Angel Investors Are Swooping in to Write the Checks VCs Won’t for DTCs

• Early DTC brands like Glossier and Away raised millions in VC money before launching their products.
• As VC interest in DTC wanes, early-stage brand founders are taking more money from angel investors. 
• Founders say angel investors come with less pressure and more individualized attention.   

In the early days of DTC retail, brands like Glossier, Warby Parker, Allbirds, and Away raised millions of dollars in seed funding from prominent Silicon Valley venture-capital firms — often before launching a first product. 

Roughly a decade later, VC interest in backing early-stage consumer-brand startups is waning. Several venture-backed DTC brands, like Warby Parker and Allbirds, have now gone public, revealing heavy losses and high customer-acquisition costs that alarm shareholders. 

A growing class of angel investors is now swooping in to write the early checks fledgling DTC-brand founders need to bring their products to market. While individual angel investors may not offer the large sums of cash or the pedigree and connections a blue-chip Silicon Valley VC can provide, they offer other advantages, DTC founders told Insider. Perhaps most importantly, they are willing to open their checkbooks to untested new brands as VCs analyze them more critically.

“If you think about the early floodgates of VC money going into DTC, it was because they were using a specific playbook,” Eunice Shin, a partner at Prophet, a DTC consultancy, said. “That playbook is broken.”

And VCs are wising up.

Operating a DTC startup now looks a lot different compared to how it did a decade ago. Brands once relied on paid social-media ads for cheap customer acquisition. But now, the DTC market is saturated. Apple’s privacy-related updates have weakened the ability to target customers online and many DTC brands are realizing that they cannot avoid retail partnerships on the road to profitability.

These DTCs are now looking to angel investors to guide them through this new reality. Many angels have founded DTC brands themselves, uniquely equipping them to offer advice.

VC pressure versus founder purpose 

When early DTC brands first launched, VCs often took a bet on a “presentation and maybe a branding deck,” Sabeena Ladha, the cofounder and CEO of Deux, a DTC startup that sells vegan cookie dough, said. 

Before founding Deux in 2021, Ladha was the general manager at Launchpad, the in-house venture studio of M13, a consumer-VC firm that was an early backer of Daily Harvest and Ring. 

For her own company, Ladha raised $1 million in seed funding in June 2021, mostly from angel investors. She avoided early funding from VCs partially because she knew they would want to see revenue milestones that her fledgling brand hadn’t met yet, or proof of traction with retail partners. 

“All of a sudden, instead of getting a seed round where you raise a million dollars even though you have no traction, now if you’re a CPG, DTC brand, VCs want to see how you’re doing in Target and Amazon,” Ladha said. 

Rajat Sharma, the founder of Ingreendients, a plant-based personal-care brand, had conversations with venture capitalists early on before deciding “it wasn’t the right fit.” 

Sharma bootstrapped Ingreendients in 2019 and tested it on Amazon in 2020 before pitching the brand to investors last year. Ultimately, he raised close to $1 million in seed funding from angel investors between September 2021 and this summer. 

Sharma, a former Silicon Valley tech worker, targeted potential angels who were as passionate as he was about building a personal-care brand made of plant-derived formulas and without many of the chemicals conventional brands use.

“With angels, yes they’re putting in the money, and yes, everyone wants to see the return, but there’s more of a sense of rallying behind a mission and a purpose than there is with institutional investors,” Sharma said.

Despite current trends, Arash Farin, a managing director of The Sage Group, an investment bank that advises consumer brands on deals, said DTC founders flocking to angel investors should not be taken as a “whole-scale shift in the market.” Venture capitalists may be more hesitant to fund early-stage consumer brands, but some VCs are still willing to take on the risk.

“Some firms are a little more cautious, but I know plenty of VCs who would take a look at an early-stage consumer brand,” Farin said. “You have to look at it on a case-by-case basis.” 

Valuing connections and experience over VC check size 

DTC founders eyeing angel investments find the individualized attention and guidance backers offer to be a major benefit of the relationship.

Ladha said she regularly texts or sends voice notes to Deux investors Yanni Hufnagel, the founder and CEO of DTC-beverage brand Lemon Perfect, and Jordan DeCiccio, the founder of Kitu Life, for on-demand counsel. She said it has been crucial to solving problems that arise when getting a startup off the ground. 

“Maybe some other investors would hate me for saying this, but former founders and operators are by far the most valuable of any of the investors I’ve had,” Ladha said. 

Ben Spivack, the founder of Folden Lane, a home-storage-and-organization products startup, was inspired by his initial pre-seed investor, Adam Burgoon, to target angel investors with specific category expertise or shared values for the company’s next funding round. 

Folden Lane closed $1.1 million in seed funding from a group of nearly 40 angel investors in June. Spivack’s investors now include Andy Dunn, the founder of Bonobos, and Christopher Stormer, the founder and CTO of DTC-furniture brand Joybird.

Ben Spivack

“As VC interest in DTC has cooled a little bit, it’s created a void that angels are filling,” Burgoon said. 

Burgoon is the founder of Drumbeat Ventures and has over 20 years of experience as an early investor in brands like AYR, Daily Harvest, and M.M. LeFleur. He specializes in helping young brands set up the right teams, systems, and infrastructure to get off the ground. When making angel investments, he looks for companies that could be future candidates for his venture fund. 

“Adam helped me understand how valuable and meaningful a strategic angel investor can be,” Spivack said. “We talk on the phone monthly and we text on a weekly basis.” 

As Spivack prepared to launch Folden Lane in retailers like West Elm and Food52 this summer, he also spoke regularly with Aaron Brown, another Folden Lane investor and DTC-retail veteran who has held executive positions at La-Z-Boy and Joybird. 

“My conversations with him really made me think about every single area of the business that would be impacted — product, pricing, supply chain, and how that would unfold as we were accelerating our omnichannel-distribution efforts.” 

Nik Sharma, DTC marketing consultant and founder of Sharma Brands, has invested in over 50 brands as an angel investor. Sharma said investing in the DTC community is often treated as “a hobby,” and angels are happy to write a $1,000 or $2,000 check if it means access to a brand’s inner circle.

“It’s like a Soho house membership for DTC nerds,” he said.

Ultimately, connections and expertise matter more than check size to the brands he invests in.

“If there’s somebody really valuable or smart who can become your plug for something — like getting packaging for super cheap — brands would be down to get that person involved for the least amount of money possible.”