March 10, 2022 by Adam Hoeksema
At ProjectionHub we help Direct to Consumer (D2C) startups create financial projections for potential investors or lenders. Although our manufacturing and ecommerce financial projection templates have helped hundreds of entrepreneurs create projections, one common question we get from clients is how to know whether projections are realistic when compared to other existing businesses. StarterStory has an incredible database of over 2,600 startup case studies which include many in the D2C Product space, so we pulled together and analyzed a group of 99 D2C startups to learn more about what these companies actually generate in terms of revenue.
In addition to D2C startups, we also analyzed data from Marketplace, B2B Software and B2C software startups, so if you want more data you can see Startup Revenue Stats: A Study of 234 Tech Startups 
For now, let’s dig into our D2C ecommerce data.
About the D2C Startup Study
We were able to break up the 99 startups into the following business stages:
- Less than 2 years old
- 2 Years to 4 years old
- Greater than 4 years old
You can see how our sample startups broke down between these stages.
Additionally, we were able to estimate which companies raised investment vs. which companies bootstrapped. You can read more about our methodology for estimating here.
Examples of D2C Product Startups
We wanted to make sure that we are all on the same page when we say “D2C Product Startup” so what do we mean by this?
CB Insights says:
“Direct-to-consumer (or D2C) companies manufacture and ship their products directly to buyers without relying on traditional stores or other middlemen.”
Some popular D2C companies include:
- Warby Parker - D2C Glasses
- Dollar Shave Club - D2C Razor blades and supplies
- EightSleep - D2C Smart Mattresses
You can also find the D2C Case Studies that we pulled our data from here - StarterStory Case Studies.
D2C Product Startup Revenue Stats
With the basic study breakdown out of the way, let’s dive into some of the interesting data that we found.
D2C Product Startups may be Fastest Way to $1 million in Revenue
When compared to 2 sided Marketplaces, and B2B and B2C Software businesses, our cohort of D2C startups were faster to reach $1 million in annual revenue.
In this graph you will see the D2C Product Startup annual revenue numbers broken out separately.
D2C Product Startups Experience Slower Revenue Growth than Other Tech Startups
D2C startups might be quick out of the gate to reach $1 million in revenue, but we found that revenue growth slowed dramatically in future years when compared to the software startups in our study.
This makes sense as D2C product companies start to run into real world constraints with manufacturing, warehousing, logistics, and supply chain that all create complexities that make growth more difficult to maintain. Software startups on the other hand have zero or close to zero cost to sell an additional unit. There are no material costs, no storage or transportation costs, so growth can actually accelerate for software startups.
Average Revenue per Employee for a D2C Product Startup is Over $500,000
When our clients are working on eCommerce financial projections they often want to know when they should project to hire additional staff. Our study found that the average D2C Product startup generated $558,000 in annual revenue per employee.
You will notice that D2C companies generate significantly more in annual revenue than their software startup counterparts. This is likely because D2C product companies have significant Cost of Goods Sold costs to manufacture and deliver the products that they sell. Forbes states that successful D2C companies may have gross profit margins as low as 50%, in other words, their COGS is 50%. This means that a company with $500,000 in annual revenue would only have $250,000 in gross profit available to pay expenses like employee salaries, advertising, and other SG&A expenses. You can calculate your cost of goods sold with our Free COGS Calculator.
It is also useful to see how annual revenue per employee grows over time. In the early years you might expect a much lower annual revenue per employee, but you will see that it levels out around the $550,000 level over time.
How Many Employees do D2C Product Startups Have?
We also wanted to see how many employees the average D2C startup had at various stages of their business lifecycle and how the employee count differed between companies that raised investment versus those that bootstrapped.
We found that companies that raised investment had materially more employees on staff in the 2-4 year old and 4+ years old stages as seen below:
It is clear that raising investment allowed these companies in the study to hire more employees when compared to their bootstrapped counterparts.
A couple of key takeaways from the study.
- Although it might be the fastest way to build a $1 million annual revenue startup, a D2C startup is likely to have a lower ceiling on potential revenue when compared to software startups.
- Growth slows as the physical world creates bottlenecks for D2C companies. Even Tesla, has trouble manufacturing enough vehicles to keep up with demand.
- Don’t overhire! Although $500,000 might seem like a lot of revenue, once you take out cost of goods sold, you may not have as much as you think left over to pay salaries.
Let us know what questions you have about the study - Contact Us.