20VC VC of The Year Forerunner's Kirsten Green on 2 $Bn+ Exits in 1 Year, Why We Are In The Very Early Innings For Commerce & How Brand Has Fundamentally Changed Over The Last Decade

In this episode of the 20 minutes VC, host Harry Stebings interviews Kirsten Green, founding general partner at Forerunner Ventures, a firm notable for its investments in major e-commerce successes like Dollar Shave Club and Jet.com. Green discusses her journey from public markets investor to venture capitalist, driven by a passion for entrepreneurship and the evolving retail landscape. She emphasizes the importance of founders being visionary, disciplined, and magnetic to attract investment, talent, and customer loyalty. Green also shares insights on portfolio construction and the significance of brand as a moat in commerce. Additionally, she predicts both consolidation and the rise of new giant commerce platforms in the industry's future. Special thanks are given to various individuals for recommending Green and to WePay and Pipedrive for their services.

• Harry Stebbings hosts the 20 Minutes VC podcast and invites listeners to suggest future guests and submit questions.
• Kirsten Green is the featured guest, a founding general partner at Forerunner Ventures.
• Forerunner Ventures has raised over $250 million and invested in more than 40 early-stage companies.
• The firm has notable investments in Dollar Shave Club, Jet.com, Birchbox, Bonobos, Glossier, Hotel Tonight, Warby Parker, and Zola.
• Kirsten Green has received several accolades, including being listed in Time's 100 most influential people in 2017, VC of the year at TechCrunch's 2017 Crunchies Awards, and Forbes 2017 Midas list.
• Thanks are given to various individuals for recommending Kirsten for the show.

You are listening to the 20 minutes VC and we are back in the world of venture with me, your host, Harry Stebbings, and today's guest is a truly special one... Kirsten Green, founding general partner at Forerunner Ventures.

This quote introduces the podcast and the guest, Kirsten Green, highlighting her achievements and the significance of her appearance on the show.

• WePay is promoted as a payment processing solution that integrates with online platforms without sacrificing user experience or exposing platforms to fraud and regulatory risks.
• Equid, Constant Contact, and GoFundMe use WePay for its ROI-positive features and award-winning support.
• Harry Stebbings has a personalized URL for a WePay video case study and offers a year of free premium support.
• Pipedrive is a sales CRM and pipeline management software used by the 20 Minutes VC team.
• Pipedrive is appreciated for its visual interface, ease of finding stats, customization, and a free sign-up option.

WePay helps online platforms increase revenue through integrated payments processing... Pipedrive is the sales CRM and pipeline management software to use.

These quotes explain the benefits and features of WePay and Pipedrive, two services promoted during the podcast.

• Kirsten Green has been an investor for 20 years, starting as an equity research analyst in the public markets.
• She focused on the consumer sector, tracking retail companies, and then broadened her coverage to include retailers, product companies, and service companies.
• Kirsten transitioned to early-stage companies, motivated by a passion for entrepreneurship and a belief in the retail ecosystem's reimagination.
• The founding of Forerunner Ventures was driven by her vision to invest in companies that were not only new to the retail ecosystem but also unique to the venture ecosystem.

I've been an investor for my career about 20 years now... my journey led me to found four under ventures to execute that vision.

Kirsten Green shares her professional background in investing and the motivations behind the founding of Forerunner Ventures, emphasizing her focus on the consumer sector and early-stage companies.

• Forerunner Ventures approaches portfolio diversification similarly to other VC firms, with the aim of building portfolios of 20 to 25 companies.
• The fund allocates 30% to 40% for initial investments and reserves the remainder for follow-on investments.
• Commerce ecosystem businesses often have clear business models, enabling the assessment of customer lifetime value and acquisition costs.
• Valuations in commerce are grounded in market realities, such as market size and potential market share.
• Investors must consider the ultimate potential of a business and how it will be valued by public markets in the future.

I'm not sure we think terribly differently about portfolio diversification or portfolio strategy than another VC firm... The other reality is that it's grounded in reality and it's grounded in kind of the size of the market.

Kirsten Green discusses Forerunner Ventures' portfolio construction strategy, emphasizing the importance of realistic valuations based on market potential and business model analysis.## Investment Strategies in Consumer and SaaS

• The skills required for investing in consumer businesses are similar to those in SaaS, focusing on long-term sustainability and economic contribution.
• Critical to a healthy business is the balance between revenue and expenses.
• It's important for investors to understand the stage of the company they're investing in, especially in relation to the scale and inflection points.

"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."

This quote emphasizes the importance of focusing on investments that have the potential for long-term sustainability and economic contribution, which is crucial regardless of the sector.

• Portfolio construction should aim for initial diversification across business models, time horizons to scale, and exit opportunities.
• It is important to allocate reserves over time and possibly over more rounds, depending on the company's progress and the fund's model.
• Decisions on reserve allocation may shift if a company scales faster, potentially warranting more investment relative to others.

"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, what are your array of exit opportunities?"

This quote highlights the strategy of diversifying investments across various business models, growth timelines, and potential exit strategies to manage a fund effectively.

• Forerunner Ventures focuses on the evolution of commerce, not just e-commerce, acknowledging the digital and offline aspects of customer interactions.
• The thematic focus encompasses various business types, including B2C, new retail models, marketplaces, and B2B services.
• There is significant opportunity in servicing the back end of retail businesses, which is a major challenge for established retailers.

"We think about it as commerce. I think the reality is the customer is very digitally nimble at this point, and the path to purchase involves all kinds of aspects of interacting and the expectations around how you transact also have a varied landscape, and it's really much more holistic."

This quote clarifies that Forerunner Ventures views commerce in a holistic way, considering the entire landscape of customer interactions, both digital and offline, in their investment focus.

• The fund size and thematic focus are continuously evaluated to ensure they align with the goal of investing in ambitious endeavors that reshape commerce.
• Forerunner Ventures started with a thematic focus rather than being stage-specific, and there are discussions on how this translates to fund size and development.
• The firm aims to partner with entrepreneurs early on and potentially broaden entry points and support for founders as the firm evolves.

"And I think we're going to continue to kind of explore how that translates over to our fund size and how the firm develops."

This quote indicates that Forerunner Ventures is considering how their thematic focus and early-stage partnership with entrepreneurs may influence the size of their fund and the firm's development strategy.

• Forerunner Ventures looks for founders who are visionary, disciplined, and magnetic.
• Visionary founders think uniquely about their business and its place in the market, addressing consumer needs and delivering value.
• Discipline is crucial for practical execution and progressing the business idea into reality.
• Magnetic founders can inspire enthusiasm and commitment from various stakeholders, including investors, employees, and partners.

"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."

This quote summarizes the three key traits that Forerunner Ventures values in founders of consumer brands: vision, discipline, and the ability to attract and motivate others.## Late Stage Investment Requirements

• Late stage investors look for companies that can recruit top talent and translate their vision to the consumer.
• These aspects are considered paramount in the investment space.

You're going to be able to need to recruit great top talent to your team. You're going to need to have your vision translate all the way to the consumer.

This quote emphasizes the importance of strong recruitment and clear vision translation for late-stage companies, as these are critical factors for growth and success.

• A truly sustainable company builds around meeting customer needs and delivering meaningful value.
• Sustainable success involves customers integrating the product or service into their lives and becoming repeat purchasers.
• Four key pillars for a business 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.

This quote underlines the core principle of building a business that is customer-centric and provides meaningful value, which is fundamental for long-term sustainability.

• Having a valuable product or service is considered table stakes in the competitive business environment.
• The product must deliver value and have a perceived value relative to its price.

I think to have a seat at the table and be in the game, 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.

This quote stresses the necessity of offering a product or service with a strong value proposition as a basic requirement for competing in the market.

• Meticulous care for the product is important, but it should not hinder speed to market.
• The philosophy that if you're not embarrassed by your first product shipment, it's too late, is acknowledged.

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.

This quote acknowledges the balance between product perfection and the need to launch quickly, recognizing that continuous improvement is part of a great business's evolution.

• Competing on price can lead to a race to the bottom, which is generally avoided by the speakers' investment strategy.
• Exclusivity is not favored as it contradicts the goal of building large, impactful businesses.
• Delivering a great experience is seen as the most important factor, with the need for good economics to support repeat business.

And then one other area that historically consumer companies have competed on is exclusivity.

This quote discusses the historical competitive factor of exclusivity but rejects it in favor of building more accessible and broadly appealing businesses.

• The concept of brand has evolved to become more complex and multidimensional.
• Brands are likened to personalities, with multiple touchpoints and opportunities to engage with consumers.
• A strong brand can be a tangible asset and serve as a moat against competition.

I think the notion of brand has gotten a lot more complicated as business has become much more multidimensional.

This quote captures the evolving nature of branding and its increased importance as a differentiator and asset in modern business.

• The speaker believes that both consolidation and the emergence of new large e-commerce companies will occur.
• Amazon's influence has reorganized the sector and created opportunities for new businesses.
• A holistic omnichannel approach is essential, and strong leadership and platforms will thrive.

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

This quote suggests that the e-commerce sector is undergoing significant changes, with room for both consolidation by existing players and growth of new entrants.## Favorite Book and Personal Connection

• Speaker C cherishes "Charlie and the Chocolate Factory" as their favorite book.
• The book represents a fond childhood memory of their father reading it to them.
• It was the first book that truly captured their imagination, drawing them into a fantastical world.
• The varied personalities of the children in the story and their different reactions to experiences resonated with Speaker C.
• The depth of the characters and the life lessons they embody have made a lasting impact.
• Speaker C looks forward to sharing this book with their own children.
• The movie adaptation was less appealing to Speaker C as it did not match their imaginative vision from reading the book.

"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."

This quote explains the personal connection Speaker C has with "Charlie and the Chocolate Factory" and the sentimental value it holds due to their father reading it to them.

• Speaker C believes the market misunderstood Dollar Shave Club's success early on.
• The viral marketing video was seen as a gimmick rather than a reflection of the founder's serious vision and business acumen.
• Speaker C recognizes the founder, Michael, as a serious entrepreneur with a deeper vision behind the company.

"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 highlights Speaker C's perspective on how the market focused too much on Dollar Shave Club's viral video and overlooked the substantial entrepreneurial vision of its founder.

• Speaker C holds the contrarian belief that Amazon contributes to market opportunities rather than solely crushing competition.
• This belief is in contrast to what most of Speaker C's peers believe.

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

The quote reveals Speaker C's unconventional view of Amazon's role in the market, suggesting that Amazon's presence can actually create opportunities for investors.

• Speaker C reads the New York Times, the Skim, and the Business of Fashion daily for professional reasons.
• On rainy days, Speaker C has a long list of preferred reading material, indicating a broad interest in various blogs and newsletters.

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

This quote indicates the daily reading habits of Speaker C, which are integral to their business activities and staying informed.

• Speaker C desires a change in how fear of missing out (FOMO) drives investment decisions in Silicon Valley.
• They believe FOMO contributes to misguided capitalization of companies.

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

This quote conveys Speaker C's critique of the current investment culture in Silicon Valley, where FOMO can lead to poor decision-making and overcapitalization.

• Packaged is Speaker C's most recent publicly announced investment.
• The decision to invest was influenced by the founder, Eric, his team, and their unique experience of working together for over a decade.
• Speaker C sees the team's cohesion and history as a significant advantage for a startup's agility and speed.
• Packaged's business model of leveraging existing unboxing videos for a novel shopping experience was seen as a smart approach.
• Speaker C recognizes the complexity of combining content creation with retail, which is akin to building two businesses simultaneously.

"It's a company called Packaged and Gosh, we invested for a handful of reasons, but I guess it is. So I was going to say off the top of my head, Eric was a big part of it, as was Eric's team."

This quote emphasizes the importance of the team behind Packaged and their long-standing work relationship as a key factor in Speaker C's investment decision.