Maybe we haven't learned anything after all?

In the prehistoric (aka pre-COVID times) times, Dollar Shave Club kicked off the DTC valuation revolution in 2016 with its $1 billion acquisition by Unilever. It wasn't so much the number itself, but the revenue multiple itself that kicked it off. Dollar Shave Club was on track to hit $200M in revenue in 2016. A crazy 5x revenue multiple for what is another (interesting, but) ultimately derivative and unprofitable CPG brand (at the time). Andy Dunn, widely credited with inventing the Digitally Native Vertical Brand, said that Dollar Shave Club's acquisition really kicked off the revolution.

Oddity Tech, if you haven't heard of them, is an Israeli-firm with data and AI-roots. But ultimately, what they are selling is beauty/cosmetics under Il Makiage and Spoiled Child, DTC-only.

It's hard to argue that the AI-driven CPG brand just didn't have another huge moment. For one, an IPO is more difficult than an acquisition. And second, the valuation is richer. At a $2.8 billion IPO valuation and $400M revenue in the last 12 months, we are talking about a 7x revenue valuation.

It goes to show that investors still value growth and at least at the moment, for AI it's different. There is another big difference with Oddity Tech, however. And it starts with a P.

"Profitability"

Unlike Dollar Shave Club at its acquisition time, Oddity Tech's DTC brands have been profitable which, as Ben Cogan will tell you, is a little bit like seeing Bigfoot.

The big challenge for the industry and investors is "pattern-matching." AI-driven manufacturing will attract copycats, at high valuations, driven by FOMO, and with less profitability than Oddity.

It's not clear to me they truly have the marketshare and reach to deserve this kind of valuation, as the company is not yet in stores. Not that this will be a problem, ultimately, (merchandisers will pick them up) but it is a little bit surprising and shows you how one new trend (AI) can put a new shine on what has been a somewhat faltering trend (DTC) in recent years due to profitability and valuation concerns.

The Oddity Tech IPO formula?

AI + CPG + Growth + Profit = Valuation.

It's going to be a FOMO parade.

Let's how investors are able to recognize what is real AI (and what are imposters) and continue to demand profitability to justify rich valuations.

I'm not holding my breath!