Spring 2020-2021


Sarah Runkle

“We’re Not a Vitamin Company, We’re a Tech Company”
A memo for investors considering the supplements space



Better sleep, clearer skin, fewer mood swings — all this could be yours, for the price of a $30+/month monthly supplement subscription. We couldn’t figure out how to put this all in one pill, so you’ll have to take a few different types to see these results. Why don’t you take our wellness quiz to see what personalized formulations would work best for you? And remember — if you don’t see results within 4-6 weeks, stick at it for a full 3+ months to make sure your body is fully adjusting.

You might have seen some supplement ads like this before as a consumer, and now we can investigate this from an investor perspective. If it’s been a while since your last science class, we can start with a brief review of vitamins and minerals. Vitamins are organic compounds, typically available naturally through a healthy diet, that act as essential nutrients for the body. Minerals, inorganic compounds in the form of major minerals and trace minerals, also add nutritional value (Sodium is probably your favorite). So where does the word “Supplement” come into all of this? Supplements are a formulation of a combination of vitamins, minerals, and/or herbs meant to supplement your typical diet.

Vitamins sound healthy, right? Vitamin C supports a healthy immune system, and a healthy immune system is more important than ever now! Not so fast. Most doctors only recommend vitamins to people with specific health conditions.1 For example, pregnant women, the vegetable-avoidant (who are not getting enough vitamins and minerals naturally), and people with specific medical concerns (e.g. chronic intestinal conditions). For most people, it is medically recommended to follow USDA guidelines for a healthy, diverse diet filled with plenty of fresh fruits and vegetables; most who do so have no need for additional supplementation.

1 https://health.clevelandclinic.org/the-best-time-to-take-vitamins/

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So, do they work? That’s the (Billion dollar) question. Dietary supplements are not regulated by the FDA as pharmaceuticals, as they are seen as a food product for nutritional purposes. There are strict rules about how supplement companies can market their products, and companies must list on their products that “This statement has not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease.” 2 Consumers are left to do their own research about brands and ingredients, but unfortunately consumers often don’t understand what constitutes scientific proof. Any effects they see may be a result of the placebo effect or other changes in their lifestyle (e.g. starting to eat healthier at the same time as starting a multivitamin). Even if I can’t tell they’re doing much for me, they can’t be harming me, right?

Unfortunately, that’s not always the case. Certain types of herbs and supplements, for example St. John’s Wort, have known interactions with medications. 3 Consumers who are taking multiple types of supplements and/or already getting enough of a nutrient from food can also go above recommended upper safe limits for these nutrients. There have also been multiple cases of poor quality control for supplement batches leading to medical harm for patients, for example a batch of supplements in 2008 that accidentally had 200 times the labeled amount of selenium, causing selenium toxicity in over 200 patients, many who “often stated they had not suspected that a health product made them ill, and thus never mentioned to their health care providers that they were taking the implicated dietary supplement.” 4 Additionally, it cannot be understated that these products are often expensive, and many people see these purchases as an important health investment rather than a lifestyle/beauty purchase.
A lot of people are buying vitamins, minerals, and supplements. Far more, it would seem, than might be strictly medically necessary. The National Health and Nutrition Examination Survey (NHANES), a nationally representative survey, has been tracking the consumption of


2 https://ods.od.nih.gov/About/DSHEA_Wording.aspx
3 https://www.fda.gov/food/information-consumers-using-dietary-supplements/tips-dietary-supplement-users
4 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3225252/


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dietary supplements periodically since 1971.5 The NHANES data shows that regular dietary supplement usage has increased from 32.9% of U.S. adults in 1971-1974 to 52% of adults in 2011-2012. When people were asked in a separate study why they take these supplements, the most common reason was “to improve health,” (45%), though only 23% of respondents used these dietary supplements based on a recommendation from a health care provider.6 Statista estimated the United States Vitamins and Minerals market (by revenue) at 20B in 2019, and the larger Dietary Supplement market at 39B in 2019.7
Based on the numbers, dietary supplements are potentially an interesting space for investors. It’s a crowded market, with hundreds of supplement companies and thousands of products in the United States alone. However, some brands have still been able to make a big name for themselves, for example OLLY, acquired by Unilever, and Vital Proteins, acquired by Nestle Health Science. After reviewing medical guidance on supplementation, U.S. regulations on the industry, and over a dozen supplement company websites, I’ve come up with this list of discussion items for potential investors to consider when considering a supplement startup. To make this discussion more concrete, for each question I offer my insights from a review of selected supplement companies.

Questions for potential investors to consider:

1. What is the goal and differentiating factor of the company? Is it focusing on a specific set of health “concerns” or aiming to expand to a broader market?

Almost by definition, companies that are trying to expand to a broader market will have to explore many different ingredients. It becomes massively more complex to try to create a full line of products with dozens of ingredients, as many scientific experts only study a select number of conditions/ingredients, and companies would have to do extensive research on these ingredients.

5 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6516064/
6 https://pubmed.ncbi.nlm.nih.gov/23381623/
7 https://www.statista.com/outlook/cmo/otc-pharmaceuticals/vitamins-minerals/worldwide#revenue, https://www.statista.com/statistics/828481/total-dietary-supplements-market-size-in-the-us/



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However, from an investor perspective, it is important to know where a company is going next and what their expansion potential is. If they are just trying to treat a specific condition (e.g. ZitSticka with acne, FLO with PMS symptoms), can they expand beyond that? Is that market large enough to be interesting?

 2.  What is the scientific and/or medical background of the team? What role does science have in their product marketing?

The founding team and/or leadership team should have some scientific expertise. Medical training does not include a large amount of information on supplements other than basic training on vitamins/minerals deficiencies and overdoses. Having staff with a medical background can help ensure that companies are reading through scientific research appropriately. However, there’s a fine line with talking up the scientific/medical background of the team. Because supplements can’t make healthcare claims, a scientific leadership team can help bolster consumer trust in the company, but it still can’t claim to be a healthcare company.

Several companies (e.g. Ritual, HUM Nutrition) actually have consumer education blog posts that help consumers understand what counts as scientific evidence and what to trust in a study.8 However, it can take years of practice (as well as statistics classes and biology/physiology background) to truly gain scientific literacy when reading healthcare studies. All of these companies couch their supplements with “we recommend speaking with your doctor,” but it is likely that your doctor doesn’t know the latest research about Mugwort or Chasteberry. This is a legal liability issue — people write the same things with nutrition books or exercise products. Your doctor likely won’t have the answers, because these products are not medically regulated.

Very few companies actually run clinical research (in-house or externally validated trials) on the actual supplement itself, but rather create formulations with individual ingredients that may show some clinical evidence. Some supplement companies don’t share the specific

8 https://ritual.com/articles/clinical-trial-results, https://www.humnutrition.com/science


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amounts of vitamins/minerals/herbs that are included in the supplement. If a study shows X micrograms were potentially effective, will the Y micrograms in this supplement be effective? Will anything change because Y is also in combination with ABC other ingredients? What about potential interactions with medications you’re on? The delivery method may matter as well (gummies, liquid, powder, or capsules) both because it affects the amount of ingredients that can be included as well as the absorption effectiveness/timeline.9

3. What role will user reviews/ personal attestations play on their site?

“I suffered from acne for years and I’ve tried everything, this is the only thing that has worked!” Who wouldn’t find this compelling? Positive user reviews can be a highly effective way of increasing product sales. Reading through supplement company reviews, there are many people who swear by these products, making health claims that these companies are not allowed to make themselves. Some brands (e.g. FLO, Vital Proteins) have invested in celebrity partnerships and influencer strategies to create higher-visibility personal attestation content.
User reviews are particularly important for supplement companies because they offer “proof” that their products work — and the company is not making these claims, so they’re off the hook for it. Site reviews, instagram posts, or influencer videos — the user review strategy the company follows is absolutely critical in the supplement space, far more so than most consumer products.



There are thousands of dietary supplement products out there, just search for yourself in the national Dietary Supplement Label Database.10 Looking for Melatonin? You’ve got 546 products you can consider. These companies all have access to the same academic scientific research on vitamins/minerals/herbs, unless they are taking a highly scientific approach by doing their own proprietary extraction/formulation methods (which some companies are). So what can differentiate a company in this space? From both an investor perspective and a consumer perspective, I recommend doing your research on what this company’s truly differentiating factor is in this challenging space.

9 https://health.clevelandclinic.org/do-gummy-vitamins-work-as-well-as-traditional-vitamins/
10 https://dsld.od.nih.gov/dsld/index.jsp

Beyond ingredient traceability, scientist-backed formulations and trials, excellent branding and customer service, or an appeal to taste (yummy gummies), my favorite differentiating factor I’ve seen is the combination of supplements with services (e.g. Proper, which pairs sleep supplements with sleep coaching). “We’re not a vitamin company, we’re a tech company,” might not be one you’ve heard before…but it may be a model worth looking into.

































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