WHY CONSUMER · STRUCTURAL ADVANTAGES

There is a je ne sais quoi with brands so palpable that GAAP accounting has a word for it: goodwill. It is the asset that explains why a $20 candle is not the same as the wax inside it. We are looking to buy or transform brands where the sum is greater than the parts. Buffet said gross margin is the yardstick of competitive advantage. Brand is the esoteric advantage that shows up in pricing power, customer loyalty, and repeat purchase behavior.

Consumer brands scale more easily than software. To a point. Consumer is not 99% gross margin, but neither is software — 99% GM SaaS is a myth. Klaviyo, thoroughbred SaaS: 75% GM. Estée Lauder at $15B revenue: 76% GM. My first acquisition, Pacific Spirit, was 80% GM at purchase, now 85% with economies of scale.

What is different is the nature of the growth. In consumer you can 10x the business and it fundamentally does not change shape. At Tuft & Needle we added $100M of wholesale revenue with one additional hire. Software companies undergo contortions to grow that fast — codebase surgery, enterprise pricing overhauls, sales org restructuring — and are unrecognizable on the other side.

People have bought physical goods for hundreds, even thousands of years. That will continue. The consumer sector has market-cycle exposure like every category — recessions hit all sectors hard — but it is not hype-cycle cyclical the way venture, AI, crypto, and SaaS multiples are.

This means fair entry multiples, and fair exit multiples — increased by growth and velocity, not hype. This makes the game about execution, something I know I can win at, not luck and timing. There is money to be made in pump-and-dump. Just look at NFTs. I want no part of it.

I love brands. Not just what they stand for — the whole stack: the visual language, packaging experience, storytelling, factory tour, customer experience pitch, and everything in between. It's what I do for fun.