As AdRizer prepares to launch its AI-powered revenue attribution and optimization solution for advertisers with conversion tracking, A+B testing, and tag management, we’ve been thinking a lot about Direct-to-Consumer (DTC) brands and how to help them reinvent consumer distribution channels. So has Henry McNamara, a partner at Great Oaks Venture Capital.

His first suggestion? To throw out the DTC playbook from 2012 and come up with a better descriptor for the category. In an interview with Digiday, McNamara and his team at Great Oaks, a seed fund that has invested in brands like Allbirds, Away, Dirty Lemon and Recess, look for differentiation, as well as scale. McNamara proffers that product differentiation is the No. 1 influencing factor when it comes to deciding on a potential investment, not necessarily the ability to eschew traditional supply-chain infrastructure to sell consumers directly through a single sales channel.

DIGIDAY: Would you say purity in direct-to-consumer brands is over? What does that mean for the category?

McNAMARA: The term direct-to-consumer is outdated. The term digitally native vertical brand is more appropriate because it doesn’t necessarily imply direct sales as the exclusive channel. Online is an unbelievable channel to launch a brand to connect directly with customers, but finding the right channel mix for your specific market, industry, product and consumer base is vital. So I don’t think there are any that are going to be 100% online, especially as it becomes more expensive to acquire customers and more crowded on some of the internet toll roads, like Instagram and Facebook.

DIGIDAY: Has this changed your standards when fielding new founder pitches?

McNAMARA: The field goal posts have moved drastically in the last few years, especially with direct-to-consumer brands. There’s no longer an arbitrage opportunity to acquire customers online. Things are so saturated and you’re at the mercy of the lowest common denominator — there are brands out there willingly and knowingly overpaying under the guise of acquiring market share and acquiring customers that will repurchase and eventually become profitable, and never will. And that affects every other business in that space.

Read More