Machine Learning For Investing In Consumer Goods Startups
Our portfolio company CircleUp has been building a marketplace for startup investing, by accredited and institutional investors, in consumer goods companies (natural foods, personal care, beverage, home goods and apparel). In four years of operation, over $300mm has been raised on CircleUp by entrepreneurs to scale their consumer goods startups.
But underneath all of this has been a sophisticated data science effort designed to track the entire consumer goods sector (all companies, not just the ones on CircleUp) and determine which companies succeed and why. Yesterday CircleUp took the covers off this data science effort, called Helio, and explained what they are up to with it.
Here are some bits from that blog post:
there’s endless data on consumer product and retail companies. And, much of it is public. A quick Google search of the product in your pantry tells you how many SKUs the brand has, price points for each SKU, where they are sold, product reviews, and a great deal more. In an A16Z podcast in 2016, Marc Andreessen commented that machine learning wouldn’t be helpful for tech VC because there isn’t enough data (40:04 mark). We agree. But in the consumer industry, the opposite is true. Data is broadly available. Business models are uniform. That’s the perfect recipe for machine learning. That makes Helio possible.
Let’s take a look at a few examples:
- Supergoop! is a sunscreen brand available nationally throughout Sephora, that Helio surfaced due to its quickly growing brand, great distribution and estimated revenue growth. We presented Supergoop! to institutional investors, and shortly after, they raised $3.25 million.
- REBBL is a line of coconut-milk based beverages made with super herbs known to reduce stress. Aside from being one of the fastest growing products in its category, REBBL donates 2.5% of net sales to initiatives helping eradicate human trafficking. Helio spotted REBBL early and qualified it for investors, showing its compelling brand, team and distribution metrics. Today, REBBL’s lead investors include Powerplant Ventures, led by the ZICO coconut water founder, and Boulder Investment Group Reprise.
- nutpods plays in the crowded plant-based, dairy alternative category. Helio spotted nutpods for its remarkable product reviews, strong early growth and overall brand, despite it having less than $50,000 in annual sales at the time. After, nutpods got investments from Stray Dog Capital and Melissa Hartwig, founder and CEO of Whole 30, and today is rated #1 on Amazon in its category.
- Tio Gazpacho is a quickly growing brand in the relatively new category of bottled soups, or more broadly, drinkable meals. Tio Gazpacho was founded in Florida, a place without a robust VC community, but Helio still spotted it, and surfaced it to General Mills, which now is its lead investor.
Helio is currently monitoring over a million brands across natural foods, personal care, beverage, home goods and apparel, and can help find who might be the next Krave Jerky, Seventh Generation or Too Faced. We are talking to likely candidates right now, and not just in the categories above, in all categories we see as promising growth areas in the consumer market.
CircleUp has always taken the view that the entrepreneurs with the best ideas, products and team should win…not the one with the best personal connections. Helio brings us a big step closer towards that ambition.
We are excited to see what happens when entrepreneurs with big ideas meet a capital market that has data science at the core. If you want to participate in that market, visit CircleUp.
Good stuff.Consumer goods, especially food, is both interesting and different type of challenge to build– and often misleading to evaluate on the size of the raise.I realize that this true of all startups but by definition hard goods are tied to third -party distribution and the raise to success cycles because of that are steeper then tech.Not harder or easier, just very different as, unless you are Amazon, simply not as in control of the cost basis.
Well done, CircleUp team. This is like ProductHunt meets Pitchbook.There are a number of deals platforms in Europe: dealroom (I know the founder), Hub Exchange https://www.thehub.exchange… (co-founded by my university friend & part of London Stock Exchange’s Elite program).In both cases, I suggested they apply ML to their datasets as soon as they were founded.In 2011, a London-based angel investor suggested I create a European version of ChubbyBrain, based on a data startup I worked at when I was 23. That startup had been a jv with the FT and got acquired by Bureau Van Dijk.But … I’m someone who likes to “push the frontiers of what’s already known and can be done.” Everyone assumed I’d stay in FinTech — given my experiences.Yet I knew there was a systems invention in me, related to solving the Natural Language Understanding (NLU) problem in AI and getting to the “why we buys” that are not necessarily to do with numbers.NLU is “Holy Grail of AI” according to Google’s SVP of Search and Deep Learning can’t cut it:* http://venturebeat.com/2016…People are often scared of “Holy Grail” quests in technology. I’m not. I can see and build this bridge:* https://m.youtube.com/watch…
V. much agree w/you on this…and leveling the field when it comes to geography, lots of people have talked about it but no execution. I can’t name one institutional or VC firm that has a pipeline that isn’t geographically skewed, despite lots of arguments to the contrary. That alone makes this huge.
I’ve been delivering global products since I was 17 so I think+do global because of that. I worked in product labs, inventing flavors, for a subsidiary of http://www.iff.com, one of the largest aroma chemical companies in the world.Tonight, I’m sharing this slide at my Galvanize talk: https://uploads.disquscdn.c…In my mid-20s I was responsible for producing the Strategic Investments report at UBS, running e-Intelligence (which I created and wrote the product+tech specs for) and being board observer on 20+ investments globally from Japan to SF. Alongside ad hoc corporate strategy projects for the Global Heads.So I empathize with investors. There are things they want to be able to do.But being on a board call, trying to proactively support their companies when there’s an 8+ hour time difference, is difficult. It’s “water off a duck’s back” when you’re in your mid-20s and single.It’s doable if you have boundless mental energies into your 80’s like Buffett.So it’s fantastic startups like CircleUp are helping with investors’ workloads of discovery and surfacing good companies for them to invest in by applying ML.
Email me at philipsugar at the google service and I will email you back an instragram post that was done of me (I don’t have an account0 that will make you cry laughing. Over 600k views in the last four days.
BTW: You know we are the largest loyalty software company in the world. Purchase data on over 300mm active consumers.
I wonder how long will it take Google to catch-up and start offering these vertical-specific ML-enabled search services. Right now, companies like CircleUp have an edge and a lead, but it’s inevitable that Google will play there too.
Dr Fei Fei Li, Chief Scientist of Google Cloud, when asked, “How can small startups compete against big players?””Part of it is that the big companies with the tagged data have advantages but they won’t go into deep verticals. And, if you’re a startup, you have to be creative.How do you snowball your data? So design the snowballing of that data. Importantly, develop an EMPATHETIC understanding of the problem you’re solving for the customer.”* https://www.startupgrind.co…Notice what I write at the bottom of that article about emotions.Does Google get emotions? Well, they didn’t get social so FB won.Remember, in Oct 2012, I asked the then SVP of Google Search, “Will Google’s Star Trek Engine have a heart?” to which he replied, “Wow, that’s very deep for a first question … No, we’re focusing on facts & figures — what can be measured.”Nov 2015, MIT Technology Review: “Google discussed some of those efforts at a briefing Tuesday at its headquarters in Mountain View, California. “We’re at the Commander Data stage,” staff research engineer Pete Warden said in a reference to the emotionless android in the television show Star Trek: The Next Generation. “But we’re trying to get a bit more Counselor Troi into the system”—the starship Enterprise’s empathetic counselor.”July 2016, Ray Kurzweil of Google: “Emotions and human language are the most cutting-edge of human intelligence. Emotions are not a sideshow. Consciousness is subjective. And, fundamentally, that (i.e., subjectivity) is not a scientific concept.”Yes, well, when my Dad was in his coma, the neurosurgeons showed me a lot of scientific rationality: fMRI scans of 0-1 pixels of electrical signals, EEGs, motor function tests to check his behavior (can he wriggle his toe?), biometrics of his physiological condition.I’m a maths grad who studied a lot of chemistry & physics so I get the whole Scientific Rationalism thing.The hospital sent us a perfunctory letter that said he was unconscious throughout.Instead of accepting their “scientific truth,” I got my Dad’s case heard in coroner’s court. The hospital and neurosurgeons ended up apologizing to my family because I showed my Dad WAS CONSCIOUS. Medicine simply doesn’t yet have the precise scientific tools or methods to measure consciousness.So … is it possible to make consciousness (subjectivity) a scientific concept and invent new tools to measure it? Sure.But unless Google (and other big techco’s) top people have Dads who go into comas and then die AND they have my know how, they’re not going to invent or execute such a system.
Not a threat the way I see it.CircleUp is very importantly tying this up with a bow for investors and doing legwork and packaging and most importantly outbound sales.To wit:Helio spotted REBBL early and qualified it for investors, showing its compelling brand, team and distribution metrics.We presented Supergoop! to institutional investors, and shortly after, they raised $3.25 million.but Helio still spotted it, and surfaced it to General Mills, which now is its lead investorThe interesting question is this. Does circleup have what in the re business might be called ‘pocket listings’? That is, are they shopping companies prior to posting them on circleup? If not and if they are doing all of this legwork of pre-qualification it appears there is the possibility of others taking advantage of their legwork of identifying investment targets and front running them (either other brokers or obviously companies wanting to invest direct and cut out circleup).
I don’t know if it’s on their radar, but I agree and Google definitely has systems they could put to work on this. One example: they’ve been strengthening Local Guides lately, incl. outsourcing all sorts of interesting data across multiple user types (“does this place have beer/wine, is it open late, how many people are normally here during peak hours, etc.” It helps to improve accuracy for consumer facing platform, but doesn’t take much to see how they could also leverage that type of data to accurately predict which businesses are growing, by how much, and what their revenue potential is…especially if the business uses Google Ads, Analytics, etc. as it grows.
The Achilles heel for Google is all their top people are mathematicians, computer scientists and Scientific Rationalists.That’s served them well … BUT the frontiers of innovation are here:https://uploads.disquscdn.c…Could they pivot and change over to new models? Well, were they able to dominate social (Facebook) or product search (Amazon).Will they eat CircleUp’s lunch? Not necessarily.Think in terms of creating whole new markets of empathetic data rather than competitive edges of having more autistic, vertical data than Google.
Delete Google Insert Amazon
BINGO!!!Front of the line Rich.
It doesn’t take data science to know that nutpods needs a new name. Just sayin’
While it relates only loosely to the product (‘made from almonds and coconuts’) it is attention getting. Which is essential to have on a supermarket shelf. So it’s at least as good (and I would argue better) than a less wacky sounding alternative. Interesting that this was also on kickstarter:https://www.kickstarter.com…
I thought it made sense. Pod is a seed vessel of leguminous plants such as peas (besides a spacecraft pod, ipod..etc). “Like peas in a pod” means very similar/made for each other.Peas in a PodNuts in a PodNutpodsAnd it has a touch of whimsy about it.
I like it too.You have to think to hard to make the male genitalia connection.Pods describes the packaging I assume and people associate pods with plants more than human anatomy.
Exactly! And you want memorable?Never forget this from a trip to the caribbean many years ago:”Big Black Dick Premium Rum”http://intoxicology.net/bla……https://uploads.disquscdn.c…
Let’s combine CircleUp AI and FourSquare Footfall Insight – and we got ourselves a real ball game.
Interesting. I wonder what specific data sources they are using.Google could so some crazy things in this area with search, maps, and potentially even Gmail data.
cool about consumer-agree. Consumer is the hardest space to pick. Data helps.
One of the challenges with econometric data is the chicken and egg problem. What’s causing what. Some answer this with a test called Granger Causality, a statistical test addressing the question does time series A (e.g., weekly sales) cause time series B (e.g. weekly searches). Or was it an third extraneous variable like a “great taste, great packaging) or a regional phenomena (sees candy). seems like circleup could adopt the crowdsource model of avc hedgefund investment to get better answers?
why don’t i just link my fund to a machine and let it get on with it while i go to the beach?
“We believe this unprecedented application of data in private markets and the predictive power of our algorithms is transformational for both entrepreneurs and investors.”CircleUp’s data analysis would also seem to present a consultative sales opportunity w/ r&d and biz dev depts at leading CPG companies.