Smalls Raises Another $9M for its Direct-to-Consumer Cat Food Brand

Despite cats as pets outnumbering the number of dogs, cats have been overlooked with most of the focus on our canine friends, and much of the products for cats are really just repurposed from dog-centric offerings.  Smalls is the direct-to-consumer human-grade cat food brand designed specifically for cats and their loyal owners. AlleyWatch caught up with CEO and Cofounder Matt Michaelson to learn more about building a cat-centric brand in a dog-centric world, the company’s biology-based approach, and recent funding round from investors that include Left Lane Capital, Founder Collective, and Companion Fund.
AlleyWatch

Direct-to-consumer cat food startup Smalls raises $9M

While dog owners have plenty of direct-to-consumer options if they want to order pet food online, we haven’t seen a similar wave of startups for cats. But that may be starting to change.

Earlier this year, I wrote about Cat Person, a startup backed by Harry’s Labs offering a variety of cat care products, including food. And Smalls, a cat food startup that launched in 2018, is announcing today that it has raised $ 9 million in Series A funding.

Co-founders Matt Michaelson (CEO) and Calvin Bohn (COO) said that it’s not simply a matter of taking the D2C dog food model and applying it to cats.

“The traditional sort of MO for companies in the pet care space is to do everything for dogs first,” and then expand into cat products, Bohn said.

Michaelson argued that this means companies “often overlooked the nutritional needs of cat.” In particular, he said, “We found that we needed a much broader range of products to really succeed. Cats are picky because they’re apex predators.”

So Smalls offers a variety of food options, including what it says is fresh, human-grade chicken and beef; freeze-dried chicken, turkey and duck; plus other treats (and non-food products like litter and toys).

Smalls

Image Credits: Smalls

Michaelson and Bohn started out by cooking the food in the kitchen of their New York City apartments, then moved into what was then known as Brooklyn Foodworks. Smalls now manufactures its cat food in a facility in Chicago.

They acknowledged that the cost can be a bit higher than what cat owners are used to paying — the exact comparison will depend on the brand and quality you currently buy, but after taking a quick quiz on the Smalls website, I was offered subscription plans that cost around $ 3 or $ 4 per cat per day. Michaelson noted that “retention is not correlated to income” (so Smalls customers aren’t just wealthy cat owners), and he argued that investing healthy food for your cat could save money down the road

“We don’t have studies to say that yet, but at the same time, you would naturally assume eating better food is going to be a good investment in yourself,” he said.

Bohn added that when cat owners switch to Smalls, they quickly notice the difference: “Within weeks, their cats were sleeping better at night, their coats were more lustrous, their stool smelled better.” (Journalists who tried it out seem to agree.)

The Series A brings Smalls’ total funding to $ 12 million. It was led by Left Lane Capital (whose partner Jason Fiedler previously invested in The Farmer’s Dog), with participation from Founder Collective and Companion Fund.

“While we’ve seen a proliferation of highly successful healthy dog food brands, the cat food market has remained completely ignored,” Fiedler said in a statement. “Smalls has successfully developed a brand, product mix, supply chain and customer experience that is specifically optimized for cats that no one else has.”

Michaelson said Smalls currently has “several thousand” active subscribers, up 4x year-over-year. And while the pandemic has created some supply chain challenges, it also led to “a huge rise in pet adoption,” as well as convincing some owners that they should look for alternatives to their local pet store.

“Because we’re seeing this big movement towards the direct-to-consumer side of things with COVID, it’s really an opportunity to lean into that and grow faster,” he said.

Startups – TechCrunch

Direct-to-consumer startup studio Innovation Department raises $3.7M

Innovation Department, a startup building a portfolio of direct-to-consumer brands, is announcing that it has raised its first outside capital in a $ 3.7 million funding round

It has only launched one of those brands so far — WellPath, which offers customized nutritional supplements. But the next, a pet wellness brand called Finn, is scheduled to launch next month.

Innovation Department was actually founded back in 2015. Initially, co-founder and CEO Alex Song said it took a more general “studio” approach to incubating startups. The problem, he said, was that the studio had “no real core competency,” while it also “didn’t have enough scale to really spread things around.”

At the same time, Song felt they’d had enough success and built enough tools on the direct-to-consumer side that they could achieve “repeatable success” using “the same methodologies, over and over again.”

To do that, WellPath, Finn and future brands will take advantage of products and teams developed within Innovation Department, including DojoMojo, a software platform that allows brands to “barter” audience from one another — a much more affordable alternative than continually spending on digital advertising to acquire new customers.

The startup has also created a number of lifestyle newsletters with a collective 600,000 subscribers under its Valyrian Media umbrella. Song said that means Innovation Department should have a pre-built customer base whenever it launches a new brand, and that the company can test customer interest “before we’ve even decided on a new product or idea.”

Behind the scenes, Song said Innovation Department will have team members focused exclusively on the growth and operations of a single brand, while sharing resources when it comes to things like engineering, design, finance, legal and human resources.

He acknowledged there have been some challenges during the pandemic, but there were enough “redundancies” in the supply chain that WellPath could continue to fulfill orders. At the same time, he said that as “a health and wellness-focused business that only distributes online in a time when everyone became very focused on health and wellness, we definitely saw that lift,” with revenue increasing 400% year-over-year.

Looking ahead beyond WellPath and Finn, Song said he plans to launch another brand next year, before gradually increasing the pace of launches.

The company’s relatively methodical, cost-conscious approach feels like a real contrast with many other direct-to-consumer brands. Song said he quickly decided that the route of high-profile D2C companies, which involved raising enormous sums of capital to fund aggressive user growth, did not offer “a viable path towards success.”

“In no way am I saying, ‘Ha! Shame on you,’ ” he added. “If the economy was still cranking and things were still going well, maybe a lot of those businesses would get more funding and break through.”

Still, Song suggested that Innovation Department has benefited from the fact that “my co-founder [WellPath CEO Colin Darretta] and myself, being finance individuals first, have always been focused on cash flow and managing towards profitability.”

The funding comes from Long Light Capital, Synergis Capital, Ambridge Capital, Ryan Freedman of Corigin Ventures and Carter Reum of M13 Ventures.

“What the Innovation Department team has developed is hugely impressive, especially their approach to building and creating wholly-owned brands and their understanding of what today’s customers are really looking for,” Reum said in a statement.

Startups – TechCrunch

Portobel turns food producers into direct-to-consumer businesses

A startup called Portobel is working to help food producers shift their businesses so they can support direct-to-consumer deliveries.

Portobel is backed by Heroic Ventures and led by Ranjith Kumaran, founder or co-founder of file-sharing company Hightail (acquired by OpenText) and loyalty startup PunchTab (acquired by Walmart Labs).

Kumaran told me that he and his co-founders Ted Everson and Itai Maron started out with the goal of improving the delivery process by using low-cost, internet-connected devices to track each order. As they began testing this out — primarily with dairy companies and other producers of perishable goods — customers started to ask them, “Hey, you can monitor these things, can you actually deliver these things, too?”

So last year, the company started making deliveries of its own, which involved managing its own warehouses and hiring its own drivers. Kumaran said the resulting process is “a machine that turns wholesale pallets into direct-to-consumer deliveries.”

He also emphasized that the company is taking safety precautions during the pandemic, ensuring that all of its warehouse workers and drivers have masks and other protective equipment, and that the drivers use hand sanitizer between deliveries.

Portobel warehouse

Image Credits: Portobel

Portobel currently operates in the San Francisco Bay Area and Los Angeles/Orange County. Kumaran said the COVID-19 pandemic has only accelerated the demand for the startup’s services, with the number of households it serves tripling since April.

That might sound a little surprising, since supermarkets were basically the one store that customers are still visiting regularly. Plus, there are a range of grocery delivery options.

However, Kumaran suggested that the D2C model is better for both producers and consumers. Producers get recurring orders for larger packages of food. And for consumers, “If you buy straight from the wholesale producer … everything’s in stock.”

As for delivery, he said that when you buy your groceries online, things are being packed and dispatched at your local store.”

“All those things about selection and availability, put those aside — the modern grocery store is not set up for efficient e-commerce delivery,” he added. “They need to block the aisles to pick up product, there’s no dedicated place to dispatch deliveries. That’s kind of why, if you’ve tried [grocery delivery], there are unpredictable delivery windows. It’s a challenge for these guys to scale online.”

Portobel’s customers include San Francisco-based grocery company Moo Cow Market. In a statement, Moo Cow founder Alexandra Mysoor said, “The pandemic has propelled retail as we knew it into a new wave, blending and merging all past and current forms of commerce. That’s where companies like Moo Cow Market enter and can scale and grow thanks to services like Portobel.”

Startups – TechCrunch

This Entrepreneur Shares Key Takeaways From Launching Her Direct-to-Consumer E-Commerce Brand

As a child, I watched my mother’s generation attempt direct-to-consumer business in a, shall we say, clunky fashion. They held Tupperware parties and loaded up the car with Avon deliveries. Before I knew what direct-to-consumer was, I wasn’t interested. However, technology has changed virtually every aspect of business in this day and age—and revolutionized the direct-to-consumer (D2C) business model as we know it.

With blogging and social media offering easy ways to build awareness, and online shopping giving customers the ability to purchase a product or service virtually, reaching consumers and making sales is now scalable and seamless.

A recent study by eMarketer found that there are over 400 true D2C brands. When I launched Cali Raw two years ago, I knew I wanted it to be a D2C company. I had worked in many aspects of B2B businesses, and I wanted to challenge myself and try something new.


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Direct-to-consumer offered the following benefits for my business:

Benefits of direct-to-consumer e-commerce

One of the biggest advantages for entrepreneurs in the D2C space is the ability to control all aspects of the customer experience.

If I were to sell our raw dog food through a big-box pet store, I’d lose control of how the product is stored and how educated salespeople are to answer customer questions. Selling direct allows me to employ very well trained, knowledgeable staff, control the supply chain and ensure that customers have a personalized experience.

Challenges of direct-to-consumer e-commerce

If you don’t have prior experience in D2C, expect a steep learning curve. One of the biggest challenges novice entrepreneurs face is building and managing a company while executing day-to-day at the same time. For me, it felt like going to grad school while holding down a full-time job.


Related: How Your Brand Can Adapt to Rapidly Changing Consumer Needs with E-Commerce

Based on my own experiences in the D2C space, these are the things I believe are four key areas where anyone looking to launch a D2C business needs to focus:

SEO

As a D2C business, your website is your lifeline. I originally spent a lot of money outsourcing our website optimization until I realized that no one knew our customer avatar and keywords better than I did. Trying to teach someone proved problematic, so I delved into learning everything I could about SEO. You may find you’ll save money and have better results if you keep website optimization in-house.

Automated marketing

I’m a big fan of automated email marketing throughout all points of the sales funnel. I also use it for surveys to help me continually evolve our customer profile and make sure the business is giving our customers exactly what they need. The key advantage to automating this process is that it allows you (the business owner) to focus on what you do best—running the business!

Otherwise, communicating with customers, prospects and other important audiences would constantly be pushed aside for more pressing day-to-day business issues.

UX design

UX (user experience) design is critical to the D2C process, and is an area everyone in the space should invest in.

All brands hope to elicit customer satisfaction and loyalty, and D2C companies must design easy-to-use interaction through their online storefront. A UX design expert will know how to build functionality for your site, as well as how to educate and inspire customers while building an emotional connection, as well.

Your digital storefront is everything, and it must be user friendly. Getting outside help from a UX expert is one of the smartest investments I made.

Content is king

This is a phrase most of us have heard, but we should all know that our web content can take several different forms:

  • Providing education to your customers
  • Sharing case studies and client testimonials
  • Highlighting media coverage
  • Offering FAQs, bios of key employees, company history, etc.

And, all of the above forms of content must feature an attractive layout, photos, and an easy to read font.

Providing several angles through which to see your business, its values, and third-party validation helps enhance customer loyalty, and also assists prospective customers, media members and potential partners to be more confident in your brand.

Providing information to the world, combined with links to other reputable websites, builds that relationship and also helps your SEO. It’s a win-win situation.


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Conclusion

Thanks to innovations in technology, creating a direct-to-consumer brand is allowing more and more aspiring business owners the chance to make the dream of entrepreneurship a reality by lowering many traditional barriers to entry for startup brands.

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