As funding for emerging CPG brands becomes more selective, investors are looking harder at what separates viable companies from the rest.
While check sizes, stages and timelines vary, investors during the Startup CPG Founders & Funders event in New York City aligned on the same priorities: Founders still matter most, but only when paired with clear traction, disciplined growth and a sharp value proposition.
Diligence starts with the founder – but doesn’t end there
Diligence begins with the people behind the brand, according to early-stage investor Alex Malamatinas, founder and managing partner at Melitas Ventures,
“The first thing is getting to know the founder and the team,” Malamatinas said. From there, Melitas evaluates product positioning and early financial traction, focusing on seed and Series A brands with initial product-market fit.
Metrics matter, but context matters more. Malamatinas noted that the diligence process can move quickly – sometimes within a month – if founders are organized and responsive. More often, delays happen when financials, channel data or operational details aren’t buttoned up.
Growth-stage investor Prelude Growth Partners takes a similarly rigorous but category-driven approach. Partner William Quartner said Prelude typically invests $20 million to $75 million and spends significant time upfront before issuing a term sheet.
“We are very precious with our term sheets,” Quartner said, explaining that Prelude prefers deep certainty about a brand’s worth over competitive bidding. That conviction is built through category expertise, consumer insights and proof that the brand’s positioning resonates in the real world.
Midnight Venture Partners, which invests across stages, echoed the need for patience.
“As a founder, I’d be prepared for longer than whatever you are underwriting,” said Co-Founder and Partner Ryan Springer. Even when deals move fast, Midnight prioritizes spending meaningful time with founders to understand how they operate under pressure.
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Growth over profitability – at least early on
Investors pushed back on the idea that early-stage brands must be profitable to raise capital.
“Profitability is important, but it’s not the goal for us – it’s growth,” Springer said. He cautioned founders against over-optimizing for short-term profits at the expense of scale, noting that VCs ultimately look for businesses that can grow fast enough to justify venture returns.
Malamatinas agreed, emphasizing that Melitas looks for a path to profitability, not immediate earnings, alongside strong growth. What that growth looks like depends on the channel: retention and repeat purchase rates for DTC brands, or velocities and category benchmarks for retail brands.
For Prelude, growth must be paired with proof points. Quartner said the firm looks for evidence that a brand has figured out its playbook – whether that’s success in key retail accounts, strong DTC performance or consistent consumer repeat behavior – before leaning in at scale.
Consumer resonance is the final unlock
When it comes to what ultimately “seals the deal,” Quartner pointed to one thing above all else: consumer love.
Prelude conducts consumer research during its evaluation process, looking for signs of genuine resonance – whether through repeat purchase, velocity or qualitative feedback.
“That’s the ceiling for us,” Quartner said. “Everything else flows from there.”
Springer framed the final decision through the lens of founder competitiveness. He asks whether the founder is someone he would be intimidated to compete against – someone who will outwork obstacles and persist even when logic says to quit.
Malamatinas described the last stage of evaluation as confirmation. Once excitement is established, the focus shifts to verifying that the founder, brand and metrics hold up under scrutiny.
Common pitfalls founders should avoid
The panel also highlighted patterns that tend to derail otherwise promising brands.
Malamatinas cautioned against betting on future fixes, whether that is assuming margins will improve or expecting a new channel to magically unlock growth.
“There’s a reason later-stage investors want to see more traction in proven channels,” he said.
Quartner flagged pricing and margin discipline as a critical predictor of success. Brands entering with weak gross margins often struggle to scale, particularly if their manufacturer’s suggested retail price doesn’t support future cost increases.
Springer added two specific warnings: scaling before truly outperforming benchmarks, and taking on significant debt too early. Early debt can limit flexibility during downturns and complicate future fundraising, especially if a brand enters a raise already over-leveraged.
The takeaway for founders
Despite differences in stage and strategy, the investors converged on a clear message: strong brands are built deliberately. Winners tend to have simple, clear value propositions, focused channel strategies and founders who balance conviction with coachability.
For emerging CPG brands navigating fundraising, the advice was consistent: Get your house in order, know your metrics inside out, prove consumer demand, and be honest about what is working now, not what might work later.
