Emerging brands have a lot of potentials, but they often face challenges regarding growth. In this episode, Elliot Begoun, founder of TIG Brands, talks about the two fundamental initiatives that he thinks will help the TIG Brands community – the TIG Venture Community and the TIG Collectives. As an entrepreneur, one of the most important things to do is build a strong business foundation. That means ensuring the right team, processes and systems, and financing are in place. As emerging brands don’t usually have the same resources as established brands, how can they get the resources they need to start up? Join in as Elliot shows the way.
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Empowering The TIG Brands Community: TIG Venture Community And The TIG Collectives With Elliot Begoun
We’re going to do something a little bit different. I always take a left turn when life puts that in front of me. I want to talk about two important and critical new initiatives that we have undertaken. The first is the TIG Venture Community. I want to go into some depth about what and why this is. Let’s start with why. There’s a conundrum in this industry. You can look at 1 million different studies, but somewhere in the last several years, something between $18 billion and $20 billion in market share moved from the top 25 CPG companies to emerging brands.
An estimated 80% to 90% of those brands fail within the first two years. That, to me, is maddening. It doesn’t mean that 80% to 90% of them are crap products or poor founders. It’s often that they’re charting the wrong course and don’t have the necessary capital that they need, and many other reasons. One of those is this growing funding gap. Let’s look at the funds out there.
The average fund size has increased. Our VC funds in the industry have gotten bigger. That speaks to the success of our industry. It’s awesome, but the big fund economics require bigger checks and bigger checks require more mature brands. What that means is that if you’re an emerging brand, you have to get further in order to get to that institutional money than you’ve ever had to get before. That creates a funding gap and that funding gap kills promising brands.
The other thing is it’s pushing so much volume against the Angels out there. Active Angels in this space are overwhelmed by investment inquiries. I’ve talked to a few that are seen as many as 100 a month. They lack the time and the bandwidth to do the necessary due diligence. It’s a lot of work even for an Angel. Even if you’re trying to vote from your gut and heart, you still have to do the due diligence. Many of them have decided to stop writing smaller checks and make a few bigger investments.
This early Angel money is so vital for promising brands. All of this in mind, it kept coming back and back to the fact that if you look at this and the growing funding gap and the Angel fatigue in the space, and yet all of these great brands coming in, that creates a white space for a nimble fund attached to our TIG Brands Community. We’ve decided to do that. We have launched a venture community.
A venture community is a different approach to venture capital. Our venture community consists of the amazing entrepreneurs who are part of our TIG Brands Community. It also includes our dedicated LPs, industry champions, venture partners’ funds, and other angels. Together, our goal is to work to empower those on the front lines of human health, climate action, justice, equity, diversity, and inclusion. It’s to give those entrepreneurs who are trying to make good shit happen the opportunity to bridge that gap to cross that chasm.
Let me talk about the fund itself and a couple of differences that are important to point out. One is because we have a deep relationship with the brands in our community. We have good insight into the companies, capabilities, and limitations of the founders. We’re also looking to write checks that are earmarked for targeted investments with specific and directed use of proceeds. It may be to help launch at a national retailer, help fund an important production run, or invest in a round that is open then needing to get some first money in. It’s going to be very specific.
TIG Brands: Big funds require bigger checks and bigger checks require more mature brands. That means if you’re an emerging brand, you have to get further to get that institutional money than you’ve ever had to get before. That creates a funding gap, and that funding gap kills promising brands.
In order to be a part of our fund, you have to be enveloped in the support of our community. You must be an active part of our TIG Brands Community and of something else that I’m going to share a little bit more with you, our TIG Collective, at least, for some period of time. You can’t just come in. You’ve got to be a part so that we know you and that you know us.
The other thing that we’re doing is that this fund will be a non-solicitation fund so no pitching. We’re going to come to the brands in our community when and where we feel there’s the capital needed, and that we can deploy that capital in the way. We’re also going package that capital up and share that with our venture community to see if any others want to participate to try to bring that forward. The other thing that’s incredibly important and near and dear to all of us is that we’re going to be prioritizing women BIPOC and LGBTQ+ founders.
We’ll talk a little bit about the structure of this fund. In typical TIG Brands fashion, we’re doing it differently. For most funds, the way it works is an LP commits to the total dollars that they’re going to be willing to invest in the fund during the life of the fund. The fund managers issue capital calls when they make investments and the LPs wire that money in.
We’re going to be doing a rolling fund that’s administered through AngelList. AngelList developed this concept a couple of years ago. We are the first and only CPG rolling fund there. They provide all the end-to-end administration, but what that allows us to do is create a lot more flexibility in the way things are done. Rolling funds are a series of consecutively formed privately offered pooled investments. Each quarter, an LP comes in and subscribes for one quarter or eight quarters, whatever they decide. At the start of each quarter, their funds are committed and funded into the fund, and then the fund makes those investments within that quarter.
There are big benefits if you’re an interested LP in doing this. You control your capital contributions. You can commit more or less capital on a quarterly basis. There’s flexibility. You can enter and exit the fund, as you please. Because we want this fund to be made up of the individuals who are in this industry, supporting this industry with open doors, we’re making those quarterly contribution limits low or keeping the barrier to entry low.
A lot of questions come up around a quarterly fund like, “Can you explain how it works?” To make it simple, each quarterly fund will be standalone, and subscribers for that quarter will participate in the investments made during that quarter. You can subscribe in advance and prior to the start of the next quarter and adjust up or down, or cancel your subscription commitment. If all the money in a single quarter is not deployed by the fund, it rolls over to the next quarter.
For fees, we won’t be charging an administration fee. Most funds charge their LPs and administration fee per year. There is an administration fee that’s charged by AngelList, but it’s 1.5% of the value of the fund on a pro-rata basis, a one-time-only, not per year. That’s for the life of that fund or the ten-year life and that handles all the admin work and so forth.
TIG Brands: Our goal is to empower those on the front lines of human health, climate action, justice, equity, diversity, and inclusion, and to give those entrepreneurs trying to make good things happen the opportunity to bridge the funding gap, to cross that chasm.
Why are we doing this and what does it mean? We’re doing this because this early money can make a difference. Having somebody that can come in and support whether it’s equity or debt gives entrepreneurs or potentially our entrepreneurs, where we see that a little bit of capital, $50,000 to $250,000, that we can bring. Hopefully, that can get some of our partners across that gap and help them bridge it.
For our LPs, the people who are investing in this fund, it’s a good deal because we have insight into the companies in our community. We know the capabilities and limitations of our founders. We’ll be providing capital when and where it is needed, and only to the companies that are part of our community. Funds are deployed directed and most importantly supported.
The LPs benefit from the flexibility of a rolling fund. That capital combined with a supportive community and access is capital that’s going to work hard. The reality is that these big future Xs that we read about like glyph bar, start with early money and that early money has to be there. If you want to learn more, reach out to me, go to our website, or anything that you would like. This is a different approach to venture and an important component for these entrepreneurs.
To switch gears a little bit and talk about the TIG Collective. This is another big initiative that we’re trying to bring forward and it is a dual purpose. The genesis of it was our conversation within our industry or a bit of industry self-reflection recognizing that our boards don’t reflect for the most part the communities that we serve. We need to create more diversity on our boards, not only diversity in race, gender, and orientation, but also in thought and in lived experience, etc.
You don’t wake up one day ready to be on a board. It does take some cultivation, development, skills, and knowledge. Also on the flip side, a lot of entrepreneurs want advisors and boards, but they’ve never figured out how to extract the most value from them and get the most benefit. What the TIG Collective is doing is setting up to be the vessel in between.
The way it’s structured is an entrepreneur-option. They decide that they want to enter into an advisory agreement. Instead of the advisory group being between them, their business, and a single advisor, they enter that advisor agreement with the collective. It’s the same agreement, no real difference, same rules, and expectations that you would anticipate in any advisory agreement. That’s executed between the brand and the collective. Also, the brand will then issue its advisor shares to the collective, not to any individual. It’s issued to the collective.
On the other side of the ledger, the collective is out recruiting a diverse group of subject matter experts in this industry, cross-functional who want to serve and grow their experience as advisors and eventually, board members. They enter an advisor agreement with the collective. They agree to be an advisor to the collective and meet all the requirements that the collective is agreed to perform with the brand.
TIG Brands: With the TIG collective, we’re creating this vibrant community ecosystem where brands get surrounded by incredible subject matter experts, where we build their skill set as entrepreneurs working with advisors and boards.
They also then will get issued an equity incentive plan from the collective that gives them the ability to share in the aggregate total upside of the collective as the collective gets issued shares from the brand. What it creates is this ecosystem of advisors and brands that truly have a vested interest in each other’s success and that everybody benefits. While all this is going on, we’re going to be running workshops for both the advisors and entrepreneurs.
For the advisors, we are going to be running workshops on things like governance, fiduciary responsibility, how to coach, and finance. They can begin to amass a deeper more confident skillset that can position them to be board-ready and have those opportunities, and more importantly, feel confident when those opportunities do come up. For the entrepreneurs, we’re going to be running workshops or masterclasses on how to extract the most value from advisors or board members. That includes driving them to accountability, building good agendas, being able to ask very directed specific questions so you can get pointed actionable feedback, etc.
The belief and the hypothesis that we have with the TIG Collective, what we’re creating is this vibrant community ecosystem where brands get surrounded by incredible subject matter experts, where we build their skill set as entrepreneurs working with advisors and boards, and simultaneously give talented individuals in this industry the opportunity to serve as advisors, build their skillsets, and CVS. Hopefully, over time, we’ll see that we’ve made some small changes to the complexion of boards.
A couple of other points, each brand would be assigned to primary advisors, but they would have access to all of the advisors. It gives entrepreneurs an amazing leg up in terms of having this incredible ecosystem to call on them to help. That’s it. Those are two fundamentally new initiatives that we think are going to help overall continue to build out this TIG Brands Community.
Our commitment is that there’s no reason why 80% to 90% of brands that start fail. We can do better than that as an industry. We need to build more tardigrades, not unicorns. We need to build brands that are nimble capital, efficient, and resilient. We can do that, but we also need to make sure that they have the level of capital and access to that capital in the early days that they need. They’re surrounded by the people who can help them make the best decisions, open as many doors, and get as many opportunities as possible. With that, it’s a relatively brief episode, but the message is important. I will leave it there and we’ll see you all next time. Thank you.
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