20VC How Startups & VCs Can Build Relationships with Potential Corporate Acquirers The Challenge Of Operating Both A B2B & B2C Business Model & Why Fundraising Is The One Element Founders Cannot Control with Gautam Gupta, Founder & CEO @ NatureBox

In this episode of "20 minutes VC," host Harry Stebbings interviews Gotham Gupta, founder and CEO of NatureBox, a startup offering a monthly subscription service for healthy snacks. Gupta shares his journey from his early career at General Catalyst Partners, where he engaged with investments in various successful companies, to founding NatureBox due to his personal challenges with nutrition and obesity. He discusses the importance of unit economics, the dual B2C and B2B business models of NatureBox, and the nuances of customer acquisition and inside sales. Gupta also touches on the broader landscape of food investing and the potential for CPG companies to acquire tech startups. He emphasizes the need for tech investors to understand the CPG business and the importance of building relationships with venture arms of large companies. Finally, Gupta outlines NatureBox's growth, including its expansion into retail spaces like Target and Delta airlines, and the goal of increasing brand presence offline.

• "20 minutes VC" is a podcast hosted by Harry Stebbings.
• Harry records live from San Francisco and invites listeners to meet up.
• Gautam Gupta, founder and CEO of NatureBox, is the guest.
• NatureBox is a startup focusing on healthy snacks via a subscription service.
• It has raised over $50 million from investors like General Catalyst, Redpoint, and Softbank.
• Gautam's background includes working at General Catalyst and Procter & Gamble.

Hello and welcome back to the 20 minutes VC with me, your host Harry Stebings at h Stepbings on Snapchat. And as I said last episode, recording live from San Francisco. Stay for this introduction. So if you're in the Bay Area and would like to meet, message me on Snapchat at hstebbings and it would be great to go for cocktails. However, time for the show. Stay and I'm very excited to welcome a fantastic founder to the show for today's founders Friday. So joining me in the hot seat today, we have Gotham Gupta. Now. Gotham is founder and CEO at Naturebox, the startup that allows consumers to discover new and healthy foods through a monthly subscription service. They've raised over $50 million in vc funding from the likes of General Catalyst, Redpoint, Softbank and many more incredible investors. Prior to launching Naturebox, Gotham was a principal at General Catalyst Partners.

This quote introduces the podcast, the host, and the guest for the episode. It provides background information on the guest's current venture, NatureBox, and his previous roles.

• Intercom is mentioned as an integrated platform for marketing and customer support.
• Cooley is highlighted as a law firm specializing in startups and venture capital.
• Nitesh Banter from B Twelve is thanked for introducing Harry to Gautam.

However, before we dive into the show today, you must check out Intercom. Intercom is the first to bring messaging products for marketing and customer support together on one integrated platform. With Intercom, businesses can chat directly with prospective customers on their website. They can engage current users with targeted messages based on their behavior and provide personal support at scale with an integrated help desk and knowledge base. All products are powered by live customer data, helping businesses avoid the stiff spammy status quo and have real conversations that build real connections throughout the entire customer lifecycle.

This quote explains the services offered by Intercom, emphasizing their role in improving customer engagement and support.

• Gautam started his career at General Catalyst at 18.
• He worked there while completing his undergrad and continued for six years full-time.
• The idea for NatureBox came from his personal struggle with nutrition and obesity.
• Gautam lost 70 pounds through diet and exercise, fueling his passion for healthy eating.

So my background is pretty simple. Over the last 13 years of my career, I've had two jobs. I was really, really fortunate to join general catalyst at the age of 18. If you can believe it, I have.

This quote provides a brief overview of Gautam's professional background and his early start in venture capital.

• Gautam suggests not drinking calories and consuming a lot of water.
• He advises cutting down on sugar, eating home-prepared food over fast food.
• These changes helped him lose weight, which he believes are well-known but hard to implement.

For me? I had such bad eating habits that it came down to just a few changes. So I'm a big believer that you should not drink your calories. I think a lot of Americans, through soda, juice, alcohol, et cetera, they drink a lot of calories. I'm a big believer that if you're trying to lose weight, drink water and a lot of water and nothing else.

This quote shares Gautam's personal approach to nutrition and weight loss, emphasizing the importance of avoiding calorie-rich drinks.

• Gautam and his co-founder tested NatureBox as a side project.
• They created a landing page with a buy now button that led to a PayPal payment.
• Over 100 people paid for NatureBox over a weekend, showing real demand.
• This success led Gautam to leave his VC job and focus on NatureBox full-time.

Yeah. So for me, my co founder and I got really passionate about this idea. And in fact, we started testing the idea of naturebox on nights and weekends. The first thing that we did is we put a landing page up that was naturebox.com. It showed a picture of what the box looked like, and then you could click a buy now button. And if you clicked that buy now button, you actually got sent to PayPal, where you could payPal us money for your nature box. Believe it or not, over the course of a weekend, over 100 people actually went through this flow and Paypal us $20 for their first nature box.

This quote describes the initial validation process for NatureBox, which convinced Gautam to pursue the venture full-time.

• Gautam believes operating experience is not necessary to be a great VC investor.
• He notes that many believe you need to be an operator first, but he disagrees.
• Gautam sees potential for a diversity of backgrounds, including podcasters, in VC.

Well, they make good vcs. My perspective is, I think that you do not need operating experience to be a great investor. Right. So first off I think a lot of people in Silicon Valley believe that you need to be an operator in order to invest and to be a good vc. I don't believe that's the case. I think that being an operator helps you be more em

This quote offers Gautam's view on the prerequisites for becoming a successful venture capitalist, challenging the notion that operational experience is essential.

• Discusses the non-traditional path to venture capital (VC) and the importance of operational experience.
• Emphasizes the value of working in a startup before becoming a VC.
• Mentors play a critical role in learning the VC business.
• Suggests that there is no formal training program for VCs and few strong mentors in the industry.

"But I had the good fortune of having great mentors across general Catalyst, Brad being one of them, but many other folks as well."

This quote highlights the importance of mentorship in the venture capital industry and acknowledges the speaker's personal experience with effective mentors.

"The simple reason for that is that there really is no training program to being a good VC and there's few good and strong mentors in this industry in my opinion."

The speaker explains the lack of structured training programs for VCs and the scarcity of quality mentorship, which underscores the recommendation to gain operational experience first.

• Addresses how non-operational VCs can develop empathy for entrepreneurs.
• Suggests that VCs can build empathy by being actively involved and supportive in the entrepreneurial process.
• Advocates for VCs to be hands-on and serve as thought partners rather than passive board members.

"I think it's about just understanding what the entrepreneur is going through, understanding most importantly how you can be helpful."

This quote emphasizes the need for VCs to comprehend the challenges entrepreneurs face and to focus on being helpful.

"They're actually in the trenches helping me build this company and a true thought partner."

The speaker conveys that VCs who actively engage in the company-building process gain the trust and appreciation of entrepreneurs.

• Reflects on how skills learned in VC, such as selling and salesmanship, are transferable to entrepreneurship.
• Discusses how VC experience aids in understanding investor expectations, recruiting, and customer interaction.

"I think often as a VC you're trying to get into deals, you're trying to win deals, and so you develop a good skill set around selling and salesmanship."

The speaker links the selling aspect of VC work with the sales skills necessary for entrepreneurship, suggesting the benefits of VC experience for founders.

• Naturebox operates both B2C and B2B models, which is uncommon for startups focused on maintaining a sharp focus.
• Justifies the dual model approach by aligning it with the goal of building a brand accessible to consumers in various contexts.
• Acknowledges the challenges of managing different go-to-market strategies for B2C and B2B.

"We want to be able to sell to consumers and consumers wherever they're buying or eating snack food."

This quote explains the strategic reasoning behind Naturebox's dual business model, aiming for brand presence across different consumer touchpoints.

"We see a lot of synergy in being both B2C and B2B."

The speaker believes that operating in both consumer and business markets creates synergistic opportunities for the brand.

• Highlights the distinct go-to-market processes for B2C and B2B models.
• B2C relies on marketing and customer acquisition, while B2B is driven by inside sales resembling a SaaS company's structure.
• Scaling strategies differ significantly between the two models.

"On the B2C side of the business, we can scale with ad dollars. So the more money we put into the engine, the faster we can scale and more customers we can sign up."

This quote describes the scalability of the B2C model through advertising spend, which directly influences customer acquisition.

"On the B2B side... it requires more top of the funnel work, it requires more people."

The speaker contrasts the B2B model with B2C, noting the need for a larger workforce and more personalized customer management.

• Discusses the importance of payback on customer acquisition costs in B2C as a measure of capital efficiency.
• Describes the B2B model, likening it to paying for employee benefits, and highlights the high account values and disruptive nature of the model.

"Well, I think what we're seeing is on the B2C business, I would argue that one of the most important metrics is actually payback."

The speaker identifies the speed at which customer acquisition costs are recouped as a key performance indicator for the B2C segment.

"You pay for snacks the same way that you would pay for employee benefits."

Here, the speaker explains the B2B model's value proposition, which simplifies snack provisioning for offices, akin to a subscription for employee benefits.

• B2B customers at NatureBox spend more than the average consumer on snacking.
• B2B customers have a higher retention rate as long as they remain in business.
• The cost of employing inside salespeople for B2B is significantly higher.
• For B2B, NatureBox focuses on the LTB to CAC (Lifetime Value to Customer Acquisition Cost) ratio, aiming for 4-5x.
• In B2C, the focus is more on payback and capital efficiency of customer acquisition.

"These customers are spending more than an average consumer would on snacking. They also retain at a much longer rate so long as they stay in business."

This quote highlights the value of B2B customers in terms of spending and retention, indicating that they are a lucrative segment for NatureBox.

"We do look at LTB to CAC, and I think we're really goaling the company on sort of north of four to five x LTB to CAC."

The quote specifies the target metric for evaluating the success of B2B customer relationships, emphasizing the importance of having a high lifetime value relative to the cost of acquiring the customer.

• Unit economics has always been a central consideration, even with Gautam Gupta's VC background.
• Unit economics are crucial, but there are times when a company can sustain poor or negative unit economics for strategic reasons like market share or growth.
• It's important to reach a scale where cost structures evolve and margins become sustainable.
• While unit economics is pivotal, not every business can operate with the same model.

"I am a big believer that unit economics is massively important, having been a vc that was front and center."

Gautam Gupta confirms the fundamental role of unit economics in business, drawing from his experience as a venture capitalist.

"There are periods of time and periods of your growth curve where you can sustain either poor or negative unit economics for other reasons."

This quote acknowledges that while unit economics are critical, there are strategic periods where a company might prioritize other growth factors over immediate profitability.

• Having VC experience provided an advantage in understanding which firms to approach and what questions they might ask.
• Fundraising is one of the hardest aspects of entrepreneurship due to its uncontrollable nature.
• Entrepreneurs influence but don't control the fundraising process, which can be a difficult realization.

"We were able to accelerate a lot of those conversations by knowing who to go to, what they would ask, sort of how they'd think about the business."

Gautam Gupta explains how his VC experience streamlined the fundraising process for NatureBox by anticipating investor inquiries and understanding the investment landscape.

"Fundraising is probably one of the hardest things of being an entrepreneur because it's one of the things that you really don't control."

This quote highlights the challenging nature of fundraising and the limited control entrepreneurs have over the outcome.

• Developing relationships with investors is continuous, but the information shared should be limited.
• Generating interest and allure without revealing too much can be a strategic approach to fundraising.
• Building high-level relationships while keeping investors curious can lead to increased investor interest.

"I think that you want to, as much as possible, keep investors sort of outside looking in and sort of knocking, initially knocking on the door and then banging the door down."

Gautam Gupta suggests that maintaining a certain mystique can be beneficial in attracting investors' attention and interest.

• The food market is one of the largest consumer markets, with significant spending in grocery stores and restaurants.
• The market is undergoing changes with consumers opting for healthier and more convenient options.
• Premium brands are succeeding, reflecting the shift in consumer preferences and spending.

"Food is one of the biggest consumer markets in the country and in the world."

The quote underscores the vast size of the food industry and its appeal to investors due to the sheer market potential.

"It's a market that's undergoing significant change."

This quote points to the dynamic nature of the food industry and the opportunities that arise from evolving consumer habits and preferences.

• There is a concern about VCs entering the food industry without adequate knowledge of physical products, margins, and logistics.
• Investors and entrepreneurs often venture into new frontiers without being experts, which can drive innovation.
• Tech investors learning about the CPG business could add significant value.

"I would say it's a little concerning."

Gautam Gupta expresses a cautious view on VCs entering the food industry without prior experience, suggesting potential challenges.

"I started naturebox with no food experience."

This quote illustrates that lack of industry experience does not preclude success, as evidenced by Gautam Gupta's own journey with NatureBox.

• CPG companies are increasingly acquiring tech companies, as seen with Walmart's purchase of Jet and Unilever's acquisition of Dollar Shave Club.
• Three reasons for these acquisitions: a massive shift in consumer spending, the need for innovation, and the incumbency of traditional players.
• Building relationships with CPG companies is crucial for VCs and entrepreneurs to navigate these acquisitions.

"Walmart buying jet for over $3 billion and Unilever buying dollar shave club."

The quote exemplifies the trend of CPG companies making significant acquisitions in the tech space, indicating a strategic shift in the industry.

"The top 20 CPG companies lost $20 billion of market share over the last th..."

Although the quote is incomplete, it suggests that traditional CPG companies are losing market share, potentially motivating their acquisitions and investments in tech companies to regain relevance and growth.

• There's a significant shift in consumer packaged goods (CPG) companies due to health and wellness trends and the need for convenience.
• Large CPG companies are just beginning to realize the importance of e-commerce.
• Most CPG companies lack a substantial e-commerce strategy, often relying on Amazon for online sales.

"There is a huge shift happening. And that's changing the way that these companies do business. And predominantly that shift is because of the trends around health and wellness, the trends around convenience, et cetera."

This quote emphasizes the transformation in the CPG industry driven by consumer demand for health, wellness, and convenience, which is altering traditional business operations.

• E-commerce and online presence are recognized as essential for CPG companies.
• Companies are looking at successful online businesses like Dollar Shave Club and Naturebox for inspiration on data utilization and direct-to-consumer strategies.
• These companies have capabilities that traditional CPG companies lack.

"I think these larger companies are only just now waking up to that fact. And the truth of the matter is that most of the large CPG companies don't really have an e-commerce strategy."

The quote highlights the awakening of large CPG companies to the necessity of a robust e-commerce strategy, which they currently lack.

• Many CPG companies are establishing venture capital arms to build relationships in the tech industry.
• Developing relationships with the venture arms of these companies is suggested for seeking exits and partnerships.
• Investment bankers and industry events can serve as good starting points for these connections.

"I think the truth of the matter is that many of them are now looking to build those relationships. They have all started venture capital arms."

This quote suggests that CPG companies are actively seeking to foster relationships with startups and tech entities through their venture capital divisions.

• Gautam Gupta shares his favorite book, "Shoe Dog" by Phil Knight, and his views on the sustainability of subscription-based companies.
• He mentions Barry McCarthy as a significant mentor and explains the impact he has had on his journey as a CEO.
• Gautam Gupta discusses his reading habits and the importance of setting aside time for reading blogs and newsletters to stay informed.

"Just read Shoe Dog by Phil Knight, the founder of Nike. Unbelievable story and truly an inspiration for any entrepreneur."

This quote shares a personal recommendation, highlighting the inspirational value of Phil Knight's story for entrepreneurs.

• Naturebox has expanded its presence by launching products in Target and on Delta Airlines flights.
• The next few years for Naturebox focus on growing the brand offline and leveraging online awareness to expand the business.

"So I think the overall business can be so much bigger given where people buy food today."

The quote outlines the strategic plan for Naturebox to capitalize on its online success and transition into the offline retail space to reach more consumers.

• Harry Stebbings expresses gratitude to Gautam Gupta for sharing his journey on the show.
• He also thanks Nitesh at B12 for the introduction and encourages listeners to follow behind-the-scenes content and check out Intercom and Cooley for their services.

"I'd like to say a huge thank you to Gotham for giving up his time today to come on the show."

This quote is an expression of gratitude towards Gautam Gupta for participating in the podcast and sharing his insights.