Sunday, July 3, 2022

The 3 Principles of eCommerce Investing

From running one of the most significant performance branding agencies in the country and managing billions in marketing spend to selling the agency and investing $10m/yr into startups - this is Andrew Gluck.

Andrew Gluck

Founder at

Hey hey! 👋, 

So, I’ve become fascinated with consumer businesses specifically, how small companies use leverage to reach massive scale. 

These companies often have tiny teams and use modern infrastructure tools and marketing channels to get its product into the hands of millions of customers. 

The systems they build can handle $10m, $20m, even $100m per year in marketing spend and acquire millions of customers annually… it's fascinating. 

Today, we’re sitting down with Andrew Gluck - a friend and the founder of Irrvrnt VC

Andrew built and sold Agency Within, one of the most significant performance branding agencies in the country, generating over $5B for some of the largest brands in the world. 

He’s an expert in building high-growth marketing machines and deeply understands the strategy and tools required to create enormous brands. 

I’m excited about this one. Let's get after it!


In Today's Expert Session:

  • Meet Andrew Gluck: From running one of the most significant performance branding agencies in the country and managing billions in marketing spend to selling the agency and investing $10m/yr into startups - this is Andrew Gluck.
  • How Can You Collaborate? If you like consumer and commerce infrastructure businesses, you can invest alongside Andrew via his rolling fund and investment syndicate.
  • Investor Toolkit: The 3 Principles of eCommerce Investing - use this as a checklist when considering building or founding an eCommerce business. 
  • Personal Capital: Andrew believes in a diversified basket of investments across real estate, public equites, and crypto, but also within the asset class of venture capital, where he’s invested in ~50 companies. 
  • New Markets: Rising customer acquisition costs create an opportunity for companies to create new, scalable, marketing channels and tools to increase efficiency.   
  • Business Idea of The Week: Marketplace marketing-as-a-service. Empowering marketplace merchants with the tools to grow their business.

Guest: Andrew Gluck, Founder at Irrvrnt.VC (Twitter: @IrrvrntVC)

Invest With Andrew: IrrvrntVC Rolling Fund

Video Length: 40 minutes

2011 to 2015 - Learning from Amazon: Andrew began his career at Amazon - working on the and products.

At Amazon, he learned the strategies behind high-performing consumer business models. The key was recurring revenue. You acquire a customer once and sell to them over and over again.

For example, is the perfect case study for a successful subscription business.

New parents need a lot of diapers, but they’re bulky and require a lot of room. Instead, Amazon can create a subscription for diapers and sell them repeatedly. 

After a few years, Andrew left Amazon to join The Vitamin Shoppe, a well-known health, and wellness business, where he led digital acquisition. His experience with The Vitamin Shoppe also gave him experience in the boots-on-the-ground retail industry.

He didn’t stay for long, though. 

2 years in, he realized he had the skills to support large companies looking for performance and branding skills.

He took his learnings and left to build Agency Within.

2014 to 2018 - Building the largest performance branding agency in the country:

Agency Within

In just a few years, Andrew grew Agency Within to be the largest independent direct marketing agency in the US with over $1B in advertising spend under management. He generated over $5B in revenue for the brands he worked with. Companies like Rothy's, Shake Shack, Goop, Nike, Spanx, and Zola.

He decided to sell the company to his business partner.

2019 to Today - Building Irrvrnt VC to invest in the commerce megatrend: Andrew wanted to bring his skill of finding product-market-fit and performance marketing to early-stage companies. To do so, he founded Irrvrnt VC, an early-stage venture firm that invests $250K-$500K at the earliest stages in direct-to-consumer, AdTech, & NextGen Commerce companies.

Let’s dig into his fund a bit more! 

Andrew has a specific investment mandate that he believes can drive strong returns.

1) The Market Focus: Andrew has narrowed down his area of focus to 3 core segments. 

  • Direct-to-consumer (DTC): Investing into brands or manufacturers that sell their products directly to the end-user while bypassing all middlemen, such as retailers and wholesalers.
  • Advertising Technologies (AdTech): Software and tools advertisers use to buy, manage, and analyze digital advertising.
  • Commerce Infrastructure: Every consumer business requires a full suite of software to automate many of its business functions - this includes the website, cart and checkout experience, payments, shipping, logistics, and even customer support. An example of a company in this market segment would be Shopify or payments companies like Stripe.

Each of these market segments are growing alongside the everpresent megatrend of retail coming online.

With his deep connections across these industries and knowledge of the space, he can source quality companies, diligence them appropriately, and effectively add value to the teams. 

2) Business Stage: Andrew often looks for first-time founders with a strong founder-market fit. These individuals have typically spent 5-10 years working in the industry and see areas ripe for innovation and disruption. 

3) Valuation: It's important to exercise discipline around company valuation. Andrew looks to invest in companies with valuations of less than $15m, with an ideal target of below $8m. This allows his average check of $250k ($25k-$500k), to purchase more equity in the company.

Is it working? 

In under three years, Andrew has generated impressive returns (All data as of December 2021): 

  • Total Value To Paid In (TVPI): 6.5x 
  • TPVI is a simple formula that attempts to calculate the total value—both realized and unrealized future profits—that a fund has produced for investors relative to the amount of money contributed. Meaning, if a fund has invested $1M, its total TVPI would be $6.5M. 
  • IRR: 170%
  • IRR shows the annualized percent return an investor’s portfolio company or fund has earned (or expects to earn) over the life of an investment. The higher the IRR, the better the investment performs (or expected to perform). The benchmark for a very good investor is ~25%-30% IRR. 

Anyone can invest alongside Andrew via his investment syndicate or rolling fund.


3 Principles For eCommerce Investing

Andrew has invested in and helped grow many eCommerce businesses. In the process, he’s developed a few fundamental principles for eCommerce investing.

  • ​​Principle #1: Use a subscription business model when subscription makes sense
  • Principle #2: The first order should have a high contribution margin
  • Principle #3: Look for companies where the current buying process sucks, especially if due to the inertia of legacy players.

In addition to these principles, Andrew is looking for a large market and a strong founder-market fit.

Principle #1: Subscription where subscription makes sense

Subscriptions for consumable products or products you need to replace can be great investment opportunities.

Cheeky, a company that provides custom night guards, is an example of this within Andrews' portfolio. 


Although they offer a one-time purchase, most customers opt for a subscription as night guards get gross after a certain point, creating recurring revenue that investors love.

In this instance, a subscription just makes sense.

If you're a teeth grinder, it's unlikely you will ever stop needing night guards.

Subscription revenue can lead to a high lifetime value (LTV), or the total value of a customer over the life of a relationship. Typically, companies using this model should have a lower average order volume (AOV), or price per order, to increase the conversion rate (CvR) and get as many new customers as possible to try their product.

Depending on unit economics, a critical component, you can aim to break even on the first order or pursue a 3, 6, or 12-month payback. You then scale as quickly as possible within that constraint of payback period and contribution margin. 

Another way to determine the healh of a businesses growth system is to look at customer acquisition cost (CaC) as a ratio to lifetime value (LTV). A good baseline CaC/LTV ratio in consumer companies is a 3:1 ratio. Meaning for each dollar they invest to acquire a customer, they generate 3. Andrew prefers to see 4+:1. 

Principle #2: First order needs to have a high contribution margin

The contribution margin is the money left over from sales after paying all variable expenses associated with producing a product.

An example of this within Andrew's portfolio is CarawayHome


Caraway Home

Caraway sells well-designed, functional, and healthy cookware. Their hero product is a $400, 4-piece cookware set. Industry reports put the home cookware category at ~50% gross margin, so that means its contribution margin is: 

 [Price Of Product] - [Cost to Product] = [Contribution Margin]

$400 - $200 = $200 


This allows for a high-allowable profitable paid CaC because you can spend $200 to acquire a new customer. 

There's room to expand LTV via reorders and product expansion, but the goal is to be profitable on the first order after CaC and all other costs are accounted for.  

Having a high contribution margin is critical to getting the revenue flywheel started. 

As you do that, you can order more inventory and drive up your gross margin percentage via lower pricing per unit (because you purchase inventory at higher volumes). This has a significant impact on the business as inventory is a major driver of cost. 

As gross margin goes up, your allowable CaC goes up in concert, creating a nice flywheel: 

Higher allowable CaC > more revenue > better Gross Margin > higher allowable CaC > more revenue > better Gross Margin.


Principle #3:  Look for companies where the current buying process sucks, especially if due to the inertia of legacy players.

An example within Andrew's portfolio is the alcoholic beverage brand Haus



Haus makes alcohol that somehow tastes even better than it looks. In the US, there is regulation around alcohol - a three-tier system in which producers/importers (1) sell to distributors (2) who sell to retailers (3) who sell to you.

This regulation has existed since the repeal of Prohibition and is starting to be chipped away. Haus 'hacked' the system via their apéritifs which are ~15% alcohol.

Business Vehicles:

  • Rolling Fund: A $10M early stage fund investing $250k-$500k in commerce and commerce infrastructure companies. The fund has a 2% management fee on assets under management and 20% carry fee. 
  • Syndicate: While Andrew primarily invests via his fund he will occasionally allocate deals to his syndicate. His syndicate has invested in 2 companies in the last 12 months with an average investment of $2.9m. Andrew takes a carry fee of 20% on these opportunities. 
  • Agency Within (Acquired 2018): The largest private performance branding agencies in the country by spend under management. Andrew manager over $1B in ad spend and generated over $5B in revenue for his clients.  Andrew sold the agency to his partner in 2018. 

Investment Holdings: 

  • Rolling Fund & Angel Investing (40%): Andrew reinvests heavily back into his fund as well as personal angel investments. He subscribes to a heavily diversified basket of investments. Any individual startup is risky, but when you take the portfolio approach with high risk assets you can reduce this risk significantly. Andrew recommends, even if you’re angel investing, you should approach it as though you manage a fund  and diversifiy check sizes, company types, timing, frequency, etc. 
  • Private Investments: 49 (Angel Investments: 25 investments; Rolling Fund: 24 investments)
  • Public Markets (30%): Andrew has been passivley investing into the market since the beginning of his career and haas seen the booms and busts that come along with it. He believe the current market correction we’re in is a sign of a healthy market that was long overdue.
  • Real Estate (20%): While he doesn’t actively pursue a real estate strategy, he does have several holdings. He receives distributions 6-12 months and that revenue is tax-advantaged where he gets to depreciate the value of the building. Because real estate is a hard asset with ~70% debt to equity ratios, doesn’t go to zero. He typically invests in the General Partner that he knows and trusts and acts solely as an investor.
  • Crypto (10%) This is for learning. Because crypto is a new asset class and has been around for 10-15 years, its likely it will continue to do so, despite some of the recent callout.



The Trend: Since 2018, the average Customer Acquisition Cost (CaC), or the cost for a business to acquire a customer, has increased by more than 50%.

Customers are overloaded with more brand content than ever before, and content marketing has become a highly saturated marketing channel.

Why it matters: The ubiquitous nature of social media has caused a surplus of messaging. Despite a surge of digital marketing channels --- like TikTok, Google, Facebook, and YouTube --- more brands than ever are competing for customer attention. This imbalance has created supply constraints in digital ad inventory and thus price increases. 

Opportunities: There is an incredible demand for new models for scalable customer acquisition, and investors are pouring funds into companies that can move the needle and provide a solution for this insatiable marketing demand. 

Many companies have seized this opportunity and are assembling long-tail marketing channels to build unique, scalable marketing inventory for today's top companies. 

Here are a few companies that are innovating in this space:

1) Play Octopus


Play Octopus has incorporated fun trivia questions into a tablet that passengers in ride-sharing vehicles can play during the trip.

The company generates revenue by playing short ads for big brands that play between trivia rounds. Octopus provides free tablets to drivers who complete 100+ trips per month. Ensuring 100+ riders see ads monthly helps them earn income.

Large brands have spend millions of dollars to acquire specific user types from busy rideshare locations like Airports or metropolitan cities.

The company was founded in 2018, raised $13M, and was acquired by T-Mobile in 2022. 

2) FireFly


Firefly is a mobile advertising company that places large LED screens on top of vehicles, earning drivers extra income while providing companies new ad inventory for out of home marketing. 

In May 2022, it launched a first-to-market ad unit initiative that changes how marketers organize and purchase media. It uses inventory transparency and real-time location data. 

The new ad unit features programmatic inventory availability that is shown in real-time. It does this through location data with a Hexagonal hierarchical geospatial indexing system (H3).

The company was founded in 2017 and has raised $53M in venture funding.  

3) Post Pilot: 

PostPilot enables brands to send profitable postcard campaigns just as quickly as Email.

Companies can target customers based on behavior or purchases  - resembling an automated campaign flow. The outcome is perfectly-timed and memorable moments that increase consumer loyalty and your bottom line. The company was founded in 2015. 

  1. Neighborhood Goods

Neighborhood Goods allows brands to test pop-up retail channels on the cheap. It is tough for new brands to test the effectiveness of retail channels. Typically, they’d have to spend millions of dollars opening up a new location without guaranteeing success. 

This pop-up retail structure allows brands to test a physical retail strategy and display their products in a trendy space for short periods.

The company was founded in 2017 and has raised $24M in venture funding.  

The Context: Have you heard of Etsy? It's a global marketplace where people come together to make, buy and sell products.

As of 2021, there are 4.36 million active sellers on Etsy, and over $13.5B in gross merchandise sales is transacted through the platform each year…that's a lot.  

The way Etsy makes money, which is similar to most marketplaces, is by taking a small percentage of a transaction. In this case, Etsy takes a 6.5% fee on any transaction.

There are thousands of large and niche marketplaces like Etsy, empowering billions of sellers and buyers worldwide.

The Problem: Many of these sellers are small business owners and don’t have the skills or resources necessary to optimize their businesses to generate additional revenue.

If Etsy could help its merchants increase revenue by implementing simple marketing tools and strategies, it could mean a considerable increase in total merchandise volume and a significant increase in revenue for Etsy.

This strategy could be used with any marketplace, of which there are thousands - Amazon, Mercado Libre, Poshmark, Wish….the list goes on. 

The Idea: Create a software stack that integrates directly with popular marketplaces and allows them to offer a suite of essential tools and services to their merchants to improve their marketing performance. 

These services could be low handing fruit—things like email marketing, SMS marketing, retargeting, and SEO. 

The platform could say, “Do you want to spend $500 on retargeting?” With a click of a button, a dashboard appears within the platform, and within a week, the company is reaping the benefits of retargeting services.

The impact of these services could be meaningful. Not only would you increase the performance of the business using the platform, which would increase the lifetime value of any individual seller or merchant, but the platform would generate more revenue from the services and increased transaction volume.