20VC Upfront Ventures' Greg Bettinelli on Testing For Founder 'Grit' & What It Takes To Build A Successful Consumer Brand Today

In this episode of 20 minutes VC, host Harry Stebbings interviews Greg Betanelli, a partner at LA-based Upfront Ventures. Betanelli, who has a diverse background including roles at eBay, StubHub, Live Nation, and as CMO at HauteLook (acquired by Nordstrom), discusses the intersection of retail and technology, emphasizing the importance of grit and an unconventional approach in entrepreneurs. He shares insights from his time at Nordstrom, his investment philosophy, and the rise of the LA tech ecosystem, known for its creativity and companies like Snapchat and Honest Company. Betanelli also touches on the changing consumer behaviors, brand loyalty among millennials, and his recent investment in Happy Returns, a company addressing the challenges of online purchase returns.

• Harry Stebbings hosts the 20 minutes VC podcast, focusing on LA's tech ecosystem.
• Greg Betanelli, a partner at Upfront Ventures, is the featured guest.
• Upfront Ventures is a leading fund in LA, with Greg specializing in retail and technology intersection.
• Greg's background includes being CMO at Outlook and executive roles at Live Nation, eBay, and StubHub.
• Mark Suster facilitated the introduction to Greg for the podcast.

"I'm your host Harry Stebings at H stepbings on Snapchat. And for today's show, we're bringing you part one, with part two being on Friday of a special feature on LA's incredible tech ecosystem." "Now, Greg is a partner at one of LA's leading funds, Upfront Ventures. And at Upfront, Greg specializes in businesses at the intersection of retail and technology."

These quotes introduce the podcast's focus on LA's tech ecosystem and Greg Betanelli's expertise in retail and technology as a partner at Upfront Ventures.

• We Are LA Tech is highlighted as a key resource uniting the LA startup community.
• Offers curated offline experiences, a top LA tech podcast, and a mobile app with a full calendar of events.
• A private LA tech immersion is available exclusively for 20 minutes VC listeners.

"We are LA Tech is the number one resource uniting the LA startup community, offering a unique combination of curated offline experiences, the number one LA tech podcast called we are La Tech and the only mobile app that keeps you in the know with a full calendar of events."

The quote describes We Are LA Tech as a comprehensive platform that brings together the LA tech community through various mediums, including podcasts, events, and a mobile app.

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• Features three-layer technology and next-generation memory foam.
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"Eve are the makers of that great mattress that give you the perfect sleep with three-layer technology and next-generation memory foam."

This quote promotes Eve Mattress, emphasizing its sleep technology and customer-friendly trial period.

• Greg Betanelli discusses his unconventional path to venture capital.
• Highlights his unique experience as a CMO and investor, and past work at a horse racing track.
• His journey is driven by his decision-making and the type of entrepreneurs he supports.
• Moved to LA in 2008, became CMO at Hoatlook, and engaged in angel investing after its sale to Nordstrom.
• Co-founded Mucker Lab accelerator and joined Upfront Ventures, embracing the LA tech scene.

"I have a pretty unconventional track record to be in venture capital... I moved down here back into Los Angeles in 2008... and really spent time getting to know what was going on here in Los Angeles, which I'm sure we'll talk about later."

This quote summarizes Greg's atypical journey to venture capital, highlighting his move to LA and his deep involvement in the local tech ecosystem.

• Greg values grit and moxie in entrepreneurs, often found in those with unconventional paths.
• Prefers entrepreneurs who have overcome challenges or have an "unfair advantage."
• Filters include skepticism towards name droppers and those who exaggerate their achievements.
• Believes entrepreneurs who have worked hard for their success are likely to have better outcomes.

"I think those are two terms that I really look for in entrepreneurs... I think really the interesting ones, or the ones that I think I like to follow and spend time with, have a different kind of element."

This quote explains Greg's investment philosophy, where he looks for entrepreneurs with grit and unique experiences that set them apart.## Founder Assessment and Investment Thesis

• Assessing founders involves looking for honesty and humility.
• A founder's ability to credit their team and bosses is a positive sign.
• Realistic market opportunity assessments are preferred over exaggerated claims.
• An unfair advantage or unique team strength is crucial for market development.

"When people really give credit to their other team members or credits to their bosses for putting them in positions to succeed, there are just some elements of what people say and how they say it, as well as how they define the market opportunity."

This quote emphasizes the importance of a founder's character in giving credit to their team and superiors, as well as their realistic understanding of the market opportunity. It highlights the value of humility and accurate market assessment in evaluating founders.

• Early investment strategies were based on general market thesis.
• Learning to react to strong entrepreneurs with market ideas proved more effective than adhering to a personal market viewpoint.
• Being reactive to quality people and ideas is now prioritized over specific market desires.

"What I quickly learned is I'm much better off reacting to strong entrepreneurs who think they can do something with a market versus my own point of view about a certain market."

Greg Betanelli indicates that adapting to entrepreneurs' visions rather than imposing his own market views has become a more successful investment strategy. This reflects a shift from a proactive to a reactive investment approach.

• Investor specialization may not be optimal for everyone.
• A great team in a very good market is preferred over a decent team in a great market.
• Flexibility and insight of a great team are critical for market success.
• Narrow investment criteria can lead to suboptimal investment decisions.

"I would take a great team in a very good market over a decent team in a great market, because I think at the end of the day, the great team has the flexibility insight to really move into great markets."

Greg Betanelli argues that the capabilities of a strong team are more important than the market itself, suggesting that a team's adaptability and insight are key to success and should be a primary consideration in investment decisions.

• Retail has evolved over time, with technology accelerating consumer characteristic changes.
• Some retailers' failures are unrelated to digital competition.
• Successful retailers often have minimal ecommerce presence.
• Consumer shifts towards value and convenience are more significant than technology alone.
• Urbanization and changing consumer preferences impact retail trends.

"The most successful retailers today in the United States have very little ecommerce... I think it's really towards a bigger macro shift."

Greg Betanelli points out that despite the growth of ecommerce, the most successful retailers in the U.S. have minimal online sales. He suggests that broader macro shifts, such as consumer preference changes, are more influential than ecommerce alone.

• Physical retail will continue due to the importance of curation.
• Not all brands can afford to distribute products directly to customers at scale.
• Influencers may become the new curators for fashion and other products.
• Physical stores may adapt by focusing on private label brands and margins.

"I think curation is important... fashion needs someone to tell us what looks good and maybe it's not going to be so much the department store anymore, but it might be an influencer or something else."

Greg Betanelli discusses the ongoing relevance of physical retail, emphasizing the role of curation in helping consumers make choices. He suggests that influencers may take over the role traditionally held by department stores in guiding consumer preferences.## Retail Customer Segmentation

• Retail customers can be segmented into different tiers based on the type of department stores they frequent.
• High-end customers are associated with stores like Barney's and Neiman Marcus.
• Mid-tier customers may shop at stores like Macy's and Nordstrom.
• Lower-end customers might choose stores such as Penny's or Kohl's.
• Each tier serves distinct markets and customer needs.

"Now you have the high end customers think of like the Barney's of the world or Neiman Marcus of the world... In the middle you have like a Macy's and a Nordstrom and on the lower end you might have a penny's or a Kohl's."

This quote illustrates the classification of retail customers based on the perceived quality and price point of the department stores they shop at, ranging from high-end to low-end.

• Brand loyalty is a crucial aspect of retail, as demonstrated by Nordstrom's reputation for exceptional customer service.
• Folklore around Nordstrom's return policy contributed to its perception as a customer-centric brand.
• Understanding the concept of lifetime value is important, as exemplified by long-term customers who shop at the same store for decades.
• The perception of a brand can significantly impact customer loyalty and company value.

"I learned a lot about brand loyalty... the perception of the brand was that of great customer service and the importance of that and the value to that, to the company, I really underestimated."

This quote emphasizes the importance of brand perception in fostering brand loyalty, highlighting Nordstrom's reputation for customer service as a key factor in its success.

• Learning about scale through the comparison of a smaller company's growth to Nordstrom's $10 billion annual sales.
• The complexity of scaling a business with both physical stores and online operations, as well as handling acquisitions.
• The logistical challenges of managing a large volume of products in a retail environment.

"Just the understanding of what it takes an organization to truly scale... the sheer magnitude of the products being moved in and out was pretty impressive."

The quote discusses the speaker's experience with scaling business operations and the significant differences between running a smaller company and a large retail enterprise like Nordstrom.

• The speaker believes there is more brand loyalty among today's consumers, including millennials, than is often suggested.
• Modern consumers are receptive to brands that they trust and love, such as Apple and Lululemon.
• The current market allows for greater discovery of new brands, but loyal customers tend to gravitate towards their favorites.
• Brand development is crucial for differentiation in a crowded market.

"I think there's actually even more [brand loyalty]. I think it's more of a changing customer, I would say... today's customer will continue to migrate more and more to them."

This quote challenges the notion that millennials lack brand loyalty, suggesting that while consumer behavior is changing, brand loyalty remains strong for companies that have earned consumer trust.

• Brands, especially direct-to-consumer ones, are considered for investment based on several factors.
• Market opportunity, high margin categories, and recurring purchasing behavior are key considerations.
• The most critical element is having a founding team with an unfair advantage or unique perspective in their market.
• Successful brand development can occur even in categories dominated by large incumbents, as shown by Dollar Shave Club's rise against Gillette.

"I think my formula is a very large market opportunity... brand development might be one of those."

The quote explains the speaker's investment criteria, emphasizing the importance of market opportunity and brand development as part of a successful direct-to-consumer strategy.

• Los Angeles is seen as a hub of creativity, no longer limited to Hollywood but extending to technology, art, food, and diversity.
• The LA ecosystem is conducive to building businesses based on content, community, commerce, and communication.
• Successful companies like Snapchat, SpaceX, and Tinder exemplify the potential of LA-based ventures.

"I'm obviously very bullish on LA... I think about it from art, I think about it from food, I think about it from diversity, I think about it from weather and global proximity."

This quote expresses the speaker's optimism about the Los Angeles ecosystem, highlighting the city's diverse and creative environment as a fertile ground for innovative businesses.

• There is an abundance of capital available locally, nationally, and globally for high-quality startups.
• Great businesses attract investment, and many top venture funds have stakes in Southern California companies.
• The presence of great entrepreneurs in LA is leading to the development of successful businesses.

"There's plenty of capital out there... The capital will find the great businesses."

The quote underscores the idea that investment capital is readily available and will naturally flow to outstanding businesses, reinforcing the speaker's confidence in the Los Angeles startup environment.## Literature Preferences

• Greg Betanelli is a fan of Michael Lewis' work due to its thought-provoking nature and relevance to actual real topics.

"I'm a big Michael Lewis fan. And so I think obviously like that kind of that thought provoking type of work that he does around actual real topics are the type of literature and books that I respond to."

The quote explains Greg Betanelli's literary taste, highlighting his preference for books that are not only intellectually stimulating but also grounded in real-world issues.

• Greg Betanelli's morning routine includes waking up at 06:00, reading for 30 to 45 minutes about current events, and catching up with email and top priorities before the workday begins.

"So I wake up about 06:00. I probably read for 30 to 45 minutes, think current events, technology, news, politics, sports, those type of things."

This quote details the initial part of Greg's morning, which involves staying informed about various topics.

"Then I spend probably another half hour just before the kids are getting up, really getting caught up with email and candidly dealing with the top priorities that probably kept me up from the night before."

The quote reveals the second part of Greg's morning routine, which focuses on preparing for his workday by addressing emails and priorities.

• Greg Betanelli is impressed with brands that disrupt legacy providers and cites Dollar Shave Club and Honest Company as examples, particularly for their marketing strategies and product innovation.

"I love brands that are really disrupting the legacy provider."

This quote emphasizes Greg's appreciation for brands that challenge established companies and change market dynamics.

"So in Los Angeles, for example, we have another company called Honest company that's done a very good job building brand."

The quote specifically mentions Honest Company as an example of a disruptive brand with strong branding efforts.

• Dan Primac's term sheet is a must-read for Greg Betanelli, forming a part of his morning routine to stay updated on business news and unique perspectives.

"Dan Primac's term sheet, which comes about 07:00 my time here in California, it's definitely a must read."

This quote highlights the importance of staying informed in the tech and startup industry and identifies a specific resource Greg finds valuable.

• Greg Betanelli considers his hiring at eBay in 2003 as the most proud moment of his career due to the impact, connections, and self-understanding it provided.

"Of all the things that, from a work perspective, obviously getting hired at eBay in 2003 really set everything off for me."

This quote reflects on a pivotal moment in Greg's career that he credits with setting the foundation for his future success.

• Greg Betanelli invested in Happy Returns, a company addressing the issue of online returns, due to its innovative solution for online retailers and his long relationship with the founder.

"So I invested in a company called Happy Returns, which we talked a little bit about, friction in retail, but returns is broken."

The quote provides insight into Greg's thought process behind his investment, focusing on solving a specific problem in retail.

• Espre's 'We Are LA Tech' is recommended as the number one resource for uniting the LA startup community, offering curated offline experiences, a podcast, and a mobile app with a full calendar of events.

"We are LA tech again is the number one resource uniting the LA startup community."

This quote highlights the significance of 'We Are LA Tech' as a central hub for the tech community in Los Angeles.

• Harry Stebbings suggests that a successful day begins with preparation the night before and carries a positive attitude into the next day.

"Every great day starts the night before. Every smart move you make on Wednesday has its roots in Tuesday."

The quote conveys the idea that proactive planning and a positive mindset are key to achieving success on a daily basis.