Logan Langberg is a Principal at Imaginary Ventures, a consumer focused VC firm that has invested in brands such as Daily Harvest, Everlane, Keeps and SKIMS.
Briefly introduce us to Imaginary Ventures and your journey to the firm?
Imaginary Ventures is an early stage venture fund focused on all things consumer. This ranges from consumer brands, consumer software, e-commerce enablement, marketplaces and platforms. We invest in Series Seed through Series B rounds and currently on our second fund (which we haven’t formally announced yet) and manage about $300M in total assets to date.
I always was interested in consumer goods and started my career in consumer & retail Investment Banking, and then later joined Alliance Consumer Growth, which began as a more traditional consumer growth fund with $10-$50 million average check sizes. ACG is particularly notable for their investments in restaurants such as Shake Shack and Blaze Pizza, but, as eCommerce and digitally native brands began taking foot, we adapted our thesis and saw an opportunity to invest in certain digitally native brands and expand them into the wholesale channel. Consequently, we led investments in brands like Lola, OUAI Haircare and Harry’s.
Eventually, I had the pleasure of meeting Nick Brown and loved what he was doing and really connected. Ultimately, I decided I wanted to join the fund he was launching with Natalie Massenet and help build it.
It has never been easier to start a consumer brand, yet that also means it’s never been harder to start a successful consumer brand. What is a common thread that you see amongst the successful brands you have invested in?
It depends on the Founder. Any early stage investment firm is betting on the Founder. The Founder has to have incredible vision, be a leader, an expert team builder and master of operations. That’s a lot! But, that’s what it takes. Every investment that we have made goes back to our conviction in the Founder.
In addition, consumer is a tangible industry; the product has to be solid, differentiated and needs a reason to exist. We are now seeing brands emerge and differentiate themselves from primarily being wholesale CPG that sits on a shelf. They are building larger communities and loyalty leading to stronger repurchase rates, velocities, and are disrupting the way we used to consume amongst the legacy players with most of the market share. This leads to greater exits, at higher multiples. We have seen this recently with SmartSweets, Freshly, and others.
It seems, compared to other VCs, Imaginary is comfortable investing in companies in overlapping or adjacent categories. For example, Kosas and Nécessaire or Universal Standard and Good American. Can you touch upon this in terms of your investment strategy?
I actually don’t think we do. We are very conscious about not investing in competing businesses, but we aren’t a generalist fund; unlike other bigger VCs that can invest across various verticals, there are going to be times as companies build out larger platforms and SKU sets, we will see some collison. You can invest in 10 beauty brands and stay in your lane, hair care vs. skincare vs. body. Premium vs. Mass. Demographic specific, etc. For the most part we are not doubling down on specific sub-verticals.
What is a thesis that you hold that most people would disagree with?
For us we are really betting on brands and consumer companies that have multiple channels of distribution. Still to this day, most VC investors we run into are betting on eCommerce driven companies that have built brands on Shopify with deep tech stacks. While these digitally native brands have been a big focus for the fund, well, we believe brands need to sell where consumers are shopping. So, we want to see brands in relevant retail stores, wholesale accounts and eCommerce businesses. Otherwise, they are often doing themselves a disservice by reducing their whitespace.
Moreover, leading up to COVID, Facebook CACs were exploding and unit economics of first purchase no longer made sense, the phenomena was ‘let’s pick a strategic partner and build shelf space’. That notion has held firm from when we started, and having strategic flexibility and distribution is incredibly important.
Out of all verticals, food and beverage is the last to have a meaningful DTC business. It is the nature of consumption habits. Most people are not shopping on Gatorade.com; they are going to Amazon and Walmart and buying in bulk. These distribution partners can create a real moat. Cann, for example, was a disruptor in the THC beverage space, and their model of getting into 300+ doors before other emerging cannabis brands could do that, as well as picking a great scalable manufacturer and building the foundation for multi-state licenses, has become a real moat. (You can find my interview with Cann Co-founder Jake Bullock here).
Another example is plant-based companies doing partnerships with food services and QSRs like Shake Shack and McDonalds, claiming that national fast casual chain unlocks major volumes. You are seeing unbelievable multiples in that space, partly because of the opportunity for those national partnerships.
What will be the next technological trend that impacts retail and consumer brands?
I think as consumer companies continue to be born on Shopify or other software, as you mentioned, it’s never been easier to start a business. This whole world of eCommerce enablement has pushed companies and brands to become that much more efficient in order to mimic the in person buying experience. This can be anything from customer service to attribution marketing platforms to sustainable packaging. Companies will continue to look for technological innovations to make processes more seamless: a more frictionless experience, faster and cheaper deliveries, etc.
Additionally, while Shopify continues to be a monster, there is new found interest in the headless movement, which could be its biggest competitor, codeless environment, separation between the frontend and backend of an eCommerce application.
If you could join the crew from Inception and implant one idea into the minds of entrepreneurs, what would it be?
I think most people prior to COVID started to change their opinion on growth vs. profitability. Over the last decade, most VCs were investing in top line growth and growth at any cost. Exits were based solely on revenue multiples. But, as we have seen, it’s not sustainable. Instead, entrepreneurs need to focus on getting their unit economics right from the get-go, finding the best distribution and manufacturing partners, and understanding how to create defensibility through product or distribution. If that means you grow 30-40% less a year, so be it. But, more importantly, it means that you have a stable business that will exist a decade later.
That may mean starting regionally or locally, building a good data story in the natural channel so that you can leverage it into a great proposition with conventional retailers. Initial eCommerce brands held off from going into wholesale until their fourth or fifth year because they wanted to focus on customer acquisition and own the consumer. Now, brands are scaling through wholesale / owned retail sooner because the data has proved omnichannel customers are more loyal, repetitive and profitable.
If you could ask one person for advice, who would it be and why?
I am a huge Winston Churchill fan. Not a lot of people know the extent of obstacles he dealt with; he was a man who constantly looked failure in the face and continued to persevere, all while holding his cigar in his notorious three piece pin-striped suit. The confidence and emotional resilience he showed the world during WWII was inspiring. And of course, his mannerisms are one of a kind. I have read so many of his biographies and I would love to be in a room with him.
What fictional character do you identify with?
I am a big Wes Anderson fan (and Roald Dahl) but specifically, I have always resonated with Mr. Fox from Fantastic Mr. Fox. He is sly, clever, always outwitting the local farmers, somewhat of a trouble maker, a family man and most of all a hustler. He often creates his own drama but in the end he usually ends up triumphant.
Often, when we are faced with obstacles or things go wrong, we think something is happening to us. But, when we reflect on these moments later on, we tend to find that it actually happened for us. What is one such example you have of this?
It is easy as a young associate at a firm to have a portfolio company that is taking off. But, I believe that young investors learn the most when they are faced with struggling businesses. In those times, you sometimes question whether your decisions could have caused these negative outcomes or as a young associate, you may feel stuck with these companies that aren’t home runs and require twice as much work. But, in hindsight, those companies that struggled or failed are the ones that help you grow. They were the best learning experiences that require you to think outside the box and turn over every stone: rethinking your distribution strategy or reinvesting in brand or product, re-examining your co-packer. There are so many challenges and thus so many learning experiences. In my case, I had one specific pain point from a past experience that taught me what to look for in certain Founders. It taught me how to actually add value as an investor.
What is the most spontaneous thing you’ve ever done?
Writing a full feature screenplay when I was in college with one of my best friends there. I ended up leaving school to go to Israel with my family and met the people who lived at the Ayalon Institute, in which I wrote about.
If you could create a fortune cookie fortune to give yourself when you were 16, what would it say?
Work hard, trust yourself and your process, never stop learning from those around you, laugh always, and then work even harder. Do those things, and you will discover happiness and great fortune.
“Work hard, trust yourself and your process, never stop learning from those around you, laugh always, and then work even harder.“
What is a memento from your childhood that you still keep and how does it serve you?
I still have my Cherrywood Gibson guitar that my five best friends, since I was three years old, bought me for my Bar Mitzvah. It allows me to reflect and be grateful to the amazing people in my life and remember the power of doing something nice for others. It also brings me back to a time when I had even a sliver of musical talent.
What is your creative outlet and how does it help you channel a flow state?
I grew up in NYC and am a big fan of the arts. Whether that be film, Broadway, or comedy shows, comedy most of all, I love them all. I think it is important, especially in the VC community where it consumes you, to remove yourself from work and take in aspects of the world around you that can stimulate you in a completely different way.
In college I loved writing as a History Major, and then after school I joined the Upright Citizen Brigade for two years. When I was a banker, I would literally leave work and run straight to UCB in my suit and do sketches. That moment became my creative outlet and a way to surround myself with very different people with different interests, perceptions who had different motivations.
What is one daily ritual that you cannot live without?
Some form of workout. It’s a way for me to unwind. I historically loved going to boxing studios or Barry’s Bootcamp, but obviously that has been tough, so I recently bought a Peloton.
What is the last:
TV show you binged?
The Great (Hulu).
Movie you watched?
Waves.
Song you listened to?
Blind by DaBaby.
Podcast you listened to?
Pivot — Vox Media.
Book you read?
These Truths: A History of the United States by Jill Lepor.
Up Next: Jenny Friedman, Co-founder & Managing Partner of Supernode Ventures