Justin Smith (Managing Partner @ Recharge Ventures) on investing in brand loyalty

  • Startups primarily care about downstream capital and distribution advantages. If you can’t help with one of these, you need to rethink how you can help.
  • There’s exponential growth in the syndicate world. It’s only going to get harder to secure allocations.
  • If you’re decently connected, you can put together your own deal and pool capital from people that trust you.
  • As you evolve into a larger syndicate, you gain more leverage over other syndicates. In exchange for access to your LP base, they’ll bring you quality deals to co-syndicate and grow out their own LP base.
  • Informational rights is one of the biggest differences between running a syndicate and operating a fund. As an LP, the downside of cherry picking your own deals is that you get little-to-no insight on company performance after the check.
  • In the syndicate business it’s a volume game. As a fund manager, there is a heavier emphasis on sound underwriting.
  • Many LPs want to outsource their investment process to somebody else. If a tier one VC is co-investing, rounds often close within days compared to weeks.
  • Regulators don’t want to deal with multi-nationals. This results in regulators prioritizing homegrown innovation.
  • You can have brands that develop in certain parts of the world that then become discoverable across the globe.
  • Brands are going more into loyalty models (LTV play vs CAC). More loyalty = more ability to upsell.