20VC 2nd Most Downloaded Episode of 2018 Kirsten Green, Founding Partner @ Forerunner Ventures



In the 2017 episode of "20 minutes VC" before the Christmas break, host Harry Stebbings interviews Kirsten Green, the founding general partner at Forerunner Ventures, known for investing in major e-commerce successes like Dollar Shave Club and Jet.com. Green shares her journey from equity research analyst to venture capitalist, driven by a passion for the evolving retail sector and early-stage entrepreneurship. She emphasizes the importance of founders being visionary, disciplined, and magnetic, and discusses Forerunner's focus on companies that offer exceptional products and customer experiences. The conversation also touches on the strategic aspects of venture capital, such as portfolio construction, valuation, and the significance of brand as a competitive advantage. Green predicts a dual future for commerce with both consolidation by incumbents and the rise of new, large-scale ventures.

Summary Notes

Introduction to the 20 Minutes VC Podcast Episode

  • The podcast episode is one of the most downloaded episodes of 2017.
  • The episode features Kirsten Green, founding general partner at Forerunner Ventures.
  • Forerunner Ventures is notable for investing in significant ecommerce exits like Dollar Shave Club and Jet.com.
  • Kirsten Green has received multiple accolades, including being on the Time 100 most influential people list and winning VC of the Year at the Crunchies Awards.

"We are back on the 20 minutes VC with our penultimate episode before the Christmas break. If you have not caught the most downloaded episode of 2017 with Peter Fenton, general partner at Benchmark, replayed on Monday and now with over 350,000 downloads, then that really is a must."

This quote introduces the podcast episode and emphasizes the popularity of the show, highlighting the previous episode with Peter Fenton as the most downloaded.

Kirsten Green's Background and Career

  • Kirsten Green has been an investor for about 20 years.
  • She started as an equity research analyst, focusing on retail companies, and then moved to the investing side.
  • Her experience includes public markets and early-stage companies.
  • The motivation to start Forerunner Ventures stemmed from her interest in entrepreneurship and the retail ecosystem's transformation.

"I've been an investor for my career about 20 years now. I spent the first half of that as an investor in the public markets."

This quote provides insight into Kirsten Green's extensive career in investment and her progression from public markets to venture capital.

Forerunner Ventures' Investment Strategy

  • Forerunner Ventures doesn't differ significantly in portfolio diversification strategy compared to other VC firms.
  • The firm's portfolio typically includes 20 to 25 companies, with about 30% to 40% of the fund invested initially and the remainder reserved for follow-on investments.
  • Valuations in commerce are grounded in reality, with business models often tied to consumer transactions.
  • Key metrics such as customer lifetime value (LTV) and customer acquisition costs (CAC) are used to assess the potential and valuation of businesses.

"Specifically on the valuation question, I think one of the things about the commerce, ecosystem and businesses that have business models that are tied to transactions with consumers, the good and the bad, is oftentimes there's a very evident business model and there are enough components of the business model to enable you to identify values around customer lifetime value, around customer acquisition costs across certain components, and you can really understand what it takes to build that business."

This quote explains how commerce businesses have clear business models that allow for the assessment of crucial metrics like LTV and CAC, which are important for determining valuations.

Comparison of Investing in Consumer vs. SaaS

  • Kirsten Green discusses the similarities between investing in consumer and SaaS businesses.
  • The application of skills such as evaluating CAC and LTV is consistent across both sectors.
  • Peter Fenton's view that great consumer investors use similar skills as in SaaS is mentioned for comparison.

"I don't know that I really k"

This quote is incomplete and does not provide a full perspective on Kirsten Green's opinion on the comparison between consumer and SaaS investment strategies. It suggests that there may be a nuanced view that was not fully captured before the transcript was cut off.

Long-Term Self-Sustainability in SaaS Investment

  • Importance of building companies with prospects of long-term self-sustainability.
  • Critical nature of the balance between revenue and expenses for a healthy business.

"I do think that as investors, we should all be focused on building companies that have long term self sustainability prospects, therefore are positive contributors economically. And in that sense, of course, your revenue to your expense is critical to a healthy business."

This quote underscores the emphasis on fostering companies that can sustain themselves economically in the long run, highlighting the fundamental necessity for a balance between revenue and expenses in any healthy business venture.

Reserves and Follow-on Funding in Consumer Brands

  • Consideration of the entry point and path to scale for investments.
  • Inflection points and time horizons are crucial in determining investment strategies.
  • The model of the fund and venture goals can influence the decision to invest pre-revenue.
  • Allocation of reserves may be spread across multiple rounds or extended time horizons for certain investments.

"Sometimes it means that we are getting in earlier and we are thinking differently about how we allocate our reserves over time. It might not really shift the relative amount of dollars in entry versus follow on, but it might mean the follow on dollars get kind of allocated over more rounds or a longer time horizon."

Kirsten Green discusses the strategic approach to reserve allocation, suggesting that while the total investment may not change, the timing and distribution of follow-on funding can vary, potentially spanning multiple investment rounds and longer periods.

Portfolio Construction and Fund Management

  • Diversification across business models and anticipated time horizons is a key strategy.
  • Assessment of exit opportunities for investments.
  • Monitoring the journey to scale and reallocating reserves based on performance and fund horizon.
  • Management of assets and expectations within a fund's given time horizon.

"But I do think that we have learned over time that one of the important strategies of portfolio construction is aiming for initial diversification across business models, across time horizons to scale anticipated time horizons to scale across."

Kirsten Green emphasizes the importance of diversification in portfolio construction, factoring in different business models and the time it takes for companies to scale, which is crucial for managing a venture fund effectively.

Forerunner's Specialization and Thematic Focus

  • Forerunner Ventures does not limit itself to e-commerce but considers the broader evolution of commerce.
  • Investment focus includes B2C and B2B companies, new retail models, marketplaces, and services.
  • Recognition of the importance of digital nimbleness in customer behavior and the holistic nature of commerce.
  • Opportunity in servicing the backend infrastructure of retail businesses.

"So at forerunner, we really don't use the word e commerce, we think about it as commerce."

Kirsten Green clarifies that Forerunner Ventures adopts a comprehensive view of commerce, not just e-commerce, acknowledging the multifaceted nature of customer interactions and transactions in the digital age.

Fund Size and Ownership Dilution

  • Ongoing internal discussions and consultations with limited partners (LPs) about fund size.
  • Belief in creating advantages through thematic focus and investment in reshaping commerce.
  • Consideration of broadening entry points and support for founders throughout company development.

"That's a really good question, and it's one that we're talking through internally all the time and one that we're discussing with our lps."

Kirsten Green acknowledges the complexities of fund size and the potential impact on ownership stakes through subsequent investment rounds, indicating that it is a subject of continuous dialogue within Forerunner Ventures and with their LPs.

Identifying Successful Consumer Brand Founders

  • Importance of founder qualities in early-stage investments.
  • Forerunner looks for founders who are visionary, disciplined, and magnetic.
  • Visionaries understand their business's unique place in the market and consumer needs.
  • Discipline is crucial for practical execution and step-by-step progress.
  • Magnetism is needed to rally various stakeholders around the company's vision.

"We have a focus and a mantra here that says we're looking for founders that are visionary, that are disciplined and that are magnetic."

Kirsten Green outlines the three key traits Forerunner Ventures seeks in consumer brand founders, highlighting the blend of vision, execution discipline, and the ability to attract and energize people as essential for the success of early-stage companies.

Vision Translation and Consumer Connection

  • Businesses must ensure their vision is effectively communicated to the consumer.
  • Vision translation is critical in areas such as product development, brand experience, and customer engagement.
  • A clear and compelling vision is essential for long-term sustainability in commerce.

"You're going to need to have your vision translate all the way to the consumer."

This quote emphasizes the importance of vision translation in connecting with consumers and ensuring that the business's core ideas are understood and embraced by its target audience.

Defining Sustainable Businesses

  • Sustainable businesses are those that meet customer needs and integrate into their lives.
  • Repeat customers are a sign of a business's success and sustainability.
  • Four key pillars to compete on are product, price, exclusivity, and experience.

"The simple answer to that, from our perspective, is a business that's built around really meeting a customer and delivering something that's meaningful to a customer."

Kirsten Green defines sustainable businesses as those that provide meaningful value to customers, suggesting that customer-centricity is a cornerstone of long-term success.

Importance of Product and Value Proposition

  • A quality product with a strong value proposition is necessary to compete.
  • Historically, an excellent product could carry a business further; now, it is considered table stakes.
  • Businesses must offer value that aligns with the price to attract and retain customers.

"You have to have a product or a service that delivers value to the consumer and that has perceived value relative to the price of it as well."

Kirsten Green discusses the importance of product quality and value, indicating that these factors are fundamental to gaining a competitive edge in the market.

Philosophy on Initial Product Releases

  • Businesses should not be hindered by perfectionism in their initial product launches.
  • The concept that "if you're not embarrassed by your first product shipment, it's too late" is commonly discussed.
  • Iteration and evolution are natural parts of a great business's growth.

"We do talk about that all the time, in that I think people who have meticulous care for their product are always going to be in a state of feeling like it could be better."

Kirsten Green agrees with the idea that a meticulous approach to product development can lead to delays and acknowledges the inevitability of product improvement over time.

Competing on Price and Exclusivity

  • Competing on price can lead to a race to the bottom, which is not a preferred strategy.
  • Exclusivity can limit growth and is contrary to the goal of building large, impactful businesses.
  • Offering a great customer experience is more critical than exclusivity for long-term success.

"That's not one where as investors we're particularly keen on, because I tend to feel like if you're saying we're the lowest price out there, if you're successful, you're going to build a competitive landscape where it ends up being a race to the bottom."

Kirsten Green explains that competing primarily on price can create an unfavorable competitive environment, suggesting a focus on value and customer experience instead.

The Role of Brand as a Moat

  • The concept of a brand has evolved from mere aesthetics to encompassing personality-like characteristics.
  • Brands now have multiple touchpoints with consumers, allowing for a deeper connection.
  • A strong brand can serve as a tangible asset and competitive advantage.

"And today I would argue that brand is closer to... people, as personalities."

Kirsten Green compares modern brands to personalities, highlighting the multifaceted nature of brand interaction with consumers in the digital age.

Consolidation and the Future of Ecommerce

  • The ecommerce sector is undergoing a significant reorganization, partly driven by Amazon.
  • Incumbent companies may acquire rising startups to expand their reach.
  • There is potential for both consolidation and the emergence of new, large-scale ecommerce companies.

"I think what's happening right now is we are still in some early innings of a sector completely reorganizing itself."

Kirsten Green discusses the current state of the ecommerce sector, indicating that it is in a phase of transformation that may lead to both consolidation and the rise of new players.

Favorite Book and Personal Connection

  • Kirsten Green's favorite book is "Charlie and the Chocolate Factory."
  • The book holds sentimental value as her father read it to her as a child.
  • She appreciates the depth of characters and the varying reactions to their experiences.
  • The book's imaginative aspect had a lasting impact on her, more so than the movie adaptation.

"Charlie and the Chocolate Factory. Why is it your know, my dad read it to me when I was a child. I think I remember that fondly."

The quote explains the personal connection Kirsten has with the book, highlighting the fond memories of her father reading it to her and the impact it had on her as a child.

Market Misunderstanding of Dollar Shave Club

  • The market initially perceived Dollar Shave Club's launch video as a mere marketing gimmick.
  • Kirsten recognized the seriousness and vision of Michael Dubin, the founder, beyond the video.
  • She saw the underlying business potential that others may have overlooked.

"I think that the market got totally taken by the video, and I think they misread that as a amazing go to market gimmick."

This quote points out the common misinterpretation of Dollar Shave Club's strategy, emphasizing that Kirsten understood the depth of the business beyond its viral marketing.

Contrarian Belief About Amazon

  • Kirsten believes that Amazon contributes to market opportunities rather than solely crushing competition.
  • This belief contrasts with the common perception among her peers.

"Amazon does more to make the market opportunity that we're investing in than it does to crush it."

The quote reflects Kirsten's contrarian view on Amazon's role in the market, suggesting that it creates opportunities for investors despite its dominance.

Reading Habits and Preferred Content

  • Kirsten regularly reads the New York Times, the Skimm, and the Business of Fashion.
  • Her reading list on a rainy day is extensive due to the necessity of staying informed for her business.

"I'm kind of religiously read the New York Times, the skim, and the business of fashion every morning."

The quote reveals Kirsten's daily reading routine, which is integral to her staying updated with current events and industry trends.

Desired Change in Startup Investment Culture

  • Kirsten wishes to see a reduction in fear of missing out (FOMO) driving investment decisions.
  • She believes FOMO contributes to misguided company capitalizations.

"Maybe the fear of missing out as a driver in investment decision making process and that contributing to some misguided capitalization of companies."

The quote highlights Kirsten's concern about FOMO influencing investment decisions, leading to potentially poor financial outcomes for startups.

Recent Investment in Packaged and Rationale

  • Kirsten's most recent publicly announced investment is in a company called Packaged.
  • The decision was influenced by the founder, Eric, his experienced team, and their vision.
  • Packaged aims to leverage existing unboxing videos on the internet to create a unique shopping experience, merging entertainment with retail.
  • She acknowledges the complexity of simultaneously building a retail business and creating engaging content.

"What I thought was genius about what the team at packaged saw as an opportunity was to take video that is already embraced at wide scale across the Internet in these unboxing videos, and to use that as the entertainment and factor in creating a shopping experience that's very novel."

This quote explains the innovative approach of Packaged and why Kirsten was compelled to invest, appreciating the strategic use of popular unboxing videos to enhance the retail experience.

Acknowledgment of Kirsten Green's Influence

  • Kirsten Green is highly recommended and appreciated as a podcast guest.
  • She is active on Twitter and influential in the venture capital community.

"I have never had so many people recommend one guest."

The quote underscores the high regard in which Kirsten Green is held within the industry, as evidenced by the numerous recommendations for her to be a podcast guest.

What others are sharing

Go To Library

Want to Deciphr in private?
- It's completely free

Deciphr Now
Footer background
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon

© 2024 Deciphr

Terms and ConditionsPrivacy Policy