The vast majority of VC-backed public DTC e-commerce businesses are now worth less than they have raised. In general, DTC has been a very bad investment for equity investors.

Here’s just a sample of the public DTC businesses who have raised more in equity capital (including at their IPOs) than they are currently worth:

  • Rent the Runway (Clothing rental). Raised: $683mm. Market Cap: $173mm. 0.25x Market Cap/Raised
  • Smile Direct Club (Teeth aligners): Raised: $1.739B. Market Cap: $155mm. 0.09x Market Cap/Raised
  • Allbirds (Footwear): R: $506mm. MC: $187mm. 0.37x MC/R
  • Blue Apron (Food): R: $692mm. MC: $38mm. 0.05x MC/R
  • Honest Co (Eco-friendly products): R: $916mm. MC: $155mm. 0.17x MC/R
  • Grove Collaborative (Bathroom products): R: $969mm. MC: $87mm. 0.09x MC/R
  • Boxed (Wholesale club): R: $700mm. MC: $1mm. 0.00x MC/R

Some businesses are still worth about ~2x what they raised:

  • Warby Parker (Eyewear): Raised: $535mm. Market cap: $1.22B. 2.28x MC/R
  • Figs (Scrubs): R: $656mm. MC: $1.1B. 1.83x MC/R

From what I can tell, only 3 businesses have done better than this:

  • HelloFresh (Food): R: $746mm. MC: $4.44B. 5.58x MC/R
  • Wayfair (Furniture): R: $705mm. MC: $3.85B. 5.46x MC/R
  • Hims (Telemedicine): R: $513mm. MC: $2.41B. 4.70x MC/R

The biggest winner is HelloFresh, which is worth about 5.6x as much as it raised.

Of course, even if a business is worth less than it raised, its earlier investors could have made money because they invested at low initial valuations. That means, however, that later stage investors are significantly in the red.

It’s worth emphasizing that the above list represents among the most successful DTC investments. For every public DTC business, there are at least 10x which shut down, are limping along today at large write downs, or sold but at a big loss.

Still, this shouldn’t necessarily be surprising. VC operates according to the power law, meaning the success of a small number of outsize winner investments is meant to outweigh the losses from the many more investments which fail. So of course most DTC businesses–even the ones that made it public–have been poor investments. That’s what you should expect.

But here’s the core issue: there are zero outsize DTC winner investments to make up for the bad investments. If the biggest winner is only worth 5.6x what it’s raised, that’s not close to enough to make up for the others.

This is not true with other types of VC investments, even ones that went public recently. For example:

  • Shopify (a B2B business serving DTCs, not DTC itself): Raised $253mm. Market cap: $61.8B. 244x MC/R
  • Shockwave Medical: Raised $245mm. Market cap: $10.6B. 43x MC/R.
  • Square: Raised $744mm. Market cap: 36.6B. 49x MC/R.

And there are many more examples of companies which are worth 40-100x+ what they raised. But none of them are VC-backed DTC. And that’s why without big winners, DTC has been a very poor strategy for equity investors.