I n t e r v i e w w i t h D e b o r a h B e n t o n ,
F o u n d e r o f Willow Growth Partners.
Please tell us about Willow Growth Partners. What inspired you to start this fund?
Willow Growth Partners is an early-stage fund investing in entrepreneurs building the next generation of iconic brands and the technology that supports them. We launched Willow as we saw a significant white space for institutional funding at the earliest stage of capital raising for brands. We are also eager to increase the number of women-founded funds and to provide a platform that invests in values-led brands founded by a wide range of diverse entrepreneurs.
According to your investment thesis, both pure VC and traditional PE are not the right sources of capital for consumer brands at the early stage. Please elaborate on this statement & share with us more insights on how Willow Growth Partners is the right alternative for these types of investment opportunities.
Traditional software VCs are best suited for technology companies – software, SAAS, enterprise, AI, etc. Inventory-holding consumer brands grow and exit very differently; as such, they should be valued, capitalized and scaled in a unique way that maximizes their shareholder value. Private Equity and/or Strategics are terrific follow-on financial partners once these brands reach ~$10 M+ in revenue, but the financial profile and operational challenges of brands earlier than that are not ideal for PE strengths and capabilities. Amanda and I built Willow to respond to both the capital and operational needs required by brands at this stage. We have over 20 years of operational, board and advisory experience that we bring to our portfolio companies; capital is necessary, but not sufficient. We aim to help our portfolio companies scale in the right way and grow with integrity, positioning themselves and focusing on the right metrics to ensure a successful subsequent financing and/or acquisition. We have also gathered an extraordinary group of LPs that are available and eager to support our portfolio companies where and when their expertise can be leveraged.
Why in your opinion legacy brands are structurally unable to innovate? How would the strategy of driving growth by acquiring / investing in challenger brands change over time?
Legacy brands and retailers are very large, often with infrastructures and policies that have been created to optimally run big, established companies. These structures can inhibit innovation and risk-taking, two elements that are integral to successfully launching new brands. Young brands need flexibility and latitude to move fast, try new things, test and learn and sometimes fail and pivot; big established players are often not set up to support this kind of activity. We’re seeing big legacy brands and retailers successfully gain access to new brands and customers by either investing in young challenger brands or buying them outright in M&A.
What types of investments is your firm looking to make & what are some of your success stories / exits?
We are looking to invest in early-stage, values-led consumer brands generating $1-$5 M in run rate revenue, strong product margin profiles, and strong unit economics. Our key categories of focus are health & wellness, personal care, beauty and apparel/accessories; we will also look at home, pet and food & beverage. Values around sustainability, non-toxic ingredients/formulations, supply chain transparency, and eco-friendly are important to us. We take seriously the responsibility of allocating capital in an intentional and thoughtful way and we firmly believe that as investors we can do well financially AND do good. As investors of the future, we should be held accountable for investing in brands that will be good for the consumer and the world at the same time.
In 2014, we invested in the very first convertible note for Carbon38, a fashion-forward activewear company that supports an active, healthy lifestyle and dresses women from the gym to the boardroom. Fast forward to 2020 and Carbon38 is the premier online destination in the category and in 2018, welcomed Footlocker as a significant partner. In 2015, we invested in TomboyX, an underwear and loungewear company built for all bodies, genders and orientations. The company has experienced extraordinary growth and built a powerful brand. Willow exited with a 5X return in 2019 when a UK PE firm, The Craftory, bought a significant position in the company. In 2019, we invested in Manscaped, a category-defining men’s hygiene and grooming company that is currently one of the fastest growing CPG brands in the country.
Only 10% of the decision-makers in the U.S. VC firms are women, totaling in just about 105 female investors. What is your advice for women who decide to start their own venture capital firm?
A strong personal goal of mine is to get more women involved in finance, investing and allocating capital. There is a massive disparity in which founders receive funding – less than 3% of female founding teams receive venture capital investment. 90% of VCs are men, mostly white. We know that women led investment teams are significantly more likely than male-led teams to invest in women founders. However, when women fund managers control so little of the investment capital, we can certainly see one of the reasons there is such inequality. Of important note, the numbers are far worse for women POC founders and funders. How do we work to rectify this imbalance? We need more women and POC fund managers.
For women who want to start their own VC funds, I have a few pieces of advice from my experience. Fundraising is hard. I would strongly recommend building a track record that you can reference. I never institutionally invested, but I have been investing off of my own balance sheet for the past 6+ years: 15 companies, 3 liquidity events, zero losses and numerous mark ups. A track record establishes immediate credibility. If you’re not in a position to do so or not at a stage in life where you’ve had the opportunity to invest, build a fund team where at least one of the partners can reference a track record. Also, as you think about building the fund founding team, think about diversity within that team. My partner Amanda brings both diversity in age and diversity in experience/skill sets to our team – that was important to me. Amanda and I have known each other for a number of years, looked at many deals together and even co-invested in a handful. Knowing and working with each other helps a great deal, not only for ourselves, knowing we have the right chemistry and values, but also from the LPs’ perspective. Fund GP discord/break ups are hazardous to fund health and LP investments.
Launching and running a fund is a LONG game, and it is expensive. It will take months to prepare, build the structure, and develop the materials before you ever get into market to begin to fundraise. Expect the fundraise to be 12 – 18 months long. Make sure you understand the economics of a fund; micro funds ($50M or less) are especially challenging given how small the management fee is that is generated to run the fund (~2% of committed capital). Most likely, you’ll need to work with no income for many months and possibly years as you launch the fund and fundraise.
Finally, I would recommend building a network of advisors that can support you throughout the process – existing fund managers, investors, even LPs – people that can help guide you through the mechanics of launching a fund and give you real and honest feedback on your materials and fundraising pitch. It is an extraordinary journey and for me, a wonderful culmination of both professional and personal goals; however, the decision to launch a fund should not be taken lightly, but rather, after considerable research, deliberation, self-reflection and preparation.