Founded in 2017, Provenance is a Los Angeles-based growth-oriented investor in the consumer space with approximately $240 million of capital under management. The firm was designed from inception to address both the increasing brand fragmentation in virtually every category of consumer spending, as well as the increasing complexity of being an omnichannel business today. The firm’s unique suite of analytics tools and its professionals’ deep operational expertise across a wide variety of categories help brands build omnichannel growth strategies around their high-value core customers.
While the increasing number of niche brands in virtually every category of consumer spending has been reported on for a number of years, research is now beginning to illustrate the specific impact that brand proliferation has had on household purchasing patterns. In “The Rise of Niche Consumption” by Joseph Vavra and Brent Neiman (2019), the authors show that while market share for any given brand across the aggregate consumer household base has steadily declined over the last two decades, the concentration of brands purchased at the household level has actually risen. In other words, any given household is increasingly more loyal to a smaller number of brands in spite of the fact that brand choice has grown.
“While the consumer now has limitless choice, they are loyal to brands that are a strong reflection of their own individual tastes and values,” says Anthony Choe, managing partner of Provenance, “so we built a suite of tools to help us, and the brands we work with, identify and serve the unique audience of consumers where their brand has strong resonance. We like to say that brands have a community, not a TAM (or Total Addressable Market). They share a common set of psychographic characteristics, and these characteristics stay incredibly consistent as a brand scales.” For example, for one of its investments in Marine Layer, a casual lifestyle apparel brand reflecting the effortless California ethos, four out of 71 potential household types continue to represent approximately the same mix of the overall revenue, even as the company has quadrupled in size over the last five years.
“We are customer- and innovation-obsessed,” said Paula Sutter, partner at Provenance, “A brand’s success is always equal parts magic and logic, and we seek to preserve that balance as a brand grows. The magic is how the brand resonates with a particular community of consumers, and the logic is using our data and operating experience to help brands scale into finding more like-minded consumers in the community. Sharing our data-driven insights with our brands’ teams helps keep us aligned every step of the way,”
Sutter adds, “There is no one-size-fits-all plan for our brands, because each of our brands has such a unique ethos and community that they serve.”
In addition to utilizing demographic and psychographic data to help define a brand’s core customer, Provenance also utilizes predictive customer lifetime value analytics to also precisely define customer behavior by channel. “We believe that staying focused on the core community of consumers is critical to maintaining the brand’s ethos, yet every brand seeks to grow its audience meaningfully. Our predictive analytics help us to guide our companies to sharpen their goals for return on investment in each channel in order to grow efficiently,” says Choe. Provenance has backtested the performance of its predictive models on its portfolio companies, and has predicted transaction error rates of less than 4% among existing customers. Sutter added: “When every brand is now almost by definition a niche brand, it is incredibly important to be efficient in reaching those customers in each channel of distribution.”
Provenance has found in its due diligence that 18% of US households are driving 63% of the spending on brands across a broad array of consumer categories, based on a sample of approximately 40 million consumer households. While correlated with income, these households aren’t exclusively the highest income earners in the US, and span four different generations. “With most brands targeting these same households, being ruthlessly efficient about reaching them is incredibly important to long term brand success, especially as the capital markets have become less forgiving about supplying capital for growth,” says Choe. “Our analytics help inform the strategy, but our experience as operators and strategists in consumer helps build a game plan for growth,” noted Sutter. “Data doesn’t create the game plan - we do.”
Provenance has deployed approximately 50% of its current fund across five portfolio companies: MeUndies, Fireclay Tile, Ten Thousand, Caddis, and Makeup by Mario. It also has invested in Dagne Dover, Knot Standard, and Marine Layer. The firm expects to deploy the remainder of the fund and harvest a few of its investments over the next two years, continuing its highly differentiated approach to investing.
“The world is extraordinarily data-rich, especially in the consumer space. We see that neither brands nor investors are using the available data fully,” says Choe. “At Provenance, we’re trying to change that, and in the process help our brands be the best versions of themselves.”
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