General view of the US retail & consumer industry

For the third city in the ‘20 Startups in 20 Global Hubs’ series (click to check the retail & consumer market in the Yangtze River Delta and Mumbai), we are taking a direct look at the United States – the most significant consumer market worldwide. 

With a GDP of USD 20 trillion and a 325 million-strong population, US household spending is the highest in the world, accounting for more than a quarter of global household consumption. As a world leader in consumer market research, product innovation, manufacturing, branding and marketing, the country is no doubt a powerful growth engine for companies of all sizes.

Why New York?

New York City encompasses the largest municipal and regional economy in the US. Being home to New York Stock Exchange and NASDAQ, the city’s 20.3 million people generated a gross metropolitan product (GMP) of over USD1.33 trillion in 2012. The city has exerted a significant impact on commerce, entertainment, research, technology and a lot of other fields. To see how retail & consumer companies run in New York will inspire players in other parts of the world. 

VC investment in New York

Please note that this series’ analyses of retail & consumer statistics in three different regions worldwide all applied Crunchbase data for the research. EqualOcean focuses on VC investment to find the general trend in each city/region. It is worth mentioning that, as the US continues to dominate the global Mergers and Acquisition (M&A) scene, both as an investor and as a destination, M&A is one of the more important ways for US retail & consumer companies to attain growth and gain a long-term edge in the marketplace. A.T. Kearney’s analysis shows a higher deal multiple for M&A than the S&P 500 in this sector, and the acquirees are mostly small and medium-sized players.

According to a Deloitte analysis, most acquisitions by consumer products companies from 2010 to 2018 in the US were within the consumer products sector. That means the primary reason for M&A in the retail & consumer sector is strategic investment instead of financial investment by VCs. The M&A deals are driven by the intent to improve geographic expansion, expand distribution networks by entering new channels or to establish better control on the sourcing side of the supply chain.

Getting back to VC investment, the retail & consumer sector in New York showed a steady upswing after taking out two of the largest outlier companies (Peloton and Casper).

Examining the period from 2014 to 2019, 2018 closed as a record year for the New York (as well as the Global) VC market. But when the momentum pulled back in 2019, this sector showed the robust characteristic during turbulence. Despite minor variations and small upswings and downtrends, the New York deal amount has mostly stabilized over the past couple of years.

For VC investments traversing the different funding stages, the seed/angel funding round remains the top position in deal counts. In contrast, late-stage ventures, especially after Series D, boast most of the financing. Based on Crunchbase data, Series D and the funding rounds after nabbed USD 2.17 billion during the past five years ending in 2019, taking over 45% of the total deal amount. Compared with India, Southeast Asia and other emerging markets, the US retail & consumer sector is developed and more likely to yield unicorns than the others.

In different sub-categories, consumer products, retail technology and e-commerce stand out as the most funded fields. In consumer products, we discover several attractive companies besides food & beverages. Peloton, an indoor exercise bike with live streaming training videos, has racked up USD 990.5 million since being formed in 2012. In its 2019 fiscal year, Peloton recorded revenue of USD 719.2 million from sales of its fitness machines, up from USD 348.6 million in 2018 and USD 183.5 million in 2017. The company went public in August 2019. Another online mattress brand – Casper (though slashed its valuation in recent IPO) – got its start in April 2014, raising almost USD 239.7 million from VC investors. It captured consumers’ attention first with its mattress that fit into a cardboard box the size of a mini-fridge and has since expanded to a portfolio of products, including dog beds.

In the e-commerce segment, Rent the Runway had received USD 125 million in the latest funding round that increased its valuation to the unicorn level of $1 billion. It has been known for lending designer dresses to women for special occasions. The company’s goal is to create the Amazon Prime of rental.

The segment that has been fueled with the most growth power is retail technology. It bagged USD 796 million from 2014 to 2019, with 200 deal events. The average deal amount ranked fifth among the six segments, indicating more early-stage ventures and anticipated growth in the future.

Top 20 Startups

EqualOcean screened 20 companies among the retail & consumer-related VC investments in New York to shed light on future trends. The three segments previously mentioned owned the most funded players, while other parts also harvested rising upstarts.

ShopKeep is a top-rated tablet-to-cloud payment and point-of-sale platform that has been chosen by over 25,000 independent retailers and restaurants in the US. As small businesses across the US accelerate their adoption of modern cloud-based point-of-sale and payment processing solutions, this retail tech trailblazer closed a USD 65 million round of financing in December 2018,  led by Tribeca Venture Partners, and has been expanding as a leader in this area (find more in the Global 50 retail technology report).

ViewLift, in the media & entertainment segment, is a digital distribution and monetization platform. It offers end-to-end solutions for media companies, sports leagues and teams, education providers and others to monetize their content through native branded apps. With live streaming becoming a new way of entertainment for the global youth, the streaming service will likely enjoy a bonanza period in the coming years.

Looking forward, there are other exciting developments to dig into, and we will keep updating on our findings in the retail & consumer sector.