Kindly do not forward as we’ve included confidential portfolio information below. If there’s someone that you believe should be part of the Palette family, we’d love to be introduced.
Hi there!
Thank you for being part of the Palette ecosystem. For those of you newer to our community, our mission is to break down traditional inefficiencies that exist in venture to build a fund that feels like family—focusing on meaningful connection and value accretion for everyone involved.
We invest in consumer value shifts at Seed across human flourishing, future families, thoughtful consumption, innovative technologies and the commerce stack.
With the official launch of our fund and first investment underway (more details below), we’d like to share the latest from our world. We’d love to hear from you, so please hit “reply” and share your update.
Let’s not beat around the bush. “Consumer” has become something of a bad word in venture capital circles. Recent data from Carta showed that just 7.1% of Seed capital raised last year went to consumer startups, versus 14.3% in 2019.
While it has certainly made for a difficult fundraising environment for early-stage founders, as investors, this makes consumer a great place to be investing. The “tourist” investors have withdrawn. Valuations are deflating. Rounds have slowed down and spaced out. And founders are being more thoughtful about how they deploy investors’ cash. All this against a backdrop where strategic and financial buyers remain hungry for ownership with lots of dry powder ready to deploy. In the first half of this year, we already see M&A activity tracking 15% ahead of 2023 both in terms of deal count and deal value, with corporates leading the way with double-digit growth. Great news.
If we recall, venture is a business that has been built on being contrarian and not following the herds. So as far as we’re concerned, we’re ignoring the noise and doubling down on the sector that has consistently accounted for 70% of GDP and has resulted in some of venture’s biggest winners.
The problem: the average investor too narrowly defines consumer to focus on brands (competitive and crowded) that sell physical inventory (expensive use of capital). However, at Palette, our definition is much wider: consumer encompasses businesses that sell to consumers (b2c) and those that rely on consumer spending (b2b2c), with solutions that can straddle physical products, digital solutions or tech innovations.
We focus on consumers paint points that give rise to massive solutions, including obvious household names like Instacart (facilitates grocery delivery; $9bn market cap), Faire (powers offline retail, $12.4bn valuation), Airbnb (redefines the travel stay, $92bn market cap) and Canva (democratizes graphic design, $26bn valuation). What all these businesses have in common is an underlying technology that facilitates and accelerates their adoption, and thereby justifies the use of venture as the right source of investment capital.
First Close: signed and sealed with strong human capital
We are officially in business. Our first close is very much powered by the human capital we often refer to: our founder and operator peers; family offices built on the back of entrepreneurial success; and a strategic corporation. A solid start to the Palette ecosystem built on a foundation of global community, meaningful connections and tangible, actionable support. If you’re interested in learning more about the Palette family, please reach out.