Exclusive: Investors Bet on Brandless as the Next Procter and Gamble for Millennials
Consumer packaged goods like diapers, shampoo, non-perishable foods and more represent a massive $770 billion industry (excluding tobacco) in the United States. Over the past few years, a number of startups have been trying to upend parts of this market, including Dollar Shave Club and The Honest Company.
A new entrant is debuting Wednesday, called Brandless, with backing from a number of well-known Silicon Valley investors, Fortune has learned exclusively.
Founded by Sherpa Capital investor Tina Sharkey and serial entrepreneur Ido Leffler, Brandless is pegged as a new marketplace for everything from toothpaste to olive oil. It just announced $16 million in funding led by Redpoint Ventures with Cowboy Ventures, Slow Capital, and Sherpa Capital all participating.
According to its founders, Brandless owns, creates, and sells all of its own products. All food and items sold on Brandless are touted to be either natural and/or organic, and the site promises simplicity in choice of items. For example, Brandless might sell one type of olive oil instead of five.
“Consumers want new options,” says Leffler. “They don’t necessarily care about buying Heinz or Tide.”
Every item that is sold on Brandless is the same price, which the company did not disclose but said it was in the single digits. Items don’t have a particular brand, and are identified by exactly what they are (i.e. toilet paper). There is an Amazon (AMZN) Prime-like membership fee, also not disclosed, but shoppers don’t need to be members in order to buy from the site. The membership will provide shipping benefits and discounts to outside services.
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Although Leffler and Sharkey say that they are not trying to compete with Amazon, the e-commerce giant that makes billions each year from selling everything from Charmin toilet paper to Pampers diapers, inevitably the startup will compete with the Seattle-company. Others have tried to go head to head with Amazon in the past few years. Marc Lore, who previously founded Amazon-acquired Diapers.com, debuted Jet.com in 2015 to take on Amazon, and raised hundreds of millions from investors. Lore sold Jet.com to Walmart earlier in 2016 for $3.3 billion.
Brandless, which currently employs around 12 people, including former Target executives. Sharkey will leave her role as an investor at Sherpa Capital at the end of this year, and will be the full-time CEO of the company, with Leffler joining as chairman.
Investors like Redpoint’s Jeff Brody, who has backed vacation home rental marketplace HomeAway and and expense giant Concur, says that he was convinced by Sharkey and Leffler within five minutes of hearing their first pitch. “They mapped out the future of the CPG industry and deconstructed it in way that I realized the opportunity there was to create a new brand and category,” says Brody. “The vision is massive and these are the right people to execute it.”
“The majority of new consumers, including millennials, say that they don’t want to buy the same products that their parents use,” explains Sharkey. But at the same time, these consumers want authenticity and quality, she adds. That’s paved the way for companies like Dollar Shave Club, which was just acquired by Unilever for $1 billion. Unilever (UL) also just bought sustainable household goods company Seventh Generation.
Many large corporations selling consumer-focused products add extra costs to the price of items, making them more expensive then they need to be, according to critics. Sharkey and Leffler refer to this as the “brand tax,” which they say isn’t added to the items they are selling.
Although Brandless is not marking up items with this “brand tax,” the company claims that it will still be able to make money from each product sold. But these margins will be taken at a much “fairer price,” says Leffler, than other outlets.
Brandless will launch in the spring of 2017 with the ability to ship in the U.S. from distribution centers and warehouses in the Midwest as well as on the East and West coasts.