CAKE
Setting the Scene
Customer acquisition for consumer fashion brands is broken, with engagement more difficult than ever to capture.
Challenges for brands:
Declining Loyalty: Gen Z and Millennials constantly switch between brands due to unlimited choices, no switching costs, and a lack of meaningful rewards or incentives.
Ineffective Channels: Traditional methods like digital advertising, influencer marketing, and wholesale are increasingly expensive and deliver diminishing returns.
This week’s company offers a platform that bridges the gap between brands and consumers by delivering value to both.
In a Sentence
CAKE is membership-based platform that connects brands with consumers, who, in turn, gain access to exclusive perks from these retailers.
Brands: Companies gain a performance-driven channel to acquire high-intent customers by offering discounts through the platform, which is still more cost-effective than traditional customer acquisition methods.
Perks: Shoppers unlock exclusive benefits like elevated discounts, private sales, and unique brand experiences.
Bulleted Version:
- CAKE is like Costco for luxury shoppers, offering members exclusive perks and special discounts, while brands gain a results-driven channel where they only pay when customers make purchases.
The Basics
- Headquarters: Boston and New York
- Employee Count: 6
- Investors:
Launchpad Venture Group, Boston Seed Capital, XFactor Ventures, and others.
- Funding amount: $2M
- Business model: $100 yearly membership with expansion opportunities in affiliate fees from brands, exclusive drops, and paid brand promotions.
- Early traction: Signed 63 premium brands, generated $117K ARR from 2,011 members, and delivered 80% higher AOV for brands compared to other sales channels.
Due Diligence
WHAT WE LIKE
Market Opportunity: The $1.2 trillion retail e-commerce market is ripe for disruption, offering an untapped opportunity to connect premium brands struggling with costly customer acquisition to high-spending shoppers seeking personalized engagement.
Customer Acquisition Challenges: CAKE addresses the growing inefficiency of traditional acquisition channels like digital ads and influencer marketing by offering brands a performance-based model that ensures ROI.
Consumer Insights: By tracking every shopper’s purchases across the platform, CAKE provides brands with rich behavioral data for personalized marketing, precise targeting, and discovery optimization.
POTENTIAL RISKS
Brand Dependence: CAKE’s success hinges on maintaining and expanding premium brand partnerships, requiring constant value delivery for both sides.
Scalability of Membership Growth: Sustaining high organic acquisition rates while keeping CAC low will be critical for long-term success.
Consumer Retention Risk: As novelty wanes, there is a risk that members may disengage or discontinue their membership if they perceive diminishing value or choose to bypass CAKE to engage directly with brands.
Founder Profile
Ben Fischman, Chairman: Founder of Ruelala, Lids, M Gemini, and multiple other startups.
Dave McLaughlin, CEO: 3x founder with two exits and previously SVP of Membership at WeWork Labs.
Estelle Palandjian, Head of Community: Former VC at Boston Seed Capital .
Comps
MILE: Backed by LVMH Luxury Ventures and others.
YaySay: Backed by Lightspeed Venture Partners, Afore Capital, Habitat Partners, and others.
Why CAKE
By creating a platform where brands can efficiently acquire customers while shoppers enjoy sweet perks, CAKE is well positioned to eventually expand beyond the fashion industry.
