Please welcome Pepper, a financial compass for DTC and app-based businesses
By: Lerer Hippeau
Tags: Startup, Finance, Consumer, Venture Capital, Technology

Meet Pepper, the latest addition to Lerer Hippeau’s portfolio.

HQ: Los Angeles

Cofounders: James Borow, Sean Friedland, Chris Lorenz, Geoff Anderson, Daniel Druger, Spencer Anderson

The problem: The “grow fast” mentality popular among tech companies in recent years has fueled the rise of some of the most influential businesses today. But that mindset has fallen out of favor as the same tech leaders have realized that focusing on rapid growth doesn’t necessarily translate into a sustainable business plan. At the heart of the problem, especially for digital, consumer-facing companies, lies uncertainty tied to speculative customer lifetime value (LTV), cost of customer acquisition (CAC) and a general lack of insight into a growing business’s overall financial health. With better tools, these brands could more effectively map their spending, plan future fundraising efforts, and decide how to best allocate crucial resources.

Pepper’s solution: Pepper aims to help DTC and app-based businesses get smarter, and grow more sustainably, by offering the analytics and insights they need to better understand their financial health. Built by a team with a background in developing predictive modeling and complex systems for marketing spend, Pepper studies different areas of a business’s financial commitments in order to help maximize return on investment. As companies learn more about their all-in CAC and can forecast their LTV, they can put their investment dollars to work in the right areas to fuel more meaningful and enduring growth.

Origin story: We first got to know the Pepper team when we backed James Borow’s company SHIFT, a platform that helped brands execute marketing plans, whose technology Snap acquired in 2016. The team cut their teeth as early employees at Snap. There, they launched and grew the company’s self-service business and were instrumental in helping build Snap’s revenue from zero to more than $1.2 billion over the course of three years, before teaming up to found Pepper last spring.

Why we’re betting on it: While at Snap, Pepper’s founding team saw the following problem first-hand: the fastest-growing e-commerce companies received poor payment terms from digital platforms because they didn’t have a traditional profit and loss (P&L), even though they were spending the most money and had deep pockets, often from venture funding. From our experience backing and supporting DTC companies in our portfolio, we can attest that this pain point is real. The product Pepper is building will be the best solution to help brands build sustainable companies by getting the most mileage from their money.

Our take: When our DTC investments get funded, especially at the Series A and later, a large portion of that capital goes towards digital advertising. If those businesses knew how investing money in different areas would benefit their business, they might use that hard-earned capital on product development or to improve the customer experience instead. There are fintech solutions for almost every category imaginable, both consumer and enterprise, so it’s fitting that this solution should exist for DTC companies as well. With their deep expertise and market savvy, Pepper’s cofounders are the right team to build this solution.

Further reading: “Pepper, founded by five Snap alums, has raised $5.6 million to help startups analyze their spend” via TechCrunch

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