuff and your kids are playing on it and that can create a really powerful relationship where people come back and then can go great then then like on that platform of that relationship what else could we do what other job could we solve for them oh maybe pests uh oh maybe how to how to actually plant and put things on there that i have to take care of or whatnot.

17:52Brent Vartan:And now Sunday is a pretty interesting platform to do that stuff. And I think Kulter and his founding team are really, really strong. We are the advocate in the room in that case where we're like, this is a very strong brand. And not taking short-term ideas about chasing low-cost CAC, but investing in essentially acquiring expensive customers that we know will have a long relationship with because there's other things that can be done for those for those people um some of it comes down to geez i think harry's harry's was it was interesting you know when you when you start thinking about what we were doing it was a pretty easy proposition quality shave at a fair price but that brand was set up to be much more about to be positioned much more on kind of the shift in masculinity that was happening at the time.

18:49Brent Vartan:And that, that was about kind of the recession of the total agro alpha male and whatnot. And it was the rise of the kind of the, the regular dudes for, for example. Um, and that was a really interesting place to play. And it, and it, it created a kind of an ethos of, we talked about it as the kind of the founding strategy for that business was man can get better the play off of the best a man can get and it was a belief in culture that man can get better it was a belief that i would say humbly the guys have taken into mammoth brands if you look at mammoth brands right now today mammoth brands is like we just make things that are better in every single category we passively possibly can it's very true to like those guys but it's just trying to think about that longer that the kind of North star, so to speak, and then working your way back, uh, and trying to make a couple of decisions about products and having enough fortitude to, um, hold your breath for customer lifetime value over CAC.

19:53Yeah. I think that's a great way to, to like really think about it when, you know, I think you said, yeah, you could just spend a bunch and acquire a bunch of customers, but is that really, you know, are you building an intentional brand and, and thinking about who's the right customer are they getting the message and what is their ultimately what's their lifetime value because if you get a massive lifetime value versus someone who buys and never comes back and wasn't interested in the brand to begin with like you can get a bunch of those people if you're just acquiring people on meta or or something like that but getting people who are really bought into the ethos of the brand i think that's a that's great and that's where a lot of that brand positioning comes in and if if you could just walk me through like i don't know maybe we take a Harry's or Sunday's lawn, like in terms of timing, in terms of like capital, like what did that story look like?

20:42Because I'm just trying to, you know, let's put ourself in the situation where it's like, hey, I'm working on a brand. I'm starting a new brand right now and I want to build a brand as big as one of these. Like, what does that story look like in terms of timeline, in terms of capital and in terms of, you know, operations and logistics to pull it off, going into retail, scaling up operations, all of it.

21:04Brent Vartan:Yeah. I appreciate you. I appreciate you circling back on that specific point. Um, it's a hard, it's a hard question to answer, um, timing on, on that stuff. Um, you know, the, both those companies have a significant amount of capital inside of them. I think Harry's is pretty public. There's, there's hundreds of millions of dollars of capital inside of harry's uh and venture capital inside of it uh those guys and those are two those are two good examples let me try let me let's take harry's let's take another one like harry's is a harry's those guys are those those guys off in year one they bought their own factory they totally vertical integrated they became the only the third vertically integrated shaving brand in the world um you know that's that's a kind of a big play um you know and yeah and i think it's i think i relevant too because i think in the news right now right like you see all the the like the venture funding that's going to this space like david just raised they were on our podcast like i i want to say like maybe four or five months ago and the next thing i do it's like he like he had just raised his zaka just raised his seed round and then he came back to me or then i see in the news it's like oh they raised like 75 million and bought a factory to like scale things up and i was like wait didn't i just like talk to him a couple days ago so like um you know and and part of the reason I want to ask is because like, you know, some for some brands like people, you know, they bootstrap the brands, they have really successful exits and others, you know, are like, go, go, go and want to fundraise and want to fundraise.

22:34So I'm just trying to elucidate like who the right person is for what that journey looks like if you go that way and what success looks like when, you know, because you've seen it now looking back.

22:43Brent Vartan:Yeah, yeah, yeah. Harry's is a longer road. Like if I use an extreme example you know those guys really wanted to build a house of brands and harry's was the first and they've they've been able to they've acquired brands they've brought them onto their platform accelerated them every time they have you know so that's a very different thing and and their trajectory is towards um you know not necessarily a strategic outcome it's it's something much bigger in those things so um you know that's a that's a different play and to your point like there's other plays where they're really lean and mean and they get there.

23:20Brent Vartan:And, um, I think you're either, you are, this is kind of a no dust statement. You're either building for IPO or you're building to be acquired. And I think both are a okay. I think you just have to be really honest with yourself, your team, your investors, your investors, investors about what these are. um i think uh so for example like hue chocolate wasn't wasn't building to get uh you know ipo and chocolate around that stuff it was absolutely building to get acquired and that like so they were building something that no strategic would have the fortitude or frankly said with respect the taste no pun intended to build it themselves um so they did an excellent job at that and that was like a i think that was like a five-year thingy four-year thingy nom nom too was not building something to go ipo that was a five five-year thing but it's being really really smart both of them both of them building with the potential acquirer in mind there's only like three there's only three people that would potentially acquire this and making sure they're building something that is of value to those people and it doesn't mean hey i gotta build something that's profitable.

24:34Brent Vartan:What you need to be doing is building something that is rich with consumer desire, that has been able to go through the emotional crucible of a strategic going, hey, that thing's dumb. No one's going to want that. Hold on a second. Let's go check that out ourselves. And then wait, let's try and destroy it. Nope. Okay, great. Let's go try and buy it. like that you'd be able to go through that fortitude but you need to be able to build through that journey that they're going to take too uh which is very real and it's all a big part of it and part of that is just having interesting things that are beyond just like hey look at our low cost of acquisition and our low cogs if you just focus on that stuff um you'll be doing that forever and i think that's that's the timing thing that's really bad because that stuff's never going to stay and it's never going to be that interesting.

25:31Brent Vartan:Um, if you build a culture that is focused on CAC and COGS, you're not, you're, you're not going to build a business that's really attractive, I think. And, and you're definitely not going to build a brand, but if you, if you have a culture that's focused on AOV and CLV, um, you could potentially grow extremely fast. And I think the, like peloton focused on aov and clv you know the any crew extremely fast had a very interesting business model on top of a mega trend that was happening not just in a category but you know john foley thought about what he was doing was like replacing religion at a certain level i hope that you know i don't there's an upset anybody but like he saw like oh sundays are gone and like whatever this is how people commune in the modern world is through fitness And I'm going to do this irrespective of the space.

26:23Brent Vartan:I'm going to link everybody up with this crazy content on this crazy bike, you know, on this crazy software. And that, that was like a huge AOV, COV business and allow them to grow incredibly fast because then it does become a math problem where you're like, all right, we can count on about$3 ,000 of value from this person. so you know we can stay in the pipe a little bit longer to get a really high value customer pay a little bit more for them that we know it's going to be very profitable for us in 18 months and and because of that we're able to do bigger things that make a bigger bigger impression around those things and i think some of the techniques are the the best brands that that go on that life cycle in the journey they think about innovation sooner they think about what's the next product i'm going to make this is where pog fails them because pog is like you stay on that one product you make that one product and the and like you so they start thinking about innovation one they start thinking about partnerships uh and then they they really start thinking about getting uh really good design and creative talent in-house like so that they can be really really strong brands.

27:40Yeah. One thing that you brought up that I think is also super interesting is you mentioned you can build for IPO. And like we just talked about, like a Peloton or, you know, Harry's is a platform and, you know, some of these other companies that you've been involved in, or you can build for an acquisition. And one thing that you mentioned about building for an acquisition was, you know, you just mentioned it casually, which I which I appreciate, but I'd love to dig in a little bit more. What does it take to build a brand for acquisition? Because there were a couple stages that you mentioned of the acquirer going through their logic of like, oh, what is that?

28:18Then they write it off and then they're like, oh, we'll just copy it. And then they realize that they actually can't copy it, which is why having a brand is so important. So you need the brand to be able to really stand out where you are needed to be acquired. So I think when a lot of people think about acquisition, they're like, oh yeah, I'll just build something and then I'll be acquired. But like, if you're a brand and you're strategically thinking about, you know, getting acquired, A, what types of brands are well suited for acquisition? Like what are acquirers kind of looking for? And then B, if you do fall in that category, like, you know, what does that journey look like and what needs to happen on the other side in order for, you know, an acquisition to take place?

28:57Brent Vartan:Yeah. It's a great question. I think the uh the i there's like eight different ways i want to answer that so the the uh i think the thing the thing the thing about building for acquisition is like the when you when you sit there they're like oh you'll hear some m &a people be like we bought we buy profitable brands and it's very it's very in vogue to be right now like oh i gotta get to profitability and you should go capital isn't as free flowing as it used to be and it's always good it's always good to be thinking about profitability i think you can't switch your strategy midstream so like there's a bunch of vcs that are like oh we go after profitable brand like what are you you shouldn't be in venture capital then um we like we put money in and we make them unprofitable so they can come out you know it's a jaker boom so they can come come out big and i think coming out like they want to see a path to profitability and that's really really important so one i think it is do you have a culture of CLV over CAC because they'll think that they can fix CAC for you.

30:04Brent Vartan:They'll think that they can fix COGS for you. But what they can't, what they can't usually do is have an amazing AOV and amazing CLV. And you should be building. And I think this is true for IPO. I think this is the actual phase we're in, in DTC and consumer investing that like we're going through the trough of disillusionment we're coming back out these are gonna we're all gonna be making really really strong really really strong consumer brands but um that this this thing that they can't do well over here is that that's the stuff that's really really valuable so when i when i talk to mna or talk to you talk to them what what is most interesting is oh my gosh, this customer base keeps coming back for more.

30:52Brent Vartan:Because what that says to them is like, okay, great. That means there's demand here. There's natural repeat. Maybe we could get these people to come back with an email. I'll just spend a ton of media to do that stuff. What is attractive to them is a path of innovation so that they have the next products to make. What is attractive to them is this brand gets potentially our portfolio into partnerships we couldn't normally get into. Again, it's access. So most of the strategics don't have distribution. They don't have relationships. So what they're looking at is a brand to create that new opening, those new relationships for them, either with higher value customers, either with an adjacent kind of world that they're trying to get into that their house of brands can't get to, or creating an allowance for other brands to come into those customers as well, too.

31:47Brent Vartan:You know, elegantly done. around the things. I think Nom Nom is a great example of that. Nom Nom is something that Mars took off the table with an acquisition, a 10x return for bullish and our investors. And that was basically saying totally vertically integrated premium dog food, fresh dog food delivered to your door. They don't want to build that. But what it is is that customer base is an extremely valuable customer base. They're really well-educated. They make really good money. They're very discerning customers. And not all the traditional brands in the pet food space can access those people.