Twenty years ago, as social media and enterprise software still transfixed venture investors, the answer would have been an obvious no. But that changed in the early 2010s with the “direct to consumer” revolution, including companies like Warby Parker, Glossier, and Away that cut out the middleman and convinced VCs to treat them like Silicon Valley hotshots. 

While some of the most iconic D-to-C startups, like Dollar Shave Club and Allbirds, operated out of California, the scene largely developed in New York, which makes sense given its status as the “mecca of global consumerism,” as Left Lane Capital’s CEO and managing partner Harley Miller put it to me. Even today, the consumer startup brands built in New York like Warby Parker remain the city’s most emblematic tech stories, even when it was the more boring business software companies like MongoDB and Datadog that found real financial success. 

That’s not to say that Warby Parker and Away didn’t thrive—you can still walk into their retail locations in Williamsburg, SoHo, or any number of hip neighborhoods around the country. But they didn’t come close to achieving the returns of a mid-size enterprise software company, let alone a Facebook or Google. Today, Warby Parker’s market cap sits at less than $3 billion, Allbirds is at just $65 million, and Away never went public and reportedly explored a sale last year.  

I spoke with Ben Lerer, the managing partner of the top New York venture firm Lerer Hippeau, about the rise and fall of consumer investing. His firm backed many of the canonical D-to-C startups as an early-stage investor, which still earned Lerer Hippeau sizable returns even if the companies never reached atmospheric heights. “The math was wrong for growth funds coming in and thinking that companies that were $100 million revenue companies were going to have a straight run to being billion dollar companies,” he said. 

In Lerer’s view, consumer exploded as the New York tech scene gained steam, with advances like Facebook advertising, the app store, and Shopify fueling the growth. Consumer startups haven’t seen a fully downward trajectory since then—fitness and food subscription platforms rocketed during COVID. But a combination of unfavorable economics with low profit margins, high costs, and lack of consumer interest made the sector less interesting to founders and VCs. “Consumer has become almost a bad word to many an investor group,” said Miller, whose firm has continued to focus on the field, investing in startups like the coffee chain Blank Street.  

Which brings us to mayonnaise. Lerer Hippeau never turned away from consumer, though it began to weigh more heavily toward enterprise tech, including the all-consuming AI, in its more recent funds (“Our strategy is founder-centric,” Lerer told me.) One notable exception has been a recent round the firm led in Ayoh, the gourmet mayo company founded by Whole Foods veteran David McCormick and Molly Baz, a former Bon Appetit editor-turned-cookbook author and Instagram influencer. Ayoh launched last month, according to McCormick, selling out four months’ worth of inventory in two weeks. 

So is Ayoh a tech company? Really, after the past 15 years, who cares? What matters more is if Ayoh is a venture-backed company, which Lerer Hippeau clearly thought it should be. “This is a company that is busting out of the gates,” Lerer told me. And still, it has learned the lessons of the D-to-C companies that came before it, including the perils of the subscription model and reckless spending on customer acquisition. Miller echoed the same, pointing to the importance of smart capital expenditure and customer retention. (How often do people need a new mattress or suitcase, after all?) 

While Left Lane Capital may be doubling down on the food space with bets on companies like restaurant chain 7th Street Burger, Lerer said his firm is unlikely to make more plays in the physical product space. Instead, he sees the AI tech shift as bringing founders back into certain kinds of consumer applications, just like Facebook ads and the app store did a generation ago, pointing to different types of consumer investments like the gifting startup On Me and the AI-powered automobile customization platform Motormia. “There is this explosion of really cool stuff,” he said. 

Leo Schwartz
Twitter: @leomschwartz
Email: leo.schwartz@fortune.com
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VENTURE DEALS

- Fluid Biomed, a Calgary, Canada-based vascular disease medical device developer, raised $27 million in Series A funding. Amplitude Ventures and an undisclosed investor led the round and were joined by IAG Capital Partners, LifeArc Ventures, and existing investors ShangBay Capital and METIS Innovative.

- Cartesia, a San Francisco-based multimodal intelligence company, raised $22 million in funding. Index Ventures led the round and was joined by A* Capital, Conviction, General Catalyst, angel investors, and others.

- Maisa, a San Francisco and Valencia, Spain-based agentic AI chain-of-work technology developer, raised $5 million in pre-seed funding. NFX and Village Global led the round and were joined by angel investors.

- Symmio, a Singapore-based decentralized derivatives protocol, raised $3.1 million in funding from Spartan Group, Orbs, MCLB, Blockchain Founders Fund, and existing investors @AgentChud, MS2 Capital, Gametheorizing, and others.

- Refute, a London-based disinformation detection and response company, raised £2.3 million ($2.9 million) in pre-seed funding. Playfair and Episode 1 led the round and were joined by Notion Capital and Amadeus Capital Partners.

- Yei Finance, a New York City-based decentralized lender, raised $2 million in seed funding. Manifold led the round and was joined by DWF Labs, Kronos Research, Outlier Ventures, and others.

PRIVATE EQUITY

- Altus Fire & Life Safety, a portfolio company of Apax Partners, acquired Facility Compliance Services, a Berlin, Conn.-based fire and life safety solutions provider. Financial terms were not disclosed.

- Dastex, a portfolio company of The Riverside Company, acquired CRTM, a Munich, Germany-based cleanroom products distributor. Financial terms were not disclosed.

- Delek Logistics Partners agreed to acquire the water midstream business of Gravity Oilfield Services, a Houston-based water and power infrastructure company backed by Clearlake Capital. Financial terms were not disclosed.

- Platinum Equity acquired a majority stake in Polli, a Monsummano Terme, Italy-based pasta condiments and vegetable preserves producer. Financial terms were not disclosed.

OTHER

- Upbound Group agreed to acquire Brigit, a New York City-based financial health technology developer, for up to $460 million in cash and stock.

- Together AI acquired CodeSandbox, an Amsterdam-based cloud development environment. Financial terms were not disclosed.

- Wellhub acquired Fitprime, a Rome-based corporate wellness provider. Financial terms were not disclosed.

PEOPLE

- Capitol Meridian Partners, a Washington D.C.-based investment firm, added Michael Puopolo as a managing director. Previously, he was at Blackstone.