Let the at-home Workout Race Begin

I’ve always had a strong viewpoint that digitally native vertical brands are a dime a dozen and those who will have successful exits are the ones who are vertically integrated, own manufacturing, strong defensible positions and/or are durable/consumable businesses built on recurring revenue and more enticing LTV metrics.  With the recent news on Lululemon acquiring Mirror for $500 million it proves there is still an appetite for strategic buyers to pay premiums for DTC startups. In this case, I estimate LULU paid 5x-6X revenue which is a phenomenal outcome for the founders and investors. LULU was already a minority investor in the company which gave them intel into the business that other competitors likely didn’t get. Why corporate VC gets a bad rap sometimes, a good strategic investor can bring a lot of value. 

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Stock Buybacks Aren’t Always Good

Less than half of the S&P 500 invest any money in R&D. Instead, they are pumping dollars into stock buybacks that ultimately provide no real tangible value to the productivity of the enterprise (sorry Warren). I’m convinced this is stifling innovation and giving startups more room to eat their lunch. Wall Street has no patience when it comes to waiting around to see innovation bare fruit which can sometimes take 4+ years. The unfortunate reality of this is management must then live by a quarter-to-quarter clock which hurts internal innovation. This myopic perspective is further reinforced by hedge funds and activist investors who are chasing short term gains. Allocators of capital need to recognize that management has to be given more leeway to invest for the long run. If they don’t, a heavily funded lean startup will be glad to take their customers.

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