L Catterton is looking to bring some style and branding savvy to some other consumer categories with its latest investment: e-commerce aggregator Dragonfly.
The consumer-focused private equity giant — which is said to be prepping for an IPO with a valuation of $3 billion to $4 billion — took an undisclosed stake in the three-year-old Boston-based company, which specializes in scooping up budding brands with a niche on big marketplaces like Amazon.
Including L Catterton’s investment, Dragonfly has raised more than $500 million in debt and equity financing since it was launched by Massachusetts Institute of Technology-trained engineers and serial entrepreneurs Philip Butler and Jeremy Todd.
The Dragonfly business model has Butler and Todd using those millions to buy, incubate, license and rapidly scale brands operating in marketplace white spaces.
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Now, they’ve synched up with L Catterton, which has a big portfolio of investments in the consumer space. L Catterton’s flagship fund, which took the stake in Dragonfly, has a lot of experience in consumer, including through investments in Birkenstock, Peloton, Everlane, Hanna Andersson, Restoration Hardware and Boll & Branch.
With Dragonfly, L Catterton is mining a newish vein in the consumer sector.
“We tend to be very thesis-driven on where we invest,” said Nikhil Thukral, a managing partner in L Catterton’s Flagship Buyout Fund. “This is a space that investors broadly call ‘aggregators.’”
In the digital domain, technology has helped companies pinpoint sometimes small spaces in the market — jeans between $80 and $100, for instance — and then dive in with businesses that can start small and become significant.
And right now, the Wild West of e-commerce is being tamed, with all the niches being filled in. Dragonfly and L Catterton want to be a bigger part of that action.
“We continue to believe in the power of these marketplace models,” Thukral said. “There are going to be all kinds of new businesses that are going to be created, that are going to participate on the Amazons and Wayfairs of the world. This is not a U.S. phenomenon, it’s a global phenomenon.”
But as businesses spring up, they can lack some of the branding refinement that fashion specializes in and that’s where L Catterton plans to put its expertise and connections to work, completing the high-tech expertise that is inborn at Dragonfly.
“The sort of magic is combining the technology and their data knowledge with brand and brand development,” Thukral said. “We can bring in marketing talent and we can bring in branding talent.”
Butler, who is chief executive officer as well as co-founder of Dragonfly, is smart enough to know what he doesn’t know.
And he knows plenty, in addition to being a CEO twice over and his degree from MIT, he also has an MD from Yale University and studied genetics.
Dragonfly is strong on data and back-end operations, but Butler acknowledged he had “limited insight on…how to build durable brands.”
“We’ve been taking a kind of beginning approach to it,” he said.
But now, he has Thukral and L Catterton to help get Dragonfly to the advanced level.
While Butler could put some of his kitty toward fashion businesses, he said the category is relatively mature on the marketplaces.
The opportunity seems to be more in bringing the fashion branding expertise into other categories, where there’s still plenty of whitespace to jump in and build big businesses.
He pointed specifically to the areas of pet, speciality and aftermarket auto goods and furniture.
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