by Susie Harbour, VP at Volition Capital
January’s ICR 2020 conference sustained its reputation as one of the largest investment conferences that focuses exclusively on consumer companies.
The conference is unique in that it’s attended by the entire spectrum of key players: private and public institutional investors, industry participants, and observers, and sell-side bankers and equity research analysts. This year, more than 200 public and private companies presented to this diverse group of conference participants.
Themes at ICR 2020
One dominant theme I noticed at the conference was a reinvigorated focus on profitability among companies of all sizes. This isn’t a surprise considering the challenges faced by recent consumer IPOs (and near-IPOs) that had failed to achieve profitability, but it represented a stark contrast to the exuberance of last year’s conference. ICR historically has been a forum for companies to present their stories to investors ahead of an upcoming IPO, but for many this year that wasn’t necessarily the aim. Among larger private consumer companies, there often was no urgency to go public. Meanwhile, smaller growth-stage companies touted their path to profitability and shift to a more disciplined expansion trajectory, rather than display the rapid-growth headlines that were common in past years.
For those of us at Volition, it has been fascinating to watch this shift – virtually overnight – to a business philosophy much closer to our own. We have always had a discipline for capital efficiency and focus on unit economics. As investors, we look for businesses that can grow sustainably and thoughtfully. This might mean that a company spends aggressively on marketing when it has at last identified a loyal consumer set. Or, it could also mean pursuing a more conservative customer acquisition approach, which delivers more gradual growth but with more favorable unit economics and customer attachment. We are excited to engage with companies that can grow with a long-term view and are keenly watching the market to see if the recently revived penchant for profitability continues.
Rise of CBD Despite Fluid Regulatory Environment
I observed that one relatively new sector was heavily represented at this year’s conference: Cannabis and CBD. The companies in this space have achieved impressive growth in a short amount of time. Volition will be continuing to watch these developments from the sidelines for now. Clearly, the regulatory environment will be evolving and current challenges could turn into big opportunities for industry service providers that can crack the code. CBD is trickier because it’s now playing the role of a hero ingredient across many CPG categories, and investment interest in the category is likely to continue near term. However, longer-term, it remains to be seen whether this trend will endure and attract ongoing consumer interest or whether it will turn out to be a fad. We lean towards the latter scenario but will watch where the dust settles when the high subsides.
Although a single conference can’t define industry trends, here at Volition we’re encouraged by renewed attention to profitability and capital efficiency. These factors underpin what we believe is a smart philosophy for companies whether they’re dreaming of an IPO or are wide awake and working to strengthen their companies for whatever the future might hold.
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Image Credit: ICR Twitter