Why we invested: Pattern Brands

We first heard of Nick Ling, Suze Dowling and Emmett Shine from Justin Hauser, the founder of Recess and Geneva (a HOF Capital portfolio…

We first heard of Nick Ling, Suze Dowling and Emmett Shine from Justin Hauser, the founder of Recess and Geneva (a HOF Capital portfolio company). As a founder that has always been obsessed with the full brand experience and user perception, Justin attributed a large majority of his brand’s distinct, relevant yet timeless, coloring, font, and marketing language to Gin Lane. Gin Lane was a creative agency run by Nick, Suze and Emmett that for over ten years built and launched brands and digital experiences for over 50 direct-to-consumer brand clients, including SmileDirectClub, hims, Quip, Harry’s, sweetgreen, and Stadium Goods. From speaking with Justin and subsequently other founders from the Gin Lane universe, it was clear to us that in order to be even taken on as a client by Gin Lane, you needed to surmount a big threshold of potential, and once you did, they’d help you build your brand at a level akin to the aforementioned iconic brands.

Pattern founders (left to right): Emmett Shine, Suze Dowling, and Nicholas Ling.

When Nick, Suze and Emmett decided to close Gin Lane and launch Pattern Brands in 2019, it was immediately clear they’d leverage that very same selectivity and expertise for the family of brands they’ve now launched under the Pattern umbrella — Equal Parts and OpenSpaces. So when we first spoke to them last year, we already knew that this was the ideal team for the multi-brand strategy. Emmett’s contagious energy, enthusiasm, and creativity coupled with Suze and Nick’s calm approach, laser-focused vision, and operational skill sets shined light on how they had come together to consistently build category-leading brands in a notoriously difficult and crowded space.

That’s why today we’re thrilled to announce our investment in Pattern Brands: a family of brands with a shared mission to enjoy daily life at home. We’re investing alongside Kleiner Perkins, RRE Ventures, Victory Park Capital, RSE Ventures, and Primary Ventures. All of whom have been tier-1 partners to some of the most recognizable consumer brands we know today, as well as owners and operators of massive strategic organizations such as RSE /Related. In addition to longer term strategic brand support from the investor base, Pattern will be using the capital to acquire direct-to-consumer brands on Shopify in the home goods space. They’re also announcing their acquisition of GIR (short for “Get It Right”) a kitchen accessories brand that launched eight years ago and has organically grown into a much loved, profitable, multi-million dollar business.

So why would direct-to-consumer businesses look to be acquired? They often seek to sell their entire business when further scaling seems infeasible due to capital constraints or increased operational complexity. Many of them have fundamentally strong products, but are challenged by obstacles such as weathering a liquidity crunch, finding efficient customer acquisition channels, hiring strong talent, or raising capital. The low barrier to entry in the market has also spurred a proliferation of consumer brands which makes traditional CPM and growth strategies less cost-effective. Even business owners who have managed to grow successful direct-to-consumer brands into multi-million dollar businesses still find it difficult to maintain growth.

Shopify’s platform hosts 1.2 million brands, transacts $120bn GMV per year, and is growing at 119% per year. An abundance of new Shopify businesses has led to a highly-fragmented market composition. This fragmentation within a considerably large market has opened the door for a well-resourced and capitalized team to capture significant value via consolidating individual players within industry verticals.

The Pattern team launched the company in 2019 to own a greater equity stake in the brands they built. And now evolving into a roll-up platform will not only empower the team to be even more invested in their family of direct-to-consumer brands, but also offer significantly greater upside on their ability to create value.

The ecommerce business roll-up model has demonstrated impressive results thus far. Consider Thrasio, an acquirer of Amazon third-party FPA brands that’s been called the fastest-growing, profitable $1B+ valuation tech startup in mid-2020. Pattern will be one of the first movers to tap into the Shopify network of consumer home goods. The mechanics of Pattern’s roll-up strategy will involve acquiring Shopify brands and expanding the company’s top-line revenue. This can be achieved by adding new product lines, improving distribution & sales channels, and increasing operational efficiency. Beyond implementing standard operational improvements, Pattern will leverage a decades worth of expertise and success from their days at Gin Lane to grow their portfolio brands. This is Pattern’s unfair advantage.

Nick, Suze and Emmett hadn’t planned on running one of the most successful branding agencies when they started Gin Lane. They started Gin Lane because building brands for their generation, and working with entrepreneurs is what excites them. Pattern has been a natural evolution, and culmination, of this team’s tremendous accomplishments spanning the past decade. That’s why we’re excited to partner with them as they continue their story for the next decade.

If you’re a DTC brand that’s looking for an unfair advantage to scale your business to the next level, get in touch with the team at Pattern.