Where's the Money?
Why Consumer Founders Need a New Capital Stack (And What We’re Doing About It)
It’s no secret: venture capital has dramatically shifted over the past few years. In the post-ZIRP (zero interest rate policy) world, capital is more selective than ever—and the ripple effects are playing out in consumer packaged goods (CPG) right now.
In this environment, top-line growth at all costs isn’t the goal line. Capital efficiency, margin profile, and profitability now dominate investor conversations - even at the early-stage. The result? Most generalist VCs have deprioritized CPG altogether, redirecting their capital into SaaS and AI.
But while capital into CPG has pulled back, founders haven’t stopped building. Nor has consumer demand disappeared. In fact, for founders building exceptional brands with real community, product differentiation, and retail potential, the opportunity is still very real. It just requires a very different approach to capital.
Here’s what’s happening—and how we’re navigating it.
The Pullback: How Venture Capital Moved On from CPG
We’re seeing the funding stack reset in real time:
Seed rounds: Early-stage consumer investors now regularly require $1M–$3M+ in trailing sales. Some won’t invest at all unless a major retail PO is already secured (Target, ULTA, Sephora, Walmart, Whole Foods, etc.)
Source: XRC Brand Capital Fund quarterly benchmark reportsSeries A: Thresholds have moved up to $3M–$10M in sales, with proven retail velocity required. The 2024 median revenue for a Series A company categorized as “Personal Product” was $7.5M according to Carta.
IPO & Exits: The public markets have never been particularly kind to consumer brands — and recent history has only reinforced that reality. Recent high-profile IPOs like Oatly, Beyond Meat, and The Honest Company made their public debuts after 8–10 years of private capital support — through SPACs.
Because of this, the strategic acquirer remains the primary path to liquidity for most growth-stage consumer brands. These acquirers increasingly wait for brands to reach ~$80M–$100M in annual revenue, paired with 20%+ EBITDA margins, before seriously engaging in acquisition discussions.
👉 All of this trickles down:
Early-stage consumer managers need to produce more “hits” in order to produce the similar return profiles and be competitive relative to the broader private market asset class. For founders without major personal wealth or insider networks, this creates significant capital gaps at the earliest stages.
At the same time, building has gotten harder:
CAC is up dramatically.
DTC channels are more expensive post-iOS14.
Wholesale can require meaningful upfront investment in inventory and retail activation.
The end result: concentrated venture dollars to a select few that can meet tougher fundraising milestones, and limited margin for error.
And yet ironically, strategics may be the ultimate losers—because they’ve never been great at building brands from scratch. Without robust early-stage capital, much of the innovation pipeline they depend on simply won’t exist.
Founders Need to Revise their Capital Stack
While the venture environment has gotten tougher, capital hasn’t vanished entirely. It’s simply shifted. Founders who understand the nuances of today’s capital markets—and who build businesses with the right fundamentals—can still attract meaningful funding.
Here’s a breakdown of where capital still exists today, and what founders need to know.
🧑🤝🧑 Individuals: Where Most Consumer Rounds Still Begin
Friends & Family, Angels, and Angel Funds
For most founders, the first check still comes from personal networks—especially for those without institutional access. But even these investors have pulled back in today's market, reallocating to liquid investments or sitting in cash amid ongoing uncertainty.
🏢 Institutions: CVCs are Pulling Back Amidst Mixed Results
Corporate Strategics
Large CPG corporates (P&G, Unilever, L'Oréal, Nestlé) have historically played an active role in early-stage consumer. Today, most are pulling back — many corporate venture arms (JetBlue Ventures, SAP.io, ZX Ventures) have shut down entirely. Others (like Unilever) remain active, but often more selective.
At the root of it: corporate venture just isn’t built for early-stage investing.
Many CVC teams are staffed by internal hires with limited venture experience, asked to learn early-stage investing on the job — but expected to deliver meaningful outcomes within 12–24 months. That’s fundamentally incompatible with an asset class where the best companies take 5–7+ years to mature.
The politics don’t help. When a sponsoring CEO or division head leaves, the whole mandate can evaporate overnight.
And structurally, many CVCs can’t make decisions independently — investments often require multiple layers of corporate leadership sign-off, slowing down processes and introducing non-economic decision-making into early-stage deals e.g. MONTHS long DD processes.
That said, there’s a distinction worth noting:
Funds with corporate affiliation but true investment independence — like Unilever — where the fund operates more like a standalone institutional manager, without corporate strategic entanglement — tend to have far more success.
The trouble usually starts when the fund requires corporate alignment, strategic linkages, or business unit buy-in to deploy capital.
Venture Capital Funds
This has been covered at length, by us and others, so we won’t belabor it here. Consumer-focused funds remain the primary institutional capital source for CPG. Generalist VCs have largely exited the category, with a few exceptions that tend to drive inflated valuations when they do participate. So honestly, we wouldn’t bother with them.
🧾 Non-Dilutive Options aka Debt: Increasingly Relevant
Raising equity alone to scale a CPG brand is highly dilutive — especially when so much of that capital often ends up funding working capital, inventory, and marketing spend that doesn’t justify giving up long-term ownership.
We believe high-growth brands should structure their capital stack differently — blending equity and debt to preserve as much founder equity as possible. That’s why our investment model intentionally combines both equity and working capital solutions — giving founders the growth capital they need, while minimizing unnecessary dilution (more on that later…)
Merchant Cash Advances (MCA)
Fast access to working capital based on predictable DTC sales.
Bank Debt / Unsecured Loans
Today, most lenders require that 25%–30% of any equity round be raised alongside debt. This “equity-first” approach provides lenders with downside protection. Additionally, the more years of profitability a company can show, the lower rates can be.
Factoring
Factoring is best suited for wholesale-driven brands—particularly those managing large retailer POs with long lead times, such as products requiring testing or regulatory approvals (e.g., SPF, OTCs). If a significant portion of your revenue comes from wholesale, factoring can help smooth out cash flow without taking on equity or traditional debt.
How it works:
A factoring provider advances a percentage of your invoice—typically around 80% - 95% upfront—as soon as the PO is issued or delivered. Once the retailer pays, the full invoice amount is wired directly to the factoring company, which then deducts its fee (typically 1%-4% per 30 days) and sends you the remainder.
Factoring isn’t cheap, but it can be an effective tool to unlock working capital quickly, especially in the early growth phase when cash is tight and purchase orders are large.
Some of the well-known lenders in the space include Dwight Funding and Rosenthal & Rosenthal.
Grants
Yes—free money still exists. We launched a non-dilutive grant with SHOPLINE, designed specifically for early-stage consumer founders.
⏳ Reminder:
Applications for our current SHOPLINE grant close June 25th; final decisions announced by June 30th. Apply here.
Early Stage Capital Options: Pros & Cons
The New CPG Capital Stack: Venture Capital Alone Won’t Get You There
Raising capital as a CPG founder today requires more than a great product and compelling story. Investors are looking for proof, not just potential:
✅ Consistent month-over-month sales growth
✅ Strong repeat purchase behavior
✅ Established wholesale relationships
But equally important: founders need to stop thinking that venture capital alone is the solution. Pure equity raises often lead to significant dilution — and many founders wake up years later owning far less of their business than they ever intended.
This is where a smarter capital stack becomes critical.
Before raising, founders should run real financial scenarios—not just on how much money they need, but on what structure (equity vs. debt vs. non-dilutive alternatives) will best support growth, protect ownership, and maintain the operational cash flow needed to service any debt obligations.
The right combination of equity and debt can maximize growth, minimize dilution, and still enforce sound business discipline.
In this market, capital is still available — but it’s more selective, more sophisticated, and requires founders to think strategically not just about how much they raise, but how they raise it.
Why We Built Brand Capital Fund
This is exactly why we created Brand Capital Fund — to meet founders where they are in today’s environment.
We combine:
💰 Equity capital to fuel growth.
📦 Working capital to fund inventory.
📉 A structure designed to minimize dilution for founders—and for us—through exit.
The capital stack has shifted. The way we invest has too.
Want to learn more? Reach out to us!
PS:
For more data on how today’s top-performing consumer brands are navigating this market, check out our latest Benchmark Reports.
⏳ Reminder:
Applications for our current SHOPLINE grant close June 25th; final decisions announced by June 30th. Apply here.
💡 Pro tip: If you’re reading this in Gmail’s Promotions tab, just drag the email to your Primary tab and click “Yes” when asked — that way you won’t miss future insights from the XRC team.