Founders who built the first wave of direct-to-consumer startups have once again caught the entrepreneurship bug.
This summer, Everlane founder Michael Preysman unveiled Magna, a hydration startup that will sell magnesium-powered electrolyte packets. In jumping from the apparel category to the beverage sector, Preysman is following a similar trajectory to Lively founder Michelle Cordeiro Grant. Lively sold to lingerie conglomerate Wacoal in 2019, and Grant went on to launch energy drink startup Gorgie last year. Ross Mackay, who formerly founded a plant-based chicken startup called Daring, is also building a new beverage startup called Cadence.
A growing number of founders, like Preysman, Grant and Mackay have been inspired to launch new businesses based on trends they’ve observed health and wellness category. For other founders, their repeat ventures have been informed by a desire not to repeat some of the operational challenges they ran into with their first startups. However, today’s digital advertising landscape looks different than the heyday of DTC in the 2010s, and founders will have to get used to a new playbook. But with more connections and access to funds, getting a second startup off the ground also has its advantages.
Navigating a new category
After launching Everlane in 2011, and growing it into a nine-figure business, Preysman stepped aside as CEO of the apparel brand in 2022. After leaving his role as CEO, Preysman ventured back into investing — which is what he did before starting Everlane. “I realized I’m a builder, not an investor,” Preysman told me, and started researching a functional beverage concept almost two years ago. He will remain with Everlane, working on the company one day per week, with the rest of his time focused on running Magna.
Going from apparel to beverage may not seem like an obvious next step. But according to Preysman, “what I see right now is people really focusing on their lifestyle and health.” Functional drinks now make up 10% of the nonalcoholic beverage market in the U.S., according to NielsenIQ. The report shows sales in the category grew by 54% between March 2020 and March 2024, to $9.2 billion.
The name Magna is derived from magnesium, the main ingredient in the brand’s products. For now, Magna is selling powdered supplements that are mixed into water, though two more products are currently in the works. Magna is currently selling its products online through its DTC website, though it will be rolling out in physical retail stores in 2025. “We’re investing in retail out of the gate — in small ways then in bigger ways — with a focus on going nationwide with a retailer sometime next year,” Preysman said.
“CPG is tactically easier because there is a playbook out there, but it’s so much harder because there is so much noise in the market,” he said. In its early days, Everlane grew to $150 million in revenue on $20 million of invested capital. “I’m very hyper-focused on creating that kind of efficiency again.”
Leveraging existing networks and experiences
Sometimes, a founder’s second business idea is born out of the challenges they faced the first time around.
Ryan Babenzien founded the DTC sneaker brand Greats and sold it in 2019 to Steve Madden. He followed that up by launching a filtered showerhead startup Jolie in 2021. Babenzien previously told Modern Retail that one of the reasons why he wanted to launch a product that was universal in sizing — such as a showerhead — was due to his experience at Greats. “Once you build a footwear brand that is primarily online, you learn a lot about the… inefficiencies of building a business with things that have multiple sizes,” Babenzien told Modern Retail.
Mackay, who founded plant-based chicken brand Daring in 2018, stepped down as CEO of the startup in April to focus on his new startup, Cadence. Cadence is an electrolyte-infused drink startup that launched in July. It will sell its products through its DTC website as well as select health clubs. Mackay is self-financing the launch of Cadence while staying on as a board member at Daring.
While both Daring and Cadence are CPG brands, Mackay said he wanted to take a different launch strategy this time around. With Daring, Mackay said the strategy was to get into thousands of grocery stores to scale in the frozen aisle and gain market share in the plant-based meat category. “That quick growth made it hard to keep the brand consistent and manage supply chains,” Mackay said.
Cadence will have a slower physical retail rollout in hopes of building a strong brand awareness, though Mackay didn’t specify exactly how slow. DTC, however, will be an important sales channel.
With Cadence, Mackay said using channels like social media and selling directly to customers gives the company more control over the brand. “But it does have its downsides,” he added. “It can take longer to grow, it costs more to get new customers, and the logistics can get pretty complicated.”
Manica Blain, an investor and advisor to early-stage brands like Blume and Left on Friday, said second-time founders can bring much-needed experience to a new launch. “Even if their first journey wasn’t a total success, it can still show what to do or not do next time,” she said.
Still, Blain said the reality is that building a brand is hard and takes time. An investor, even with second-time founders, still wants to see proof of concept and sticky adoption. “Creating organic, authentic communities is great but that takes time,” Blain said. “There is no shortcut, the same rules still apply.”
Grant of Gorgie said that “as a second-time founder, I’ve leaned into all of the learnings that came along with our Lively successes — and challenges — to shape my approach.” Even in two completely different industries, apparel and beverage, Grant said she sees a number of similar moments, milestones, pitfalls, and opportunities.
“The biggest component that I’ve brought with me from one venture to the next is the core focus on community-first brand building,” she said. This was how Lively started out, growing an ambassador group to over 165,000 members. With Gorgie, “we started with an idea, and posted some hack-y videos on TikTok to get feedback and insights from real people in real time,” Grant said. “From flavors to brand colors, our community is involved in every decision – we even feature the faces of real community members on our rotating can design.”
Repeat founders also benefit from knowing more investors this time around. If they had a good outcome the first time, they may also have more capital to fund their second business.
Preysman said Magna will be funded through a combination of self-funding and raising capital to support retail expansion, which the company will announce at a later date.
Grant, meanwhile, said she was able to leverage Lively’s initial lead investors to help get Gorgie off the ground. The company raised a $6.5m seed round in June 2023, a few months after the brand’s debut.
“I learned that it’s important to stick with your roots and circle back to who supported you from the beginning,” Grant said, though she also raised money from CPG veterans like Andrew Abrahams, co-founder and CEO of Orgain.
For second-time founders, the road isn’t any less bumpy, especially in the current tough climate. Many startups still face challenges, like more expensive customer acquisition costs or crowded product categories.
“Despite knowing all the plays and moves, everyone else does too. So figuring out how to break through is very hard,” Preysman said. “The thing I’m trying to make sure of is we don’t fall into the curse of ‘because we’ve done it before we can do it again.’”
What I’m reading
- Clean beauty brand Summer Fridays received a strategic growth investment from private equity firm TSG Consumer Partners.
- Rihanna’s lingerie brand Savage x Fenty is launching in its first U.S. retail partner with 16 Nordstrom stores.
- Also at Nordstrom, Indochino is opening five more shop-in-shops at the department store chain this year.