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The DTC Brands IPO Story

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The last five years, 2017-2021, has been a 'coming of age' period for Direct to Consumer (DTC) commerce. Digital native brands have had to innovate and adapt their (initial) digital-only business models in order to grow, while DTC as a strategy has been iterated and has evolved to mean both a business model and a channel strategy. In the same period, the DTC space saw a flurry of M& as well as IPO activity. At least 15 DTC companies went public in the last couple of years. These brands had started out as Digital Natives and still have significant revenues via their own online channel. However, many of these brands were no longer "digital-only", expanding their presence to other sales channels such as retail partnerships, own physical stores, and/or selling via marketplaces.

Using data from S-1 filings (prospectus) filings we analyzed these brands to understand the segment better and what changed during the pandemic. This report summarizes our findings from our study.

What is a DTC Brand?

We've classified the brands as Digital Natives (almost all sales from their own digital channel), DTC brands (most sales from their own digital channel and own physical stores), and Omnichannel brands (significant indirect sales in addition to direct digital channels).

Number of DTC Brand IPOs in 2021 & 2022

There were nine IPOs in 2021 with at least three of them in August 2021 alone. Seven of these IPOs were in the Fashion and Apparel category.

How long does it take for DTC brand to go public?

Digital natives took significantly less time since inception to go for an IPO than brands with physical store presence.

Digital native and DTC brands also attracted relatively higher valuations than omnichannel brands.

DTC brands have taken longer to go public due to the time shift that has happened due to the pandemic.

Post-pandemic IPO brands also attracted relatively higher valuations while accumulated losses reduced significantly. While post-pandemic IPO cohort companies seem to have taken longer to go public, the average revenues at the time of IPO were lower than the pre-pandemic IPO cohort by 42%.

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DTC Marketing Costs

DTC brands with physical stores have built a relatively bigger customer base than digital natives and omnichannel companies.

We also observed marketing expenses and cash burn ( operating cash flows) to see how they fared .

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Expense comparison of DTC brands before and after IPO

A few DTC and digital-native brands have completed at least one business cycle after IPO. While there was no discernible change in marketing expenses before and after their respective IPOs, few have improved upon their accumulated losses.

Notable among companies with high marketing expenses are SmilesDirect Club which is trying to build a niche market with a single SKU (3D printed clear teeth aligners) and Casper, the mattresses brand. Both these brands have fewer SKUs and have had a high marketing expense before IPO.

List of DTC brands that went for IPO