How Red Antler quietly built its venture arm Habitat Partners

Founded in 2022, Habitat Partners was established as a separate business entity from Red Antler. But its partners include Red Antler’s founders, JB Osborne and Emily Heyward. With a $31 million initial fund, Habitat Partners has invested in startups ranging from PopUp Bagels to Black Crow, an AI app for Shopify stores. In May, it brought on another partner, Daniel Faierman, who was formerly the general partner at Vitality Ventures. 

While Habitat Partners has been referenced in press releases over the past couple of years, the firm is now trying to make more of a name for itself as it has amassed more of a portfolio; Habitat Partners has invested in 38 companies so far. The hope is that the first fund of Habitat Partners will be so successful that the company can go on to raise fund two. 

“Personally, one of my goals is just to have us recognized as an independent venture capital firm,” Faierman said. “I think we’ll always have a special relationship with Red Antler… but I also want us to get to a point where founders who know nothing maybe even about Red Antler, are coming to Habitat because we can just be really thoughtful partners overall.” 

Blake Lyon, Red Antler’s chief business officer and a managing partner at Habitat Partners, said in an interview that the idea for Habitat Partners was born “out of a bit of FOMO.”

“If [Red Antler was] behind a company that just went to market, the founder would oftentimes say, ‘Hey, can you introduce me to 50 investors that you know?'” Lyon said. “And we would make those introductions, but we didn’t really have the firepower to invest in those rounds.”

In 2019, as a stepping stone to starting its own fund, Red Antler partnered with a small family office to create a pool of capital meant for angel investing in startups, both in and outside of the Red Antler ecosystem. Red Antler’s partners then used the traction they saw from those investments to launch Habitat Partners and raise a fund. 

That’s one of the key distinctions between the type of investing Habitat Partners is looking to do now versus the sweat equity model Red Antler has historically operated under. The hope is that Habitat Partners will be able to attract a wide swath of brands thanks to its connections within the startup ecosystem, some of whom may or may not go on to work with Red Antler. 

Take PopUp Bagels. Its founder, Adam Goldberg, told Modern Retail that he met Red Antler’s founders at a private equity conference a few years ago. Since then, Habitat Partners has invested in PopUp Bagels’ seed round as well as its Series A. Goldberg said that the firm ended up introducing PopUp Bagels to Stripes, the growth equity firm that led PopUp Bagels’ Series A round. Outside of the investments, he said that PopUp Bagels also ended up working with Red Antler to redo its branding. 

“A lot of private equity firms aren’t creative-centric,” Goldberg said. What made him interested in working with Habitat Partners and Red Antler, he said, was their understanding that “there are lots of amazing products out there and if you brand it right, you will get it into everyone’s hands.” 

Red Antler isn’t the first agency to try its hand at startup investing. In the consumer space, Bullish operates as a hybrid agency and venture capital fund, having back brands like Warby Parker and Nom Nom. Another Red Antler competitor, the agency formerly known as Gin Lane, pivoted to launching its own brands, and then acquiring them through a holding company called Pattern Brands. 

But across industries, there’s a long list of companies that have tried something similar. 

Eunice Shin is the founder and CEO of Elume, a growth consultancy ​​focused on customer culture. But years ago, she worked at a law firm that launched a venture group she helped lead. Called Manatt Venture Fund, it launched in 2013 and was born out of investments the firm’s partners had made in startups like Pinterest and Etsy.

“I think any services-related company — accounting, legal, consulting, any type of professional services business that [operates] in the startup economy — has looked at this model before,” she said. 

That’s because there’s a tremendous amount of upside for a firm if one or two startups are sold for a significant amount of money or IPO. Particularly in the branding space, where firms are responsible for bringing an idea to life, or figuring out how a brand will live on shelves, “there is almost an inherent sense of ownership and desire to see that succeed,” Shin said. 

At the same time, she said that Red Antler’s entry into the space comes at a tumultuous time for agencies. Overall, she’s seeing more agencies try to diversify their business to protect themselves against trends like the rise of artificial intelligence. She added that there’s also “been a slowdown in the number of new consumer brands hitting the market — and I think that’s directly tied to venture capital.” Shin pointed out that Habitat Partners could then help fund a new class of startups that, in turn, would have more capital to spend on agencies like Red Antler. 

When asked how a slowdown in venture capital is impacting the types of businesses Red Antler is working with, Lyon replied that Red Antler’s business is “way more diverse than [people] think it is.” Red Antler Group, for example, now encompasses multiple businesses, that work with a wide range of companies including startups and publicly-traded conglomerates. These include Wild Fruit, a presentation design agency, and Fat Earth, an Austin-based creative performance marketing agency that Red Antler took a majority stake in last year.

Still, he said, “the client type of Red Antler normally ebbs and flows with where the innovation dollars are flowing.” For instance, during Covid, he said that Red Antler saw an uptick in interest from telehealth companies. 

Faierman said that Habitat Partners invests anywhere from the pre-seed to Series A rounds, though the seed stage is the most common entry point for the firm. He added that while Habitat Partners occasionally leads pre-seeds, it generally intends to do follow-on funding with fund one. Its average check size is $500,000, though it typically ranges from $250,000 all the way up to $750,000. 

Lyon said the firm invests in both consumer and business-to-business startups. Given Red Antler’s background in branding, Faierman said that one of the key things Habitat Partners will be looking at when considering what companies to back is what kind of brand equity they have.

“Why does it need to exist in the world? And what kind of emotional connection does it make with consumers?” Faierman said. “And that’s where I can really rely on some great creatives and strategists who work pretty closely with me in the same office.”