Editor’s note: This is a repost of a story written on TechCrunch by Jon Shieber.

Procter & Gamble, allow me to introduce hair-dye company Madison Reed and baby care and home-cleaning-products retailer The Honest Company. Gillette, perhaps you’ve heard of the shaving companies Harry’s or Dollar Shave Club? And Uniqlo, meet VANCL, the big, online, Chinese-branded clothing retailer.

These companies are part of a growing wave of venture capital investments into branded consumer goods predicated on using information technology to reduce costs and the Internet to market directly to customers. It’s all with an eye on replacing entrenched industry players, rather than selling those players the tools they’d need to compete against young upstarts.

“It used to be that tech went into the vertical and sold to everybody in the vertical. Now companies are saying ‘No. I’m going to directly compete with you,'” said one venture investor who is backing the eyeglass retailer Warby Parker. That glasses company has set the standard for how startups can try to carve out a market in old-line industries with entrenched competition, according to a number of investors.

“This is a big thing in e-commerce,” the Warby Parker investor said. “You can’t compete selling stuff that Amazon has. Where you can compete is when you sell stuff that can’t be on Amazon.”

It’s the same realization that Fab.com came to in April of last year, when it decided to acquire the custom furniture shop Massivkonzept. “To be unique in e-commerce means you’ve got to own products, not just sell products,” the investor said.

As a thesis, consumer product companies aren’t attracting the same amount of capital as technology offerings in enterprise software, security, or mobile, but the number of investments into companies selling low-tech or no-tech products like razors, soaps, glasses, or clothes, is growing.

For these companies, even grabbing 5 percent of the total market means billions of dollars in sales, investors said.

In 2012 and 2013 there were at least 26 investments made into consumer products companies, according to data from CrunchBase. That’s up from 16 in 2011, and 13 in 2010.

The companies that have raised the largest rounds in this category include Harry’s, the razor blade manufacturer and retailer; Fab.com, which is now making its own furniture; VANCL, the Chinese online clothing retail behemoth; and Bonobos, which has its own brand of preppy upscale casual wear and suits for men. All told, the five companies have raised in excess of $1.1 billion.

It’s also worth nothing that of the investors who are active in the consumer market, none is investing more aggressively in the sector than hedge fund investor Tiger Global Management, according to CrunchBase data. The hedge fund first invested in consumer retail branding in China with VANCL before applying the strategy in the U.S. with Warby Parker and Harry’s.

Other top investors active in the largest rounds for consumer brands include Andreessen Horowitz, Thrive Capital and Index Ventures, according to CrunchBase.

“It’s most importantly about leveraging technology to create new brands or extend markets into places where they haven’t existed before,” said Renata Quintini. “Now you have distribution channels, social media, and a lot more ways to touch consumers and establish relationships with them.”

Photo via Flickr user Magnus Bråth

  • Originally published January 28, 2014, updated April 26, 2023