This is a huge red flag": Why this DTC Investor will pass on your brand

"If unit economics don't work today, they're never going to work tomorrow."

With this stark warning, Sam Kaplan cuts through one of the most common pitches in DTC: the promise that everything will work better at scale. Drawing from his experience leading venture and growth investing at Burch Creative Capital (Tory Burch's family office) and now as a partner at Five Seasons, Kaplan delivers a masterclass in what really makes investors pass on brands - and what makes them invest.

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The Red Flags That Kill Deals

"Your CAC typically increases a lot faster than your gross margin," Kaplan explains, dismantling the common founder belief that economies of scale will fix current issues.

His other major red flags? Premature team building ("revenue per employee should be around 500k in your early days") and the early hiring of C-suite executives ("when a business is that small, what is the founder doing if they're not operating the business?").

The Holy Trinity of DTC Success

Rather than chasing scale promises, Kaplan reveals what he calls "the Holy Trinity" of metrics:

-High AOV

-High repeat rates

-High margins.

"It's the Holy Trinity because it's not common," he explains. "Metrics oftentimes cancel each other out - if it's a high AOV item, oftentimes there isn't going to be high repeat, but there should be high margin."

‍The Chubbies Case Study

‍Perhaps the most fascinating part of the episode is Kaplan's insider perspective on Chubbies' journey to a nine-figure exit.Despite operating in what seemed like the hardest possible category (low AOV, fit issues, rising CACs), they succeeded through unwavering brand commitment and revolutionary content strategy. "Their entire marketing team was aspiring stand-up comics," Kaplan reveals, explaining how they built a content machine that competitors couldn't replicate.

‍The Trans-Atlantic Difference

‍Now based in London, Kaplan offers crucial insights about the differences between US and European DTC landscapes. "In Europe, it's about building a local hero," he explains, noting how this affects everything from fundraising dynamics to growth strategies. His observation that European founders are "less drunk on venture capital" provides a fascinating lens on different paths to DTC success.Whether you're building your first DTC brand or scaling an established operation, this episode offers critical insights about what really matters to investors in 2025. Because in an industry where everyone promises future improvements, understanding what needs to work today might be your best competitive advantage.

‍Jacob's Expert Segments

‍As always, Jacob Becker joins to add financial expertise about the topics discussed in the episode. This time, he double-clicks into:

-Unit economics

-Financial Knowledge

Subscriber-Only Exclusive Content

‍After Sam Kaplan's candid revelations about what makes investors pass on DTC brands, we're sharing Part 1 of our "Unf*ck Your Financials" guide that breaks down the exact KPIs investors scrutinize:

-A complete framework for measuring inventory efficiency (from COGS to dead stock metrics)

-Cash flow KPIs that reveal true business health (not just growth)

-Real benchmarks based on Finaloop data from analyzing thousands of DTC brands

-The metrics that actually predict business sustainability

SUBSCRIBE TO GET IT AND MORE EXPERT CONTENT FOR FREE.

Chapters

[00:00-00:24] - Intro & Guest Introduction

[00:24-03:23] - Chubbies: Lessons from a Nine-Figure Exit

[03:23-07:30] - Chubbies' Unique Approach: Humor, Content & Shorts

[07:30-09:09] - Consumer Investing: Then vs. Now

[09:09-13:08] - How Founders Have Become More Financially Educated

[13:08-15:31] - Capitalization Strategies: Equity vs. Debt

[15:31-18:37] - Jacob’s Segment: Contribution Margin & E-commerce Finance

[18:37-20:58] - Brand Investment: Balancing Content & Product Market Fit

[20:58-23:20] - European vs. American Consumer Investment Approaches

[23:20-25:05] - Consumer Brand Saturation & Competitive Markets

[25:05-27:22] - Beyond AOV, Margin & Repeat: Key Investment Criteria

[27:22-30:49] - Common Financial Mistakes in E-commerce Brands

[30:49-33:21] - Jacob’s Segment: Operating Leverage & G&A Expenses

[33:21-35:28] - Scaling Challenges: Margins, Supply Chain & Hiring

[35:28-37:15] - What’s in Sam’s Cart? Personal Consumer Picks

[37:15-38:35] - Where to Find Sam & Final Thoughts