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BFD Expert Voices - Retail Deals

BFD Expert Voices

Bonobos co-founder Andy Dunn is ushering in the next wave of startups with his angel investing firm Red Swan Ventures and his new social app.

Why it matters: Dunn helped pioneer Bonobos before its strategy became a playbook for today's newest e-commerce brands, Kimberly writes.

Why we chose the restaurant: As part of our 1 big meal series, we ate at Keens Steakhouse in Manhattan, a local haunt for his Bonobos team in the early days.

What we ate: We both got a steak salad for lunch and a side of creamed spinach and fries.

This interview was edited for clarity, style and length.

What is it like to return to Bonobos as an adviser?

"It's amazing to be engaged but to not have to worry so much about being the CEO. It's like you're just worried about the numbers and, like, the stress married to the joy of building a brand. And now I feel like I just get the joy.

I'm not trying to sell pants, which I was for a long time, but now be more of a mental health advocate, in part to the Bonobos universe.

I have a new app that I've been working on called Pie. The mission is to end the loneliness pandemic. And one of the cool things about Pie is we can kind of quickly make a plan for an in-person thing, and then use social media."

Do you plan to build your new app the same way you did with your first company?

"Funny that you raised that because we are at a moment right now, where we're starting to try to get the initial kernels of a movement going. We probably have a few 100 users in each of our key markets focused right now in New York, the Bay Area, and Chicago, where I live now.

It feels very similar. There's like an early cohort of true believers who are intrigued by it. It's kind of pounding the pavement. We're doing a lot of events, spending a lot of time in front of people, recruiting what we call Pie ambassadors.

It very much is that groundswell that reminds me of having an apartment at 17th and Irving [in New York] and trying to sell pants out of the back."

How important is the strength of your network to a startup's success?

"The challenge is that we're all constrained by our friends, the number of friends that we have, how often they're doing stuff, and how many we have where we live. And it's not enough.

That was a big part of Bonobos. It was not the person that would reject me for an investment, which was like everyone. But it was the conversation of like well, who should I talk to about this? Like who in your network do you know that you think wouldn't have that challenge with it?"

What are the pandemic-era consumer trends informing the way you advise DTC companies today?

"I actually stopped investing in DTC brands even though at Bonobos we helped pioneer it. Unless, the brand was actually not committed to DTC as the primary engine but was instead committed to building a great brand where DTC would be a core business, but not the only business. Which means you've got to have a brick-and-mortar strategy.

I actually think that the retail store approach to channel diversification, away from e-commerce, is super hard because you've got to figure out a whole bunch of new stuff now — leases and operations and inventory management.

What I love to see now is brands that are focused on wholesale early to build out awareness, to get more leverage in their supply chain.

I'm seeing a lot more people who are wired to building profitable businesses sooner and focus on profits."

What are common mistakes you see DTC founders make?

"Overbuilding a team is a big one. Trying to build a team that does digital well, that does wholesale well, that does physical retail well, that does horizontal everywhere, from needing a customer service team to data science and technology to needing real estate people.

♟️1 fun thing: Dunn takes two to three lessons a week with a chess grandmaster in Chicago, whom he initially hired for his 3-year-old son, "which is pretty type A, I guess," he quips.

His son found it boring, so Dunn stepped in and got hooked.

1 big thing: Bonobos co-founder Andy Dunn slices some Pie

illustration of Bonobos co-founder Andy Dunn in front of a tablecloth print background

Illustration: Axios Visuals; Photo: Brian McConkey

Macy's (NYSE: M) received a $5.8 billion takeover offer from an investor group that includes Arkhouse Management and Brigade Capital Management, per multiple reports.

Why it's the BFD: It was only a matter of time. Macy's has been the occasional target of both activist investors, who've pressured the company to monetize its real estate, and other potential acquirers, Axios' Dan Primack writes.

By the numbers: Macy's has over 500 U.S. locations, and the $21 per share offer represents nearly a 21% premium to last Friday's closing price.

Reality check: The department store category remains deeply troubled and real estate has lost some of its luster.

💭 Richard's thought bubble: Leaks about Neiman Marcus and Macy's generating buyer interest set the stage for two potential sale processes in early 2024, injecting some life into a moribund retail M&A market.

The bottom line: "Its cultural significance outweighs its diminished size, owing to the annual Macy's Thanksgiving Day Parade and extravagant window displays at its stores in New York City around the holiday season." — Lauren Thomas, WSJ

2. The BFD: Macy's gets $5.8B takeover offer

Exterior view of the store during early morning Black Friday sales at Macy's Herald Square on November 24, 2023 in New York, New York

Marketing tech company Daydream raised a $2.5 million pre-seed round to help companies revamp search engine optimization, CEO Thenuka Karunaratne tells Kimberly exclusively.

Why it matters: With many customer acquisition channels becoming expensive or disintermediated, search engines have become an important vehicle.

Details: Daydream's investors include former Webflow executive Melissa Tan, Notion executive Lauryn Isford, former Survey Monkey executive Eli Schwartz, Basis Set Ventures and WndrCo.

Fresh capital will finance hiring and inbound and outbound marketing, Karunaratne says.

What they're saying: If you look at the major retailers, "they figured out an automated approach to really optimizing for search," Karunaratne says.

"When you have the introduction of AI, the possibilities for how retailers can reach users on search changes drastically."

How it works: Daydream identifies the type of product customers are seeking that's closely related to the service that the company provides and then automatically produces content to reach those users.

Daydream aims to automate the content performance monitoring, the search traffic tracking, and the continual updating of the content in hopes of getting the content "to perform better over time."

The company can take a product catalog, analyze product attributes and reviews, and automatically create listicle articles showcasing the top items in a particular category, for instance, Karunaratne says.

By the numbers: Daydream plans to reach around $1 million in ARR by the end of Q1 2024.

Context: Around 7.8% of digital marketing spending goes toward search advertising, while 8.5% goes toward SEO, according to a Gartner report.

The big picture: When people search "rentals near me," links to Airbnb and Vrbo typically populate. Similarly, Redfin and Zillow would likely pop up if users search "houses for sale near me."

"There's been enough examples of really successful tech companies that have used automated content creation to acquire a lot of users and use that as a primary growth marketing strategy," Karunaratne says.

"But until now, there hasn't been a product that's made it very easy to execute a playbook like that. "

What's next: Daydream will probably look to raise again next year, depending on how quickly it can acquire customer revenue, Karunaratne says.

Daydream's customers include SaaS players like Tome, Twingate and Mesh, and it plans to expand into e-commerce and retail over the coming months.

3. Daydream raises $2.5M for better SEO

Illustration of a search bar being illuminated by a spotlight.

👀 The week ahead: Keep your eyes peeled for a look into the FTC's second request process and a spotlight on Saks owner Hudson's Bay. 

❌ Sotheby's, the auction house owned by French-Israeli telecoms billionaire Patrick Drahi, is backing off plans for an initial public offering.

Bloomberg reported last year that Sotheby's was looking at a listing, hiring Goldman Sachs and Morgan Stanley as bankers.

"We are really enjoying operating as a fully private company," CEO Charles Stewart said in a Bloomberg TV interview. "That suits us well and keeps us focused on our mission."

🛍️ ByteDance's TikTok is investing $1.5 billion in a new joint venture to unite Tokopedia, the e-commerce business of Indian tech company GoTo, with TikTok Shop Indonesia.

TikTok will initially pay $840 million for its stake — about 75% — with the remainder of the $1.5 billion to be distributed over time.

GoTo's stake in the JV is 24.99%, which will remain fixed.

The venture comes after TikTok faced regulatory scrutiny over its wholly-owned unit TikTok Shop Indonesia.

Jakarta banned direct payments for online purchases on social media earlier this fall and TikTok was forced to suspend its e-commerce service in October to comply.

4. Retail therapy

Illustration of a shopping bag with the handle becoming a smiley face. 

Want more retail deals? Search the Axios Pro Deals Tracker beta.

• GlacierPoint, a Bronx, N.Y.-based portfolio company of Mill Point Capital, acquired Cool River Beverages, a Bronx-based specialty beverage distribution platform. www.glacierpointenterprises.com

• Hildred Capital Management is expected to buy the bankrupt baby brand Hello Bello, founded in 2019 by Kristen Bell and Dax Shepard, per Bloomberg. https://axios.link/47NKNZF

🚑 Partners Group agreed to acquire Velvet Care, a Polish maker of hygiene paper products, from Abris Capital Partners. www.velvetcare.com

• Palmex, a portfolio company of Wind Point Partners, has agreed to merge with Highlander Partners' Benestar Brands to form one of the largest providers of Hispanic and better-for-you salty snack products in North America. https://www.palmex.com/

• Nordic Seafood, a Danish subsidiary of Japanese giant Nissui, has acquired a majority stake in Netherlands-based fish producer Maxima Seafood. https://axios.link/3RkpQhO

• Straand, an Australian microbiome-centered scalp care brand, has raised about $2.6m from the Harvey Family Office and Unilever Ventures. https://axios.link/3NlbRY1

• Shiseido has launched venture fund Shiseido Long Term Investments for the Future Ventures targeting early-stage companies in the beauty and wellness space. https://axios.link/489IOyD

5. Retail transactions

• Randy Garutti will retire as CEO of Shake Shack after spending 24 years at the company. https://axios.link/3v0fkVo

• Allison Abraham plans to retire from the board of Beyond, formerly known as Overstock.com. She most recently served as co-chair alongside Marcus Lemonis. https://www.bedbathandbeyond.com/

• Vince Tyra was named CEO of Gildan Activewear, the Canadian apparel maker, succeeding Glenn Chamandy. https://axios.link/486Sk5s

• Michael Barkley, former Kind CEO, Alissa Hsu Lynch, a former Google Cloud executive, and Andrea Turner, a former logistics executive at Mondelēz, have been named to the board of Honest Co., effective Dec. 8. https://www.honest.com

6. It's Personnel

🥓 What we're eating: Kim had homemade cinnamon buns and beef bacon over the weekend.

✏️ Big thanks to newsletter editor Claire Rychlewski and copy editor Mickey Meece for today's edits.

December 11, 2023

1 big thing: Bonobos co-founder Andy Dunn slices some Pie