Interview #4: Sivan Gompers

In this series so far, I have had the pleasure of interviewing a CPG founder and a CPG investor, among others. Today, I had the pleasure of chatting with Sivan Gompers, from Squared Circles, which blends aspects of BOTH investing and operating in the CPG world. I am super excited to share this conversation. Thank you so much, Sivan, for making the time!

This is the fourth conversation in an ongoing series with movers and shakers in the retail industry. Is there anyone you want to hear from? Please be sure to drop their names 👇

The following conversation has been lightly edited for context and clarity.

Sivan Gompers: My background is in consumer, and all that boils down to food and beverage. I always loved watching early iterations of cooking shows, reading Bon Appétit, as well as traveling and learning about different cultures/areas of the world through food. I have also worked in some really awesome companies such as Banza, Anheuser-Busch, and learned a ton operationally along the way. [After learning on the operating side], I pivoted to investing across the consumer space in both CPG, as well as some food and agtech ingredients. That has led me to Squared Circles.

[Squared Circles is] a venture studio that incubates brands that are CPG companies and SKUs. We think [what] sets us apart is having real concentration across themes and categories. Also, being able to combine two things, culture and community. There is a lot of AI talk everywhere, but AI cannot tell you what something tastes like, and it cannot create. It cannot create a community for you, and it can't produce the physical good for you just yet. We are seeing consumers being a bit siloed from the AI takeover [compared to] a lot of other industries. [In terms of product development,] leaning into doing first-person, quantitative and qualitative consumer research is important to us. Scientific IP is [also] really important to us. We think that is a moat that we are able to build, and it is not just a [product with] better-for-you, slightly different ingredients and flavors. It is a real net new product that brings the FOC and clinical data to back it up.

SG: For brands launching on D2C, it is a great way to really test, iterate, and learn really quickly. [You] get really fast feedback from your consumers on what messaging is working and what is not really quickly. Also, [you can] run tests on primary versus secondary messaging, on pricing. But, the goal and the understanding [of launching on D2C] was that it was always going to be a retail play. If you're looking at where cooking oil sales are, if you're looking at the success of Chosen, we always knew that this was going to have to be a retail play, and that [retail] was going to be a channel that we have to go into sooner rather than later. Ultimately, the business was started in D2C, but retail is the place where the business is going to be able to grow and scale, especially as we launch more products. Like, the squeezy bottle and the flavored oils [we launched], that is able to show up in the grocery store in a differentiated way as a brand block.

In addition to retail as the north star, we also unlocked Amazon pretty early. We found that that was a channel where there was a lot of pent-up demand. We were able to look at various keywords, search terms, and sales of other cooking oil brands on Amazon. [These sales were done] in a way that was not cannibalizing any of the other channels, and were able to be really efficient sales on that channel.

SG: In terms of why retail to scale, I think that a lot of it is category dependent. If we are looking at food and beverage, specifically cooking oil, the vast majority of sales for those products are being done in person at the grocery store or Instacart. [We view Instacart as] ultimately still equivalent to retail, although there are ways to tap into platforms like Instacart by partnerships, SEO, ads, etc. For retail specifically, it is a place to be able to scale because you are able to more easily access a broader number of consumers. Specifically, not just going after, for example, coastal consumers that tend to have a higher percentage of D2C sales versus those in the Midwest. One of many things that I think we saw, what made Gruns really successful was that they were able to talk to Middle America Mary, as I like to call her, and have a product that spoke to her, but that also showed up where she shopped. So we are really thinking about [replicating] that for Algae Cooking Club.

In terms of success, I think that velocity is really the only honest number that brands can really show that VCs honestly care about, and that CEO should care about. I think that some consumer VCs are looking at TAM, repeat rate, CAC, and other various D2C-driven metrics. But, I think the number that actually ultimately predicts if a brand is going to survive in retail is the velocity, especially against the shelf set average. I think if you're below the set average after 60-90 days, you are most likely a cut in the next reset. If the brand can't be in at least the top third quartile of the set in year one, then it is going to be really difficult to scale up from there to use that as a data point for other retailers.

I think there is still this notion in CPG, where we just got accepted to this retailer, and this retailer reached out to us, and not that that's not exciting, but being a lot more selective and being okay with saying no until it's the right time to play velocity story versus a net new doors story, [will be better in the long run for the] consumers, VCs, and strategics are sniffing around.

SG: I would say that for all of our brands, even before we are diving into the initial concept stage of our incubation playbook, we're doing consumer research. Both ourselves at Square Circles, talking to not just friends and family, but [also] people outside the network in our consumer groups that have pain points, doing expert interviews, and talking to various clinic clinicians in various fields. Also, through our investors, looking at L Catterton, we are getting really great consumer data as well. That is shaping not just the areas that we're going after, but the problems that we are trying to solve. In all of that, we are really mining what people are saying online and always come back to Reddit. It is an area where people can be truthful and share their problems with other people who are going through the same thing and trying to hack together solutions. [Reddit is] where we bring in the culture.

For each individual brand, we have an incubation playbook that we go through 3 or 4 different stages, depending on the incubation. One of the stages is consumer validation. For a couple of months, once we have some information on the product, the economics, the form factor, and where is it gonna show up from a channel perspective. We then go back to those same networks [to get feedback]. Also, we work with partners like Knit and Listen Labs that help us do AI-enabled surveys to put the concept in front of [consumers] and then go back and iterate from there to get as strong consumer signals as possible on the actual product.

In terms of science, that comes in two ways. We do both top-down and bottom-up builds. A top-down build is if we are really excited about pet health, and we want to build the next pet supplement, and we [decide we] really like the topper idea. We then do concepting with the team, and then we'll go into the product validation stage. We will do a search for ingredients, and we will tap into our science advisors. [Simultaneously] we are trying to get cute with some Claude agents in being able to scrape interesting IP out there. Then, we figure out what ingredient, material, and partner would be good for us to bring into the brand. We are making sure that they have real clinical data. We are doing clinicals, through Citrus Labs, on our end as well. [We like that there] is real science for consumers who care to look deeply into the science.

Bottom is up is where we get introduced to an incredible partner, for instance, who is creating bioidentical breast milk, but the proteins also have other really great efficacy in different areas. Through that, we built Amulet, which is a women's cycle support gummy that combines creatine and lactopharon. A creatine 2.0 for women. They are pioneering research specifically for women's bodies across the menstrual cycle. That is an interesting area of science as well, but we make sure that it is embedded [in our product].

Finally, an area of big science and biotech enables is sustainability [discussion to consumers]. As much as consumers say they want to care about sustainability and want to pay more for the product, when it comes down to it, every study and report shows they just don't put the money where their mouth is. For something like Algae Cooking Club, we are not going to lead with the fact that it creates way fewer GHG emissions, uses less water, etc. But for people who care about that, they will find that messaging on the website.

SG: I think for the categories themselves, there is always the notion of you don't want to be too late, but you don't want to be too early either in creating a net new habit. [In terms of the categories ripe for disruption], a lot of it comes from team pain points. A member of our team, like many people, was going through fertility issues. In going through that with his wife, he was realizing how many of his friends were having the same problem, and just people were talking about it to a societal degree, but were in individual relationships. In digging into more of the consumer and cultural research, he felt like that was something similar [in that market] to ED and hair loss that [these categories] would follow the same trajectory. We try to, in the areas that we're looking at, get the best comps that we have in terms of markets. Then we track where the inflection point for those was and try to be at that same inflection point.

Another piece of it is that across all the brands, we think that [there are] three things for the brands of today and tomorrow that drive the majority of enterprise value. Creativity and brand creative, which ultimately drives the purchase intent. Diving into consumer culture, which drives relevance, eyeballs, earned media, and organic [traffic]. Then the community, which ultimately drives velocity, retention, and long-term lifetime value. We also look at categories that are able to tap into all of those three.

Especially for the skincare brand, both personally and then with folks we talked to, felt like there just weren't any skincare brands built by and for athletes. Specifically, for athletes who spend a lot of their time either playing their sport or training outdoors. The brands of today and tomorrow that are successful, really lean into that community. [In the mind of] the older adage of being something for someone and not everything for everyone, that is what we try to build across all of the brands.

Pet health is definitely one of them. Interestingly, some of the same ties to Swim Club, our male fertility business, where people are having fewer kids, fewer people are deciding even to have kids [are seen in the pet market as well]. Part of that is the declining fertility rates. Part of it is a choice. Even if or when people do decide to have kids, they're having fewer kids and it's later in life. Pets are really taking the place of children. L Catterton was really early on the humanization of pets. That then extends to a lot of really early, exciting brands and science research in longevity. There is a direct line to longevity for pets. People are more willing to spend money on their pets. I would give my pet better food than myself [even] if I could only eat ramen. Many people feel that way [too]. They are willing to be more experimental with their pets, given the relationship, even the lifespan. That is a really exciting place.

[Another interest is] peptides. It is a proof point that consumers are willing to inject themselves with something, or have a doctor inject them, with something that is quite unproven. There is not really a lot of science and research behind them. Many of these people, may be people who don't want to inject themselves with other things, like vaccinations. Pulling back the layers, they want to build personalization, autonomy, and prevention into their lifestyle. There will be some regulation, and [we will see] where that plays out. But, whether it's injectables, whether it's topicals, there's clear consumer interest for [peptides]. Both the increasing [interest on the] science side, and how AI has just really sped up that feedback loop. People are really, clearly interested there.

The final one that is really interesting is hair care. There is a K18, Kilgur, Neutrofol, but not really a ton of others. For things like GLP-1s and other drugs that people are taking, some of the side effects include hair loss. [Hair] is something that is also becoming a status symbol. In looking into social media, having strong, healthy hair and consistently taking good care of it, akin to skin, [is becoming more common]. That is one where it feels like there is pent-up demand, but not yet many brands that are doing much more than preventing breakage or coating with a moisturizer for the hair, but there is more to come there.

I think retail is very much alive. Retail is a living, free breathing thing. On the flip side, as we have seen with our brands, chasing the D2C, Meta, and Google-led engine, there is way less arbitrage there than there was 10 or 15 years ago. For TikTok, maybe you could argue there still is for the next 6 or 12 months, some arbitrage, but, as I mentioned, the velocity is a stat that doesn't lie. Building in retail architecture from day one and treating it as a net new sales channel too, in terms of thinking about product, pack, supply chain, and building that in is really critical. Getting to stronger retail is underrated.

Another underrated area, which ties into retail, is the clinician channel. They are often pushings their consumers to retail or have their own retail or have their own retail hubs. With everyone fighting over the same shelves and fighting over the same meta auction, building through and being approved by clinicians is another area that retail is expanding to.

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