Investor Spotlight: Denise Lambertson, Constellation Capital

0:02You know, when it comes to nootropics for supplements, foods, and beverages, not all ingredients are created equal. Cognizant citicoline is patented with more than 30 years of clinical research. It supports the brain's natural systems, DNA synthesis and repair, phospholipid metabolism, and ATP production. That translates into real-world cognitive benefits. The only branded citicoline studied in healthy adults and adolescents, Cognizant supports focus and attention, improves accuracy, reduces errors, and supports reaction time and motor speed. It even supports working memory and mental energy. No stimulants, no jitters, no crash, just benefits people actually need.

0:42So if you're developing products in the cognitive health space or just want to learn more about the science behind Cognizant, head to cognizant.com. That's C-O-G-N-I-Z-I-N.com for more information.

1:10it's not a flex to say you spent nothing on marketing and all your influencer buzz is unpaid or organic and I get that a lot if that's true first of all it's great you've got some great network or you've got some great people to reach out to but it's not going to last right so what that really tells me is you haven't actually tested influencer or any other marketing strategy in a rigorous way that would give me confidence that it can scale. And for some reason, there is this like, look out everything I've accomplished without paying for anything. And so I really want to caution founders against being seduced by that idea.

1:43As an investor, that's not what I'm looking for. I'm looking to see that you have tested a few different channels. And with the capital that we and my peers deploy into your company, we're going to deploy it into a system that we know is going to work because you've tested it and will scale.

1:57Hannah Dittman:Hey, everyone. I'm Hannah Dittman, operations and finance host of the Startup CPG podcast. And today I'm excited to be joined by Denise Lambertson, founder and managing partner at Constellation Capital. Denise brings a unique perspective to venture investing with a background that spans marketing, brand building and entertainment before launching her own agency, LMS, and moving into early stage investing. She's even spent years early in her career working with cultural icons like Madonna and now backs emerging consumer brands through Constellation Capital, where she partners with founders to help build standout brands.

2:30Hannah Dittman:In this episode, we tap Denise's deep marketing experience as she shares the digital marketing insights she sees working across her portfolio. We unpack how follow-in capital works both in terms of diligence and post-investment. Denise sheds light on what an LP base of angels, celebrities, operators, and creators looks and works like. She shares advice for founders, aspects of brands and founders in her portfolio that really stand out, and lessons learned from her experience investing. If you're a founder looking for some great takes from an investor with a broad background outside of finance, this episode is a must-listen.

3:03Hannah Dittman:Enjoy!

3:08Hannah Dittman:Hey everybody, welcome back to the Startup CPG Podcast. This is Hannah, and today I'm thrilled to be here with Denise Lambertson of Constellation Capital. Denise, welcome to the show. Hi, thank you so much for having me. We're so excited that you're here with us today. I'd love to dive into your background. I know you've got a really interesting one and the path that led you to Constellation Capital. Yes, my route to venture capital is very non-traditional. Nobody is more surprised that I'm a venture capitalist than me, to be honest. I started my career in the music industry through a very happy accident.

3:42I ended up as Madonna's executive assistant as my first job right out of college. I worked with her for six years and we did three world tours and put out albums and some incredible brand partnerships that I got to observe. I left in 2009 thinking that I was ready to transition into marketing and business, which is where I got my degree. I thought the whole world was going to be waiting for me, waiting to give me this corner office job. And I found that most people that I interviewed with at the time were really interested in my network that I had built and my experience, but didn't really know what to do with me.

4:19So I started to put together consulting fractional work that was connecting celebrities and brands. The beginning, it was really big brands. And then I found that the majority of celebrities that I knew were really interested in the startup community. So I decided I was going to learn about that. That quickly turned into building an agency around celebrity and influencer marketing for startups, which was pretty niche at the time. We're talking 2011, 12, 13. And that was honestly my on-ramp into CPG. It was maybe one or two clients in and I got a beverage brand. And wow, was my mind blown at what an incredible network and community and virality exists in CPG.

5:01You know, who was an investor at this brand was on the board of this other one. And I started to get kind of moved around in a really incredible way, right, as health and wellness was really crossing over. And I did that. I built that agency. It was called LMS. We worked with almost 250 businesses in the 15 years that it was running. And in around 2016, it started to become popular for the celebrities that I was building these sweat equity deals with. They started to want to invest capital. And that was when the germ of the idea of Constellation Capital was created. I decided instead of trying to do all of these connective investments one-off that I would organize the community of celebrities, influencers, athletes, et cetera, that really trusted me and that I worked with into one pooled entity and deploy capital on their behalf and come to these brands that I had been serving as a marketer through my agency with capital and marketing expertise, which at the time was pretty rare in CPG venture capital, especially the marketing.

6:04So that is my background. I closed LMS at the end of 2023 so that I could focus wholly and completely on the portfolio companies at Constellation.

6:14Hannah Dittman:Denise, you are so cool. I can only imagine all of the awesome stories and lives that you've lived and the cool experiences that you've had and a really entrepreneurial and trailblazing mindset too to be able to pivot and really create a niche segment that ended up becoming like a mainstay power lane in today's day and age long before it was commonplace to do so. I think being early on that whole idea of influencer marketing celebrity partnerships in the more modern way that we think about it now is awesome. And I'm sure you had a big hand in changing the marketing landscape over time to where it is today.

6:56Hannah Dittman:So super pumped that you're here with us today and appreciate you walking through your journey for context. I'd love to also get a little bit more color on Constellation Capital as a firm, you know, your differentiation, your mandate, check sizes, stage focus, or the criteria of brands that you're looking at. Absolutely. So Constellation Capital Inaugural fund, Fund 1, launched in 2018. And as a boutique fund,$10 million, that fund has been deployed. So we're currently raising Fund 2, which will be approximately$25 million. It will still be considered a boutique fund, though$25 million sounds like a lot of money and sounds like a lot of money to me.

7:35We are a follow-in fund, which means that we don't lead rounds. We don't set terms. We invest with other incredible institutional leads or angel leads. And we write initial check around$250 ,000 with the opportunity to follow on. We invest into the kinds of brands that I know and understand through the lens of my marketing experience. So a lot of that is consumables, CPG, that's over 60 % of our fund one, and it will be similar in fund two, but also more holistically, you know, anything that is good for you and good for the world. So we have an incredible, sustainable sock brand in Fund One. We've got not just consumables, right?

8:18We've got pet products and skincare, things like that. So our differentiation, I like to call it a network capital advantage. And the reason I use network instead of celebrity and influencer is because while celebrity and athlete and influencer, those are our LPs and they're really valuable and important, but just as important is the community that we invest with, right? So the other institutional leads that we go in with and the incredible expertise that they have that I don't are the community of operators that I built when I was running LMS, incredible agencies and service providers, et cetera, that we have access to.

8:55All of those parts are what allow us to provide differentiated value. Of course, the celebrity and the athlete and the influencer gets like so much attention and it is, it's really exciting. But as we all know, a celebrity does not make a business, right? It takes a really large team of really incredible experts and helpers, whether it's with capital or operational expertise that will actually get you from zero to exit.

9:20Hannah Dittman:Well said. And I think you're probably one of the best to know that we've seen a lot of celebrity or influencer brands maybe not achieve the success that people thought they might on the onset or celebrity backed brands in the same lane. And you're totally right. You have to have a great company to start with, a great product to start with. And then I think the celebrity aspect or the other marketing levers can be an unfair advantage to get that top of funnel a little wider. But if the bottom of the funnel isn't working, it doesn't really matter how wide you get the top to go. And I'd love to dig into the follow-in definition and kind of experience later on in this conversation.

10:00Hannah Dittman:But first, I wanted to kind of ask a little bit more about your LP base. You know, a lot of institutional funds, they'll have kind of these big, broader institutions, maybe endowments, pension funds, other type of investors in their funds. And you've got a little bit more of a personal touch and an activated base. What's the notable differences to you between celebrity or influencer LP base and a little bit more of a traditional LP base? Well, in fairness, I've never worked with a traditional LP base. So I don't know exactly the intricacies of that, but you're right. I envision them as being kind of faceless, larger entities.

10:36And my LP community is all angels. We've got 35 LPs that fall into the celebrity athlete, influencer, creator bucket. Then we have kind of entertainment industry adjacent. So their managers, agents, lawyers, like the other incredible people that make the entertainment industry work. There's a lot of interest from that community and participating in these investments and in these brands. Then I've got a large group of operators, whether it's in CPG or in other incredible industries, but individuals who see the opportunity, who have their, what I call more traditional angel investors that really have made a career probably in their own business and understand the founder journey and also can see the nascent trend of CPG and wellness and want to put their money there.

11:25So that's kind of the larger makeup and they all play a really important part. Now they're all individuals, so it's hard to generalize their behavior in any way. But what's so great about our industry, Hannah, is that as an individual, you get exposed to the category every day, all day. I mean, go to the grocery store, you go to your CVS. So you're constantly surrounded by these are the important brands and products that fuel our life. So everybody in the LP base has a distinct point of view. They're all from different parts of the country, which I find really valuable. You know, the celebrity and creator contingency are typically very, very far ahead of the trend, probably like farther ahead than we would want to even invest in.

12:08Setting the trends. Exactly. They see things way before they understand the value of who they have access to things. And I forgot to mention, we have a great group of LPs that are also independent grocers. and they have a really unique perspective that they bring. So it's really nice to have this kind of, especially for me in Fund One as a first-time fund manager that again came to venture capital in a non-traditional way to have this kind of group think around what we're looking at, what we're diligencing, what the categories are. It can be a bit overwhelming, to be honest, because there's a lot.

12:41And so there's a lot of opinions. And ultimately, we have a diligence process that I follow, but it's more additive than it is overwhelming.

12:48Hannah Dittman:Yeah, no, that sounds like a huge plus and a little bit of your own market research almost in your backyard, which is awesome. And also, I mean, kudos to you for getting from fund one to fund two with no institutional players and doing that all. I mean, I think any founder listening to this who's done a friends and family or an angel round and has collected a bunch of people on their own cap tables probably knows how hard executing and managing some of that is. And to get to fund two to the scale that you're looking to get it is really exciting and no small feat. So I'm sure you have a lot of founder empathy on that front as well.

13:27I definitely feel like I understand that unique pain point of founders better than I ever did before.

13:34Hannah Dittman:Yeah, it takes a little walk in the mud to know what it's like on your shoes. Well, I'd love to dive into, like we said, kind of the difference between a follow in or a follow on versus a lead investor and how this experience plays out in your investing experience. What kind of dynamics are a typical diligence process like that? And at what points are you getting involved and how does your investment journey typically go? So to clarify and set vocabulary straight out the gate, you know, a lead investor is usually the one who writes the largest check, negotiates the terms and sets the valuation and they'll often take a board seat.

14:12Because of that, they run like a much a very, very extensive diligence process. And the follow in investors, anybody else who invests in that round is taking that those terms in that valuation and making their investment based on that. We are, again, as I mentioned, a follow-in investor. So we don't invest unless there is a lead that has done that hard work. And thank you to all my friends in Venture that do that hard work and allow me and Constellation to participate off of the back of that hard work. We write smaller checks. We are significantly less involved in like day-to-day governance. And I personally look for very specific things related to what, again, my expertise is that, frankly, a lead investor needs to look at a much wider set of data points, diligence, etc.

15:00So the way that investments, the way that we deploy is a bit of a mixed bag. I'll often see businesses that don't yet have a lead investor and I'll like what I see. And I will then make some recommendations, some introductions to funds in my network that do lead and see if any of those funds want to take this on that are as interested as I am. And that can validate some of the things that, again, I don't have the capacity or I don't have the ability to diligence supply chain, for instance. I just, you know, and it's so important. It is not lost on me that you can't market something that you cannot get or is not priced right and all right.

15:38Like it needs to be done. And so I look to my peers in the industry to do that hard work. And, you know, usually when something, when a business comes to me early before they have a lead, the company really appreciates my willingness to like open my network and make these introductions. I tell the other funds in our network, like, this is what I see, this is what I like, et cetera. And if they pass or if they participate, I want to know what they do see, what they are worried about, what they like. It becomes a very, again, community, like group think with everyone sitting based on their experience.

16:12So we deploy once that valuation is set and as long as we agree with it and we can market in our portfolio construction as something that would make sense. But it's a pivotal piece. And frankly, I don't have the experience and background to set those terms. So I lean on those around me to do it and bring what I do know how to do really well into the business.

16:32Hannah Dittman:I love how complimentary that is. And thank you so much for the color and for additional context. I think it is very commonplace, probably the rule versus the exception for multiple investors to be involved with early stage CPG deals. It's very rare that you'll see one firm take a whole deal until a lot later into the growth stage of a consumer investment lifecycle. So I think that is more the norm and kind of an expectation. I think it's awesome to be able to get deal flow going, both founder driven with yourself into your network or from your network into you, especially maybe if they see something that they want your eyes diligencing or your expertise to weigh in on.

17:16Hannah Dittman:And it maybe gives a little bit more of a rounded view and experience for the founders that are getting all these different participants in their cap table. And I do want to actually underscore that point, Hannah, which I didn't before, which is, yes, often I will see deals first and send them to my network. But I am so grateful that oftentimes the incredible peers that I have in venture will be investing in something and bring it to me as well. That happens more often than the former. And that is really a great way to kind of cut through the clutter on a specific category or product is to have these, you know, what I call friends in the industry bring me great deals once they've done the hard work that they can do.

17:54So that happens more, more often than not.

17:57Hannah Dittman:Yeah, it takes a village on the founder side. It takes a village on the investor side. We're all in it together out here. From a founder seat, you know, if I'm a founder listening to this, thinking about what it means to have my cap table construction if I'm going through a fundraise, what's my interaction with a follow-in investor post-investment versus my interaction with maybe my lead investor? Am I getting to interface with you still? Do I reap the benefits of your network and the value that you can provide? How does it all work together once the check is cleared? Well, I can only speak to the way that I behave at Constellation Capital, and I don't know that it's consistent across individual angels, et cetera.

18:37And I know every fund says this, but we do believe in men really being more than just a shack. And I try to live that every day with our portfolio companies. So listen, my expertise is in marketing, celebrity, influencer, social media, and e-commerce, right? So my POV is I'm here when you need me, and I try not to bother you when you don't, frankly. There are certain things that I have to check in on throughout the year. I have to report to my LPs. I've got, you know, get some information. But typically, the company I like to check in at the end of the year, how can I support and look at, review your marketing plan for next year?

19:12Can I help look at your metrics and numbers? Let me see where you're putting your marketing dollars. Do you have a celebrity influencer creator in your business? How are they performing? What can I do to support? We run mailers for all of our portfolio companies to my network, which include our celebrity and influencer LPs, but also I have a very large network of celebrity and influencer and athletes that aren't LPs that I like to share the product with. And a lot of times that's just about visibility and introducing the product to a group of people, but that's something that my portfolio companies really appreciate.

19:46in digital marketing metrics and what is what works and what doesn't work changes really fast. So I like to share the wins anonymously of like one company with another. Hey, this incredible platform, this incredible strategy, et cetera. Again, I used to own a marketing agency and I would provide a bunch of these as services. And it's so frankly, heartwarming for me now that I can do everything that I used to do as an agency without having to say, well, here's your scope of work and this is out of your scope. This is a change. Like now I can just do because we are all aligned and incentivized in the same way, which is to see the company, you know, grow and reach its full potential and succeed and show a return.

20:23So again, I try not to bother our portfolio companies when they don't need me. And there's not always a time when marketing is the big focus, right? Especially in the early, early days, it's not as much brand marketing, maybe it's more shopper marketing or trade or some of the more foundational things around brand. But when it comes to like very push, consumer marketing, pull, direct response, et cetera, you know, like put me in coach. That's where I can really be valuable.

20:48Hannah Dittman:I love that. And Denise just wanted to like give you a double click on this too, because I think it's really unique that you've been able to kind of capitalize on a non-traditional investment background and have it be a real value add for the companies that you're working with, almost in an advisor capacity in some instances, which I think is really unique because I think a lot of investors have amazing backgrounds and provide great value. You know, the ones coming from traditional paths where they've just been in finance and they go the finance route to investing. They are so sharp. They have a lot of pattern recognition and provide a lot of value to companies, but not the same value.

21:25Hannah Dittman:And you're normally kind of rounding out a lot of your investors experience with within your own company and your advisor board and all these other people. So I think it's really special and unique to be able to provide a really strong lens on a core power lane of consumer businesses, which really is product and marketing to the most extent. And being able to provide that as an investor and having the incentive aligned for that company to really win and doing what you can to make it happen, I think is really unique. I'd love to ask you about a standout founder or company from your portfolio and maybe the journey of what the fundraising process was like or what really stood out to you to get a little bit more insight into how you're specifically thinking about brands and brand performance.