One of the most unique entities in the social impact space that I’ve come across is The Craftory, a self-described ‘Cause Capital’ VC fund.
Based in London and San Francisco, The Craftory is a $375M global investment fund focused exclusively on investing in companies offering products that positively impact the categories they serve, our society, and the planet.
They offer permanent, early stage and growth capital (Series A, Series B etc.) to mission-driven consumer brands, and have a terrific portfolio including eco-conscious laundry brand Dropps, NotCo, a plant-based food company using artificial intelligence, and most recently led a $20 million funding round into DYPER, a subscription-based diaper service that delivers the highest quality bamboo-based compostable diapers directly to customer’s doorstep each month.
I caught up with the co-founders Elio Leoni Sceti and Ernesto Schmitt for a fascinating conversation on how they plan to disrupt the consumer goods space with positive impact (and why their awesome logo is a She-Wolf with laser eyes).
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Afdhel Aziz: Elio, Ernesto, welcome. Please tell us a little about Craftory and how you articulate its purpose and vision?
Elio Leoni Sceti: The Craftory is the home of cause-driven challenger brands. We’re a $375m investment house focused solely on backing the new breed of consumer goods brands that are out to take on the status-quo incumbents with alternatives that are better for consumers, the planet, or society. We amplify the impact of the brands we back, and help them grow from tens of thousands to tens of millions of consumers. We do this because we believe consumer goods have the potential to bring about change, at scale: hundreds of millions of people, making billions of small consumption choices every day, can radically change the accepted standard of how we interact with the planet’s resources, with each other as societies, and with our own health and well-being.
Aziz: I love it. So, what is your investment thesis and what categories and areas are you focusing on?
Sceti: We believe that a meaningful portion of consumers – maybe 20 or 30% of the total – care more about the consequences of consumption, how it impacts the planet, individuals, and society, than they care about the ever-increasingly efficient delivery of functional requirements, which is the logic of conventional packaged consumer goods. For these consumers, having a surface cleaner do an efficient job for $1.50 a bottle is less important than knowing that it won’t harm the environment, or their own health.
Brands that fight for alternatives that are more sustainable, fairer, more democratic, better for self-esteem or better for your health than the status quo, are the cause-driven challenger brands we look to back at The Craftory. Across categories, we are seeing such brands out-perform the incumbents because they offer an alternative that speaks to consumers on a different level, and offers them hope. We’re especially interested in backing disruption in those categories dominated by lumbering corporate giants, like personal-, home- and beauty-care, vitamins and supplements, better-for-you foods, pet care and baby care.
Aziz: What is the difference between traditional VC’s and the approach you take? For instance, how you are not a fund, but rather permanent capital?
Ernesto Schmitt: We specifically went out to structure the Craftory to be like a counter-corporate anti-VC. Not because we’re in the slightest anti-capitalist, but because we believe there’s a better way. It begins with ensuring that the interests and incentives of us, as the capital, are entirely aligned with those of the founders and entrepreneurs we back. It begins with us not being a fund, but permanent capital. That means we don’t need to return the money from our own investors in a specific time horizon like a VC fund has to – which in turn means that our portfolio companies can stay with us for as long or as short as they want: no fixed exit timescales, no required exit multiples, nor any of the toxic constructs that make traditional VC so problematic.
Next, none of us at The Craftory are conventional financiers. We’re all entrepreneurs, brand-builders and operators, with the experience of scaling and building brands between zero and billions of dollars of value. That means that we understand the growth of ventures, and have the entrepreneurial empathy required to be true allies and mentors to our brands. We focus uniquely on helping our brands scale effectively. We do this thanks to having codified a growth model for challenger brands that leverages expertise in the 4 key areas of capability that we believe make the difference between those brands that scale, and those that do not: master craft in brand and storytelling, digital growth platforms, product innovation, and operational scale-up.
Aziz: What do you believe are the true characteristics of a Challenger brand, and what are some of the examples in your portfolio?
Schmitt: Challenger brands have as their core reason for being a burning desire to change something radical in the category they serve, for the benefit of its consumers, the planet or society. Challenger brands have cause and purpose at their core, and they carry it on their front label. Challenger brands derive their meaning from their cause – as opposed to being just cool or new. We’re proud to have 6 brands in our portfolio to date:
1. TomboyX, a fabulous, progressive underwear brand that champions an empowered, non-objectified, non-subservient and non-binary femininity as antidote to the toxic representation of women embodied by the likes of Victoria’s Secret
2. Dropps.com, a no-nonsense laundry care brand powered by nature that calls out the BS and removes the stupid from the offerings of P&G and Unilever
3. NotCo, who use clever AI to formulate delicious plant-based alternatives to animal protein foods in our diets, driving forward the sustainable nutrition revolution our planet needs
4. Dyper, who set new standards for recyclable and compostable diapers, made from bamboo
5. Present Life, who champion clean beauty and supplements that harness the power of active naturals
6. RubyLove, a brand of period-proof underwear aimed primarily at young girls as a natural alternative to tampons and pads.
Aziz: What a great group of brands! Finally, please tell us about the She-Wolf, which is your awesome logo, and how she represents your approach?
Schmitt: The wolf-mother with shining laser eyes is The Craftory’s spirit animal. Wolves show remarkable camaraderie and hunt in packs, generating renewal in nature by taking down the weak and old, just like our brands take down lumbering corporate giants. The wolf-mother looks after her cubs, nurtures them, and teaches them how to hunt. In the same way we nurture and grow our brands, and teach them how to win at scale, with shining eyes.