Brian Bustamante-Nicholson, a consumer goods investor at downtown-based Greycroft, has a unique take on early-stage investing. Consumer goods can get to market and start making revenue far faster than enterprise-focused companies, allowing for less reliance on late-stage funding than other capital-intensive funding sectors, he said.
Why have you chosen to set your sights on seed-stage and early-stage companies?
We’re an entrepreneur and investor-led fund. My partner Katherine Power is an incredible entrepreneur who has started several successful consumer brands. I’ve been investing in the space for 15 years. Collectively, we believe we have a level of experience and pattern recognition that allows us to identify very early on, and then support, what we believe are the breakout brands of tomorrow.
Can you explain how factors like location, risk appetite and sector preference played into your decision?
We’re consumer investors and we look for companies exhibiting the first signs of product-market fit through retail sales velocities, social engagement and repeat purchase behavior. From a geographic perspective, we’re agnostic and feel comfortable investing globally, though we feel the United States has been at the forefront of consumer products innovation for some time.
How do you define pre-seed, seed and early stage? What benchmarks do startups need to meet in order to be classified as each?
We define pre-seed and seed as businesses within one-to-two years of being founded probably doing just a few million dollars of revenue. At this stage, it’s really about identifying exceptional founders executing against what we believe is a really big market opportunity. With early-stage businesses, we’re looking for businesses that are growing exceptionally fast (300%-plus) and have demonstrated business model durability in the sense of margin structure and capital efficiency.
Investing in nascent companies that don’t have the reputation or revenue of developed startups is rather risky. How do you go about determining what investments are the right ones?
When we invest this early, we look for opportunities where we have an unfair advantage – either through past investments we’ve made in the space or through our collective networks’ experience operating in the space.
What is the riskiest investment you’ve ever made? How did it play out?
The riskiest investment I’ve made was in a direct-to-consumer healthy kids meal service.
I wasn’t a parent at the time, so I didn’t understand the business really needed both customers to approve of the meal – the kids and the parents. Turns out, we didn’t have both.
What late-stage or exited company are you proud to say you’ve invested in early? What about that company made it worth the investment?
The investment I’m most proud of was in an apparel brand called Reformation headquartered in downtown Los Angeles. They built an incredible brand, centered around sustainable fashion and built a manufacturing operation in the garment district that served their employees very well.
What role do seed-stage and early-stage investments play in the larger startup community?
Seed-stage and early-stage investments have started the flywheel of some of the biggest venture-backed success stories like Meta, Spotify and Uber. It’s a critical part of the ecosystem that paves the way for companies to innovate into big markets and achieve massive scale.
What role do you see later-stage venture firms playing in bolstering the innovation ecosystem?
Later-stage firms help promising startups reach their full potential by bolstering and professionalizing management teams. Importantly, their investments help validate those businesses with their customers and potential acquirers or public market investors. They’re a critical part of the ecosystem.
As the startup community in Los Angeles has gotten more developed, and as startups globally blurred geographic lines since the pandemic, how has your brand as a Los Angeles venture firm evolved?
Greycroft has built what we believe is the strongest multi-stage investment firm in Los Angeles. We’re just getting started.
