A chat with Daniel Faierman of Habitat Partners

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Art > Science

The single biggest disconnect in early-stage CPG fundraising:

👉 Valuations

We’ve seen hundreds of pitches in the past 18 months and the gap between what founders think their business is worth and what investors are willing to pay has never been more pronounced.

Why the misalignment?

Mainly b/c the valuation metrics that apply to a $20m brand simply don’t translate to one doing $2m in revenue.

Metrics like EBITDA/revenue multiples and tools like DCFs are essentially useless in seed funding.

“Valuing early-stage CPG brands is far more art than science. You’re making judgement calls and there’s just not enough data to plug into a model. So instead, you’re pattern-matching, drawing from past experience, and trying to find signal in a messy picture.” - Dan

At this stage, valuation is much more about triangulation vs. calculation.

So what factors matter most in this process?

Five Key Drivers

1. Founding Team Experience
2. All-in Gross Margin
3. Proof of Retail Velocity
4. Brand Addressable Market
5. Exit Potential

Habitat portfolio company, Pop-up Bagels

Founding Team Experience

With limited metrics at play the experience level of the founding team becomes the clearest indicator of future performance. Investors are drawn to founders who’ve either built something before or have deep functional experience in the relevant category:

“There’s a ton of fragmentation in early-stage CPG. It’s easy to get excited by a cool brand, but we’re looking for founders with real operating range. That could be deep supply chain knowledge, or a clear command of brand strategy. Ideally both.” - Dan

Second-time founders and operators from breakout brands get more credit, especially if they understand the gritty realities of scaling: margin management, channel conflict, co-man challenges, capital efficiency, etc.

On the other hand, first-time founders without category fluency often struggle to justify higher valuations or secure institutional backing.

All-In Gross Margin

Few numbers tell investors more about a brand’s viability than its All-In gross margin.

All-in margin = product (COGS) + freight, fulfillment, and warehousing. If that number is flawed, everything downstream becomes harder to scale:

“If your gross margins are broken, nothing else really matters. You can’t fix them easily without changing the product. And strategics won’t want to either.” - Dan.

Target ranges vary drastically by category. For packaged food, 30-35% is viable. For beauty and body care it should be closer to 60%.

These margins aren’t just about profitability down the line. They determine how much a brand can invest in trade spend, marketing, and headcount today without burning unsustainable amounts of cash.

Retail Velocity

While getting on-shelf is a milestone worth celebrating, velocity tells the real story.

Investors are less interested in how many stores a brand is in and more focused on how it performs in each one.

“Retail velocity is the proof point we care about most. You don’t need to be in 5,000 doors—but if you’re doing double-digit units per store per week in a respected retailer, that tells us a lot.” - Dan.

High velocity in limited doors signals real consumer demand with scale potential. It shows the brand can drive repeat purchases without relying entirely on outsized promo budgets.

Brand Addressable Market

Category size is a starting point, but what matters most is how much of it a brand can realistically own. This goes beyond broad TAM and focuses on brand-specific addressability.

That means understanding target consumers, price positioning, and how the product fits into existing shopper habits.

“We look at whether this brand can carve out a sizable piece of a real market,” Dan explained. “That means right format, right price, right timing. We're not just betting on the category, we're betting on how much of it this team can win.” - Dan.

Investors want to see founders who have thought critically about where they fit and how big their slice can be. The best pitches go beyond market theory and make a compelling case for real-world share.

Exit Potential

Every early-stage investment is ultimately an exit bet.

It’s not just about growth, but who might buy it, why, and when.

This means thinking through detailed acquisition scenarios based on all factors listed above.

“If a big CPG player can’t materially improve your margin or scale your distribution, they’re probably not buying you.” - Dan.

At the seed stage, that lens heavily influences valuation. If the only way to justify a high price is to assume multiple massive capital raises and long-term dilution, it's likely not a fit.

Investors want to see a believable pathway to acquisition, not just a theoretical one.

Startup CPG Valuations