Why Tim Armstrong Invested in Iris Nova to Launch His DTC Company

The former Oath CEO explained his new venture at Brandweek: Challenger Brands

Tim Armstrong explains why he's investing in Iris Nova's Zak Normandin. Sean T. Smith for Adweek

Before former Oath CEO Tim Armstrong officially launched his new venture, the dtx company, he showed off his first investment—an unmanned store for healthy beverages that relies on text message payments—to a fellow investor, the investor was left bewilderingly asking, “This is your first investment?”

How could a company that relies on the honor system be a good idea? Armstrong sunk his money into two brands, Dirty Lemon and The Drug Store, and their founder Zak Normandin because of their potential to revolutionize the consumer experience.

The concept of The Drug Store is simple: Consumers enter the store, grab a Dirty Lemon beverage, text the company what they bought and leave. That creates a frictionless experience with no cashiers and no waiting in lines. It also means Iris Nova, the parent company of Dirty Lemon and The Drug Store, must trust its customers to pay.

Normandin’s company caught the attention of Armstrong not just because it’s the first company worldwide to sell beverages through text messages, but because Normandin built what he believes is the perfect kind of DTC: It finds middle ground between its online and retail experience.

Armstrong, who created the dtx company to introduce more people to direct-to-consumer companies through experiences, is also interested in finding “groundbreaking founders” in the space like Normandin to back.

“Very few people on the planet have as deep a viewpoint on where consumer brands are going, where retail is going,” Armstrong said of Normandin at Adweek’s Brandweek: Challenger Brands conference.

Armstrong said he wants more brands to put more focus on the customer experience, and Normandin’s innovative text message payments meet that criteria in two ways. First, he wanted customers to be able to order from anywhere. After consumers link their credit card to their phone number through Dirty Lemon’s website, they can text their orders to the company and then typically receive their purchases on the same day or next day. Customers can also buy Dirty Lemon products at The Drug Store by grabbing a beverage and texting the company what they bought.

Video/Editor: Nick Gardner

Normandin chose text messaging because it’s the most “ubiquitous form of communication” in the world. He thinks it’s a more natural action than apps, which create an extra hurdle for customers to clear as apps require users to learn a new behavior.

Despite its simplicity, it does come with its obstacles. “Our theft is under 5 percent, and I think it’s mostly people who are confused because it’s such a new consumer behavior,” Normandin said.

As Iris Nova scales, Normandin sees the potential to launch new skews that take advantage of the company’s infrastructure. With seven warehouses nationwide, the company offers express delivery at no cost. Initially, Dirty Lemon subsidized shipping fees, but no longer needs to thanks to the way the company’s grown.

In addition to Dirty Lemon, Armstrong revealed on Thursday that the dtx company is also investing in female-focused companies Olive & June, Third Love, Margaux and Argent, as well as Niche, which allows consumers to compare schools and neighborhoods. For the experience side of the business, CNBC reported that Armstrong plans to create pop-up events that are a mix of Coachella and CES, where consumers can test products from DTC brands.