Investor Spotlight: Consumer Psychology, Channel Strategy, and What Actually Makes Brands Win — David Bell, Idea Farm Ventures

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1:16As a founder and investor yourself, it's kind of hard, like early stage stuff. It can be very fragile. You can go up or go down. That's just the nature of the business. So I think there's at least two or three things, and these are probably not unique to us, but you do anger to. So one has to be the human behind it. There's some really amazing founders out there, people who try to get a sense of, they'll just sort of run to the end of the earth, you know, to do whatever has to be done. I think the second thing you always like to see is either a novel twist on something old or something that's a genuine sort of white space and that has some tailwinds behind it, some existential trends, whether it's around health and wellness, convenience, the importance of aesthetic, whatever those pieces are.

1:56And then I think the third piece is really important, particularly in consumer, and this is where some other kind of really star brands like sadly went off the rails, is having a very disciplined mindset around the economics.

2:09Hannah Dittman:Hey, everybody. I'm Hannah Dittman, operations and finance host of the Startup CPG podcast. And today it's a real treat that I'm joined by David Bell from Idea Farm Ventures. David brings one of the deepest and most academically grounded perspectives in consumer that I've come across. For decades, he's studied what actually drives success in consumer brands and retail, from his early work digging through Nielsen and IRI data as a PhD student at Stanford, to building Wharton's first digital marketing and e-commerce courses, to advising and backing standout brands like Warby Parker, Bonobos, Harry's, Cotopaxi, Jet, and Diapers.com, just to name a few, in their earliest days.

2:50Hannah Dittman:Through IdeaFarm Ventures and across his broader career, he's spent years unpacking the underlying principles behind why certain brands win, how channels and distribution shape outcomes, and what the best consumer companies consistently get right. In this episode, we dive into consumer psychology, market shifts, and the evolving retail and distribution landscape. We also unpack lessons learned from decades of studying high-growth consumer businesses, explore the common threads behind standout brands, and get into how great investors and operators develop conviction. Davis shares tons of thoughtful reflections and case-by-case insights from years spent analyzing the companies and founders that shaped modern consumer today.

3:33Hannah Dittman:If you're building a brand, thinking deeply about consumer behavior, or just want to sharpen your perspective on what actually drives enduring success in CPG, This one is packed with insight. Enjoy!

3:49Hannah Dittman:Hey everybody, welcome back to the Startup CPG podcast. This is Hannah and today I am super excited to be here with David Bell from Idea Farm Ventures. David, welcome to the show. Hey, thanks Hannah. Good to be here. It's such a treat to have you here. I know you've got an incredible background that I would love to dive straight into. you're not only an investor and a competent investor in this space and also a true academic in it as well so i would love to understand a little bit more about your journey through consumer and the path that led you to idea farm ventures oh thanks great question try and give a short version so as you may tell from the exit originally from new zealand even though my american friends sorry my kiwi friends think i sound very american i'm sure that's the case so like many people from down under, you know, you want to get out of a small country as great as it is, see what's out there.

4:39So I went to grad school at Stanford. And back then, Hannah, there was a whole cottage industry of people analyzing Nielsen data, at least on the quantitative side of marketing. So I was one of those guys analyzing barcode scanner data. So Coke drops the price. Do people switch from Pepsi? Do they buy more Coke, drink more? Did they go to Safeway instead of some other store? So all your classic CPG decisions, consumption, brand switching, purchase acceleration, store switching. And then I got a teaching job, as you do typically, not required to, but if you're in a PhD program, there's kind of an expectation that you go into academia.

5:15So I was teaching at Wharton and the internet was just sort of kicking off. It was like 20 odd years ago. And I was like, wow, this is really interesting because you and I have a physical store, right? We know two things immediately. The good news is we know where all the customers are. they'll be like close to the store and the further away you get they kind of dissipate right no one's driving from like Delaware to Philly to shop so it's kind of good where the customers are like the bad news is you have a fairly constrained pool of customers and I was like oh the internet's like it's the opposite diapers.com has this like huge country it can sell into but like where do you start like do you put a billboard yeah the jersey turnpike do you buy adwords in miami lane so it's the opposite problem.

5:56And I was just really fortunate. There were some great entrepreneurs who were students, one of whom was Mark Law, who's doing all kinds of cool stuff. And they let me get their hands on the data. And then I started analyzing e-commerce businesses. That was kind of the starting point.

6:10Hannah Dittman:That's so interesting and such a fun lens to be coming into the space with. I think everyone has different areas of focus that kind of are their entry point for a lot of people. It's being a consumer themselves or the branding and the marketing or something like that. But I think the decision making process in consumer is just such a fascinating one. And with e-commerce ever evolving, I'm sure whatever was working back in the early days when you started to look at it, it's like the playbook, if you will, changes as the technology progresses more and more. And I think strategies that worked five, 10, maybe even three years ago are now so different.

6:48Hannah Dittman:So tons of insights and things to learn there all the time. And for someone who's intellectually curious like yourself, I'm sure just a buffet of information out there to be sorting through. No, it was a fun ride. And as you say, like the playbook does evolve. I think what's interesting is some of the consumer behavior principles might be more robust, like things that people like, how you appeal to people. That may have a fairly long duration, but the way that you actually do it kind of changes over time. And what was interesting, going back to the diapers.com stuff, it's like showing some of this in class to the MBA students and showing these cool maps of how diapers.com is like growing like a weed or like a disease or all these dots appearing over the map over time, but from small customer base to thousands.

7:31And I had these four guys come into my office hours after class. I said, oh, you know, that e-commerce stuff's really interesting. This is like 2010. And we want to start an e-commerce business. Oh, really? Fascinating. What is that? Well, we're going to sell eyewear on the internet. I was thinking, oh my God, you know, sort of a nutty idea is this, you know, because like, Hunter, if you want to buy some sunglasses, right, you might want to touch and feel them before you commit. And so I said to the guys, you know, this academic jargon is they have non-digital attributes, meaning product attributes that are hard to communicate through the medium of the internet.

8:02Oh yeah, we thought of that. We're going to put them in boxes and like ship them to people. This is, you know, hope to try and program. And that was kind of the evolution of me getting involved in Warby Parker, not as an investor at that point because there were still students that came later after they graduated. But I met Andy Dunn from Bonobos, like really revolutionary kind of guy. So before I knew it, it was kind of deep in the so-called D2C. And I think your point's a very good one, but I think back then, a lot of people thought that that was kind of a business model in itself. And obviously now we know it's like a channel that you need to do certain things right in that channel, but it's not the end point.

8:37Hannah Dittman:You've been a part of so many amazing stories and clearly the professor mentorship in you is quite evident and the way that you've cultivated so many of these early huge success stories and walked alongside them is truly a testament I think to your knowledge but also probably your demeanor working alongside founders. I'd love to dive into a little bit more about your firm Idea Farm Ventures and get the firm overview and the understanding of how you guys are participating in the market today and what you're really focused on in it. Yeah okay great question so my dear farm really came out of a shared passion between myself and my co-founder jim and i'm a bit older than him he's sort of the younger guy you know that you want it's just works all day and night you know he's really an amazing engine of a human being and like jim's skill set is really was training was in banking there's a very high level banker at lazard which is probably the best job you can get banking and so i was like a little bit older as a marketing professor, but we were both kind of very, very interested.

9:39And we'd become friends way before he also went to Wharton and we were kind of doing things as angel investors. And we thought we should sort of formalize this and like set up a real entity. And that was kind of the genesis over a few years. And he got out of Lazard and then I moved to New York. I was still teaching a little bit, but then decided to take the plunge and go around the world and raise money for idea farms. That's what we did. And the vision was always to only invest in consumer and retail brands. And we had these sort of acronyms, which I guess I can share that kind of funny. So Andy Dunn, right, in a Medium post, the founder of Bonobos, he coined this term, the DNVB, the Digital Native Vertical Brand.

10:18So we said, okay, we're probably going to invest in some of these kinds of things, but there's two other formats that we cooked up, two other goofy acronyms. One was, I think, the LCBB, it's the Location Centric Experiential Brand. It's those forwards and the idea was you could have a business that was anchored by a physical space something like a glow bar where you come in and you get services and maybe eventually that brand might also have some product and then the third one was the awlb the authentic wholesale-led brand so a brand that kind of starts its life in the supermarket and then kind of blows up and the idea was that wherever you started you could ultimately encompass all three of those formats And so like Warby Parker started online, but they also have stores.

11:00I guess they don't participate really yet in somebody else's store. Whereas you say Harry's, right, they had barbershops. So vacations just kind of for fun. They had e-commerce and then they sort of target Walmart. So that was part of the way we thought about commerce at the time.

11:14Hannah Dittman:Really interesting way to look at the ecosystem and focus on the customer journey of where they're finding brands, which I think is a really nice approach. And I think it's easy in consumer to kind of get caught up in the gamification of sales or widgets and things like that. But I like that, remembering the anchor point of the human experience and the consumer experience, which is the most important. I had no idea Andy Dunn had coined that term. But coming up in my own path through consumer, that was definitely a hot keyword for quite a long time. yeah if i remember correctly i think it was a 2016 medium post and that's where he kind of got it out there and you know this like digital native vertical brand you know selling direct and again i think this is sort of credit to him being sort of a visionary guy but if you go back and you hear him in early days maybe old youtube videos from 2010 he was quite adamant that like physical stores would be totally insane like who wants to store with inventory and staff and turns and all that kind of nonsense that the way of the future at least for men buying clothes the bonobos the man is like a monkey and is going grabbing a few things it was going to be the internet and then to his credit he realized pretty quickly oh some guys actually want to try the pants on right they want to touch and feel the shirt before they commit and he had a really cool kind of like a lot of these brands did back then henna they had kind of like an office sorry sort of a store inside the office so you could go down to 25th street go into the bonobos sort of head office and there was like a little shirt would be trying a pair of pants right and then that's what led to the guide shop very innovative concept and it was around the same time I think the economists they referred to that as the zero inventory store and said this is really cool because you separated the two core retail functions of kind of the experience piece and the fulfillment piece and with e-commerce you could separate it like how I could come in have a great experience try all this kind of stuff on let's just ship it to your home or to your office yeah he had such an interesting journey i read his book actually and i believe touched on the journey through setting that up and the wins and the pain points alongside with that fascinating i'm sure being part of that ride you learned so much that was just funny there too there were a lot of really early good entrepreneurs who have remained like pretty good friends with through that journey so craig who found a care of craig albert like he was one of the early guys at bonobos like john Hutchinson who's building a new fashion brand he was Bonobos so a lot of good people came out of that company as well yeah I feel like everyone was just really critically thinking innovative and very problem-solving solution-oriented mindsets which when you're doing something so new like that especially god what an important trait that must be as you're just encountering new thing after new thing after new thing and kind of constantly tackling new obstacles.

14:13Hannah Dittman:Before we move on too far from the conversation about Idea Farm, I'd love to also just double click on, obviously, we have an understanding of the big picture thinking of how you're structuring the original concept and sector focus, but would love to understand where you guys are investing in in terms of stage focus or any key criteria that you're thinking about now as you've constructed your mandate and where you gravitate towards? Well, I think the first thing is, you know, as a founder and investor yourself, right, is that it's kind of hard, like early stage stuff. It can be very fragile. You can go up or go down.

14:48That's just the nature of the business. So I think there's at least two or three things, and these are probably not unique to us, but you do anger to. So one has to be the human behind it. There's some really amazing founders out there, people who try to get a sense of they'll just sort of run to the end of the earth to do whatever has to be done. I think that's just a really important trait and characteristic. And they can come from all walks of life, right? It doesn't have to be somebody with like a fancy educational background or whatever. So just the personal tenacity, the willingness to do whatever it takes.

15:18And also, I think the way that spills over into your ability to hire other people as well. So that component's really key. I think the second thing you always like to see is either a novel twist on something old or something that's a genuine sort of white space and that has some tailwinds behind it. some extra central trends, whether it's around health and wellness, convenience, the importance of aesthetic, whatever those pieces are. And then I think the third piece is really important, particularly in consumer, and this is where some of the kind of really star brands like sadly went off the rails, is having a very disciplined mindset around the economics.

15:54Like how do you actually get to a positive economic situation from a margin point of view, not raising too much money, thinking of a business, because the idea of venture capital in some sense applied to consumer businesses, there's a little bit of, I'll say anomaly, but if you and I are building a business, we'd sort of like to make money from it. And then from that money, then kind of grow the business organically. And obviously with consumer, once that engine's running, you might want to pour in additional capital to really spur the growth. But I think discipline around the economic piece, I think it's really important.

16:24And with that comes a lot of scrappiness. Well, how do I create content? How do I do interesting things? How do I remain relevant in the culture gets tied to that.

16:33Hannah Dittman:All great points and very well said and agree. I think so much of early stage consumer is dancing with your hands tied behind your back. You've got to really figure out ways to backbend and work magic, turning water into wine in a lot of ways when you don't have those big incumbent CPG budgets to just lubricate anything you're trying to do. It's a very different animal. I think you've got to like roller coasters a little bit to gravitate towards it. You've clearly been not only a student, but a professor in a lot of senses in this space and have seen trends and wins and losses and companies and behavior changes and so many different things.

17:16Hannah Dittman:Looking back at all of the brands or companies that you've spent time with, do you notice any patterns or similarities in the successful ones, any fundamentals that they had in common or approaches to the market, relationships with their consumers or anything else that you think others can learn from? Yeah, it's a great question. I mean, it sort of follows on a little bit from those three things that I mentioned about sort of the founding team, the tenacity and all that, and understanding a white space and then being capital efficient. But I think there's one thing like a real attention to detail I think is really important and I should say like I'm not an investor in the brand Grunz it was like great to see they have a big win it's great for the whole space and this could be totally off base but one thing that I love about that product and why I use it is I love the fact that it's many little bags inside a big bag that just makes me comply I don't want to pack my suitcase with a big jar of gummies I don't want that stupid thing Monday to Sunday where I flip it up and I put all my whatever you know vitamins and god knows what I'm taking but I'm going away for five days I take five little bags and he did many other things too but that to me is like a nuance of understanding the customer that creates compliance because the worst thing with vitamins and you don't comply you don't use them you're like what the hell I've got these I shouldn't say this because he's a kiwi but I literally have like three bags of AG1 powder sitting in my pantry over there where they keep coming thank god I finally canceled it again no disrespect to their brand because it's a great brand but the form factor wasn't one that I could really get on board with and I would give it to my trainer, give it to the doorman, whatever.

18:49And then I think just attention to detail, you think about a brand like Touchland, right? It's not something where you have to take off a cap, you can take it out, you can use it with one hand, you know, it turns out that kind of thing is really important. Another thing that I've seen is just really a success is being able to create great stories, narratives that continue is always kind of new news. So I have this sort of framework that I use when I think about brands and one piece of it is thinking of a customer as an orator, right? If you're a customer that's transactional, I sell you this mug and you give me some money.

19:21Okay. But what if in the selling of the mug, you liked the mug so much you told other people about it, right? So what are the triggers that I can use that you propagate my story for you? And some of the really successful brands that do that, they do it through collaborations, through physical activations, through really interested content, through drops, through different colors, different flavors, sort of keeping the thing fresh and having its own momentum. So yeah, I might've gone on to them, but those are threads, the attention to detail and the ability to create like narrative in the culture, ideally without spending too much money, that can really take you a long way.

19:56Hannah Dittman:Well said and great words of wisdom. I love your point on reducing friction in the customer experience. I think the more friction, the more drop off you have in your consumer base. So anything you can do to alleviate those points of drop-off obviously help you retain and keep a loyal customer base. So very well said and articulated. And I think kind of ties back to your Bonobos example as well. A big reason why some of that was working for them was focusing on removing friction in a shopping experience or a journey. Same with Warby Parker. I think there's so many different ways to think about that concept.

20:37Hannah Dittman:Some may seem so disruptive and world-changing and creating an entirely new customer journey, but to your point on Grun, some of them are just a lot more simple with understanding the in-home use of a certain product and being like, okay, how can we make this an even easier experience if we really understand what our customer is doing? Yeah, I'll give a shout out to an old buddy of mine who was a few years ahead of me at graduate school and to this point of understanding. So this is very true and quite typical in academia, Hannah. So you might be just some dude or some woman in an office like running regressions on like customer data, right?

21:14You never have to interact with anybody. And there was this guy, Brian Wansink, who was a professor at Cornell for many years. He wrote this book called Mindless Eating. And it's a pretty interesting book. And what he did was he actually went into people's homes. He looked in their pantries and stuff like that. And he found all these goofy things like the size of the bottle that you sell something changes the psychophysics of how they perceive the quantity so if i give you a cocktail and a martini glass versus a champagne flute you just think there's much more volume because it's like tall and thin but there's actually there's more on this one right or if you and i have a startup cpg conference and like daniel gives us a budget to buy snacks and outside the room like we leave a big bowl of m &ms and if they're all multicolored, like people just come and just eat them out of the wazoo, right?

21:59If we're all red ones, you're like, oh my God, I just ate 10 red M &Ms. But if you eat too blue, too green, too yellow, too orange, and too brown, you feel like you've eaten less. So this guy went right down the rabbit hole and actually looking at what people were doing with the products. And I think sometimes people sort of forget to do that. We're just going to a store and wander around and see what people pick off the shelf. And that's almost being a bit of a, like an anthropologists in the consumer space can be real useful.

22:26Hannah Dittman:So true. And consumer psychology, I just think is so fascinating to your point, perceived value. Even if you talk to any packaging engineer out there or brand manager, they're going to know the size impression of a product makes a big difference. The colorways grab your eye in a certain way or give you kind of perceived emotion. There's so many little tiny details that we pick up as humans and aren't even really fully conscious of what we're thinking about them. And I think tapping into all of those mental pathways and thinking them through and being just really intentional, I think, to your point about why you're doing everything you're doing, you may not always have the right answer and probably rarely will, to be able to accurately study all of these behaviors and come to the right conclusions and get enough data to actually be able to do that were actually impossible.

23:21Hannah Dittman:I'm sure Pepsi has been working on that for decades and decades and decades. But I think at a minimum, when you're making decisions in a brand, really trying to think through why you're making every little tiny decision that you're making and what the potential impact of it could be is a great way to be thoughtful and to constantly remember your consumer as part of your decision making process. Yeah, totally. I think sometimes it even swings the other way. I guess this is a different space, but I think it was Steve Jobs or someone like that sort of famously said, didn't believe in customer research because, you know, David and Hannah have no idea what they want.

23:57I'm just going to build them something cool and I'll buy it. So I think sometimes you might take a contrarian position, but I think mostly in consumer really helps to look really closely at the details. I think we live in such a visual world now too because the phones and social and pictures. And so I think you see really simple things like the brand like Brightland, which I have sitting over there. I don't put it in the closet, right? Or the pantry because it just looks cool. So I leave it out on my table, like my caraway pot, like I leave sitting there because it kind of looks nice. So I think people really are attracted to things that have positive aesthetic these days.

24:32It could be the functional form, the color palette and so on, because it's a way to also socially signal to other people the kind of stuff that you have in your everyday life and for whatever reason there's a slight sense of maybe pride's too strong with like sense of enjoyment

24:45Hannah Dittman:from having those things yes a thousand percent i always spend a lot of time in beauty personal care and i always think about it as decorating your bathroom because all those products have to be out in your shower they have to be out on your sink obviously the perfume industry just knows it so well the more beautiful a bottle is the more you want to display it like i think the kitchen, especially with the olive oil scene, yeah, like you're saying, Brightland Graza, like a big lift for both of those brands was having something that was attractive to display in the kitchen, when most things in the kitchen you want tucked away behind closed doors.

25:18Hannah Dittman:We're reflecting on quite a lot of things that in hindsight kind of makes sense why they worked out with Grooms, with Brightland, with all these different companies. But as an early stage investor, you need to be able to have the foresight to think through how it might unfold that way. when you're evaluating brands or thinking about early stage investment what are some of the things that you're anchoring on that help you get conviction that you can see it turning out that way or that you have an understanding that the path might unfold successfully yeah okay so maybe i'll separate the consumer stuff from the financial stuff so the consumer stuff we always like try the product ourselves give it to a few other friends and family members like do very informal kind of like non-scientific work-focused groups market research like that's a must and then sort of having done that and seeing what the reaction is we might then formalize that by doing some broader surveys and so on so getting some comfort so i'll give you a tangible example that most people would probably relate to this brand so when jim found touchland on instagram or we bought some and say man is anyone ever going to pay 10 bucks for a hand sanitizer when the same quantum of pure elves was two right so five times the price then we thought well you know with this one you might take it out and people might see it and it's got fragrance so it's kind of different and it's this whole idea of craig dubitsky did an amazing job with the brands he's been involved in right in the oral care and like the eos and could you take something prosaic and turn it into something elevated and we sort of came to the conclusion that you could but then this is really funny then we sat around this you and i might have done right and you agonize of how the heck am i going to tell daniel that when he's standing at the shelf does the ten dollar option and the$2 option and nanosecond that he's devoting, right?

27:02I guess the jargon is it's a very low involvement decision-making process, that he's going to pick the one that's 10 because we're not telling him, hey man, this is the same price per use because it's a spray. You need more goop, less spray. We've done the math, so don't worry. And you've got this other stuff, like it looks cool, it smells nice and yada yada. And then we kind of realized like it's really difficult to get that message across, but he's just not going to pay attention to that. And at some point, somebody figured out or forget how the decision arose like the way you tell that story is you just sell it in sephora like that says everything that you want to say about the product without actually having to say it like you couldn't say it better than selling it in that channel which i have a whole theory about why channel is so important and then on top of that you're sitting there at 10 everything else in that store is 25 and above so one it by three such a great point