Scaling the Growth to Scale Impact
Every operator in the impact space, if they’re successful, will confront a choice at some point in their evolution — whether to accept outside capital and potentially sacrifice control or remain independent and avoid any temptation that might undermine a social or environmental mission. Stuart Landesberg, the co-founder and CEO of Grove Collaborative, is proof these choices don’t have be mutually exclusive.
Grove Collaborative, for the uninitiated, is among the fastest growing sustainable names in the consumer-packaged goods (CPG) sector. The industry is among the most fiercely competitive areas across the economy, but it’s also a sector that presents nearly unlimited opportunity to change consumption habits, at least to those with an environmental mission. Grove, which obtained Certified B Corp. status in 2014, does this through over 150 high-performing eco-friendly brands, with 400-plus SKUs, ranging from household cleaning and personal-care products to baby, pet care, beauty and paper products (tree-free, of course), among other lines of consumer goods.
Grove’s vision is to create a world “where all choices are sustainable choices.” To appreciate how ambitious this mission really is, consider that no other sector creates or utilizes more plastic than the packaging that goes into consumer products – estimated at over 14.5 million tons, as of 2018. Of that plastic, not even one-tenth is recycled annually. So to even begin making a dent, any would-be change agent has to do far more than just provide planet-friendly alternatives – they have to change consumer behaviors, create a market that facilitates a sustainable supply chain, and ultimately present enough of a threat that the dominant incumbents in the CPG space are forced to react and alter their own approach to business. Developing a better competitive alternative is just a start; in CPG, scale is equally important to drive impact.
After Grove Collaborative went public through a combination with Richard Branson’s SPAC in June, valuing the company at $1.9 billion after its first day of trading, it’s safe to assume the company’s peers are indeed taking notice. But Stuart Landesberg’s journey to get to this point underscores the role of the capital markets – and the impact investing space, in particular – to recognize the vision of entrepreneurs tackling society’s biggest problems and help fund these efforts through mission-aligned capital.
Survival of the Persistent
In recounting his startup story, Stuart will often note it took Grove nearly five years to secure its first Series A round investment. In the preceding years, Grove approached 176 venture capital firms, and secured 75 meetings, but emerged with exactly zero term sheets for its efforts. In hindsight, Landesberg credits the fundraising failures with forcing the senior team to get in front of the market and better understand their core customer and what that customer was looking for in sustainable products. At the same time, to meet payroll, manufacture and distribute its products, and create brand awareness, capital is required. The company secured its first investment in 2016 and hasn’t looked back.
“The key for us was to show up as our authentic selves,” Landesberg recalls. “Our intention is to create a business that drives positive change, and we weren’t going to stray from our mission to tell investors what they wanted to hear… You don’t need everyone to love you; you just need one to recognize the opportunity.”
The company takes the same persistent approach in the pursuit of its mission. Grove Collaborative was the first plastic-neutral retailer in the world. For every ounce of plastic used in the packaging of the company’s products, Grove collects and recycles an equal amount of plastic pollution through a partnership with rePurpose Global. Beyond the obvious impact on the environment, through its commitment to plastic-neutrality, the company creates a financial incentive to get out of plastics entirely. And it has set a goal of doing so by 2025. This commitment shapes everything, from finding new alternatives across its supply chain and creating awareness among consumers to innovating around new materials, technologies and logistics required to enable a full assortment of plastic-free products.
Funding Innovation, Scaling Impact
Landesberg notes that the company’s early funding put Grove on a new trajectory. But while the transition to the public markets, at first blush, may seem like the culmination of Grove’s growth story, over the 50- or even 100-year timeline that Landesberg envisions, the combination with Richard Branson’s SPAC, Virgin Group Acquisition Corp. II, is just another milestone that reflects a secular shift still very much in its early innings.
Landesberg and his business partner Jordan Savage recognized when they launched Grove Collaborative 10 years ago, that over a 30- to 50-year window, it was inconceivable that single-use plastics wouldn’t become obsolete. It’s not unlike the shift that occurred the previous decade when, after years of incremental awareness and slow momentum, consumers seemingly stopped using Styrofoam products overnight or, in the 1980s, when the population suddenly decided to start wearing seatbelts.
“The climate crisis is in front of consumers every single day,” Landesberg describes. “When they recognize the government isn’t going to solve it, many will begin to change their own habits. When people put their own money behind solving societal problems, capital flows tend to follow.”
And by reinvesting in innovation, Grove amplifies and accelerates its first-mover advantage, creating what Landesberg refers to as a virtuous flywheel.
“As the business gets larger,” he describes, “Our data improves and our resourcing improves, which allows us to invest in better, higher-quality innovations that are more sustainable, drive top-line growth, and improve margins.”
At the end of the day, though, Landesberg views financial performance as an enabling tool to effect change. “If I make 10x the amount of money in reaching one-tenth the number of consumers, I would consider that to be a failure,” he says.
He also recognizes that no amount of capital or funding can make up for a product that isn’t effective or comparable to existing alternatives. This explains why it’s so critical to continually invest in innovation and seek out direct feedback from customers. “Our goal from Day One was to scale our impact,” he adds. “We have partners who understand our mission and appreciate what makes Grove special.”
Landesberg may have a long-term view on the business, but his sense of urgency is driven by the climate crisis and the irreversible damage being done to the planet. “The time for change is now,” he stresses, underscoring why Grove is so focused on accelerating both the company’s growth and impact.