Will any digitally-native brands out-scale and outlast the 20th century heritage brands that came before them? This is the most pressing question for the digitally-native gold rush, which has led investors to pump hundreds of millions of dollars into fledgeling brands. To answer it, one has to evaluate both brand cohorts against a number of vectors: their funding, retail growth, sales milestones, profitability and financial troubles.

This is exactly what we did in the first Special Report from Loose Threads Membership, titled Fast or Frivolous: How building consumer brands is evolving, accelerating and evaporating. It’s the most in-depth report on Digitally-Native Phase 1 Brands—who started between 2008-2012 and include Bonobos, The Honest Company, Happy Socks, Nasty Gal, and Warby Parker—and Digitally-Native Phase 2 Brands—who started after 2012 and include Allbirds, Away and Casper. It is also the only report that compares Digitally-Native Brands to their Heritage Brand counterparts—who were founded in the 20th century and include Comme des Garcons, Nike, Patagonia, Ralph Lauren, and Victoria’s Secret.

While the report covers all of these issues along with case studies, graphics and analysis, there are two specific concepts worth focusing on that are leading indicators of the gold rush’s future: expectations and optionality.

An expectation is the belief in a future outcome, while optionality means one has multiple roads to get to a destination. If a company can sell itself to ten companies it has more optionality than a company that can only sell itself to two companies.

Expectations and optionality are often inversely correlated: lower expectations mean more optionality and vise versa. For example, since Uber has raised over $12 billion, is valued at close to $70 billion and is unprofitable, the expectations surrounding the company are massive and its optionality is very limited. Its only choice is to go public and give its investors the returns they are begging for. If Uber had raised one hundredth of the amount of money it did and was profitable, it would have more options such as remaining a private company or delaying an IPO.

Expectations, like many things in life, are relative. A company’s expected financial performance is one of them. If Company A raises $1 million and says it will use that money to get to $50 million in sales profitably, that’s a pretty good outcome that is highly capital efficient. One could put a fair valuation on this company that would allow both investors and employees to see liquidity for their efforts. If Company B says it will raise $50 million to get to $100 million in sales, there is a lot more baggage associated with this deal. More money means higher expectations, and higher expectations mean a smaller chance of meeting or exceeding them.

While many people believe that Digitally-Native Brands have both larger addressable markets and cheaper acquisition avenues to realize their potential—leading to this influx of capital—there is little proof that these theories will result in long-lasting or profitable companies.

Building a successful brand takes time. While many Digitally-Native Brands have tried to take shortcuts—raising more money and spending it faster—many of these companies find themselves in precarious positions, with investors breathing down their necks, employees’ livelihoods in their hands, and uncertainty about what comes next.

Digitally-Native Brands took anywhere from three to ten years to hit $100 million in sales. By comparison, Heritage Brands took anywhere from seven to 17 years to hit the same milestone. Digitally-Native Brands cut this time in half, but did so with tens of millions of dollars of additional capital. The difference between the amount of money Heritage Brands raised in their first ten years and the amount of money Digitally-Native Brands did is staggering: Heritage Brands raised hundreds of thousands in their first few years and Digitally-Native Phase 1 and 2 Brands raised tens of millions.

Happy Socks and Bonobos are the only two Digitally-Native companies we studied that are profitable at all, with Bonobos achieving this ten years into its business. Comparatively, most Heritage Brands were profitable from their early days.

All of this raises a number of questions:

What if the internet has made it cheaper to find early adopters but more expensive than ever to reach scale, meaning over $250 million in revenue?

What if acquiring customers online is getting so expensive that it’s now much cheaper to open retail stores after hitting a certain sales volume? Is this why Digitally-Native Phase 1 Brands are averaging 26 stores each after ten years while Heritage Brands averaged only two stores in the same period?

If all of this is the case, and much of our research leads us to believe it is, the internet has not obliterated the old brand building playbook as much as it has made some things easier and other things much harder to accomplish than ever before.

This brings us to back optionality, which is a crucial concept for investor-backed companies. Investors want their money back in less than ten years, often sooner, and companies need many different exit options to make this a reality. Yet the rush of money going into Digitally-Native Brands has put many of them in a challenging predicament. Since these brands raised millions of dollars, there is no chance investors will get their expected 5-10x return from cash flow and profits. The numbers simply don’t add up.

Therefore, for investors to see these returns, Digitally-Native Brands either have to get acquired or go public. The acquisition landscape is very uncertain right now. Only a few big strategics are looking to make deals (Walmart, LVMH, Estee Lauder). There is a bit of interest from private equity, but only if the underlying fundamentals of the business are sound, which often means profitability. And few of these brands could or would go public, since they don’t have any of the financial discipline that public market investors demand.

This leaves the entire Digitally-Native ecosystem in a very uncertain place. Heritage Brands have been around for an average of 47 years, and many of them—such as Patagonia, Comme des Garcons, and Nike—are in solid places. They don’t have it all figured out by any means, but the motor is still running and, for better or worse, that buys them some time to figure the future out.

Given all of the expectations surrounding Digitally-Native Brands and their limited optionality, it’s unlikely that many of them will be around in their 47th year, let alone as independent companies. There will always be exceptions to this rule—Dollar Shave Club, Glossier, Proper Cloth—might outlast the pack as brands that either successfully exited or are mostly in control of their future. But other than these rare exceptions, over the next few years this gold rush will probably turn into a bloodbath.