20VC Why Risk Is Misunderstood In Entrepreneurship, Why Acquisitions Are Cheap For Incumbents Today & 3 Strategies To Improve Diversity In Your Team with Henry Davis, President & COO @ Glossier

In this episode of the 20 minutes VC, host Harry Stebbings celebrates the podcast's growth and welcomes Henry Davis, president and COO of the beauty brand Glossier. Henry shares his journey from a VC at Index Ventures to the operational side at Glossier, highlighting the brand's digital-centric approach to customer engagement and its aspirations to redefine the beauty industry. They discuss the challenges of hiring diverse talent, the evolving role of Amazon in e-commerce, and the importance of building a brand that resonates beyond product transactions. Henry also touches on Glossier's international expansion, driven by customer demand and digital community engagement, as they aim to become a global consumer goods conglomerate. The episode also features partnerships with Naturebox and Lisa, promoting health and well-being in the new year.

• Harry Stebbings hosts the podcast "20 minutes VC".
• The podcast has a global listenership with over 20 million downloads.
• Harry started the podcast three years ago from his bedroom.
• A team of five supports the podcast behind the scenes.
• Harry encourages listeners to follow behind-the-scenes content on Snapchat.

You are listening to the 20 minutes VC with me, Harry Stebbings. I want to start today with a huge thank you to all of you for your support. Three years ago yesterday I started the 20 minutes VC from my bedroom in my family home. Today we have listeners in 191 countries, over 20 million downloads, and a fantastic team of five behind the scenes here.

Harry Stebbings expresses gratitude to his listeners and shares the growth of his podcast, highlighting its global reach and the team behind it.

• Henry Davis is the president and COO of Glossier, a New York-based beauty brand.
• Glossier has raised approximately $35 million in venture capital.
• Henry transitioned from venture capital to operations at Glossier.
• He previously worked at Index Ventures and in corporate finance at Citigroup.
• Harry thanks Kirsten Green and Roseanne for introducing him to Henry.

I'm thrilled to welcome Henry Davis, president and COO at Glossier, a New York brand that has taken the beauty world by storm. To date, they've raised close to $35 million in vc funding from some of the best in the business, including past guests on the show, Kirsten Green at Forerunner Index Ventures IVP, and our friends at Thrive.

Harry introduces Henry Davis and his role at Glossier, mentioning the company's success in raising venture capital.

• Naturebox offers an unlimited snacking program for offices.
• Naturebox focuses on healthy snacking with simple ingredients, no artificial colors or sweeteners.
• Lisa is a mattress company that offers a premium foam mattress sold online.
• Lisa mattresses are made in the US or UK, and a mattress is donated to a shelter for every ten sold.

Naturebox is the first ever unlimited snacking program for offices of all sizes, starting with just $12 per month per employee... But good sleep with Lisa the Warby Parker or Tom shoes of the mattress industry.

Harry discusses the podcast's partnerships with Naturebox and Lisa, emphasizing their offerings and alignment with healthy living.

• Henry worked in banking before moving to venture capital at Index Ventures.
• He describes venture capital as a positive experience with global exposure and access to entrepreneurs.
• Henry always wanted to run something and was drawn to companies where he could be on the operational side.
• He met Emily, the founder of a beauty blog, and was impressed with her vision for a new beauty brand.
• Henry joined Glossier because it aligned with his interests and presented an opportunity to work with an innovative founder.

I always had this itch that I wanted to run something and run with something... And so the great thing about venture capital as well is it exposes you to so many different kinds of business and different stages of business.

Henry explains his desire to be involved in operations and how venture capital provided him with broad exposure to various businesses.

• Henry discusses the importance of knowing one's risk tolerance.
• He had savings and a supportive partner, which helped mitigate financial risks.
• Henry believes in risk mitigation and management in entrepreneurship.
• He viewed the transition as an opportunity to gain valuable experience.
• Lifestyle adjustments were necessary due to salary changes.

It's very important to know what your risk tolerance is... I think there are ways that it can be very risky, particularly if you do it as your first job out of university or college.

Henry speaks about the importance of understanding and managing risk when making the leap into entrepreneurship.

• Henry acknowledges a paradox between risk management and the 'burn the boats' entrepreneurial mindset.
• He suggests being aware of jumping-off points while still fully committing to the venture.
• Henry's business-minded approach complements the vision of the founder he works with.

I think there absolutely is a paradox, and I think it's always about for me... Remember, I'm a sort of business-minded entrepreneur who came to someone else's idea to help realize that.

Henry discusses the balance between careful risk assessment and the passionate commitment required in entrepreneurship.## Awareness of Potential Outcomes

• Understanding the potential outcomes, including those that deviate from the expected, is crucial for entrepreneurs.
• Being aware of possible changes to plans, even positive ones, is a key aspect of successful operation.
• Entrepreneurs should consider "what if" scenarios to stay ahead.

"You don't have to have mapped out a plan b, but you have to have some kind of idea about what the not perfect outcome could look like."

This quote emphasizes the importance of entrepreneurs being cognizant of various possible outcomes, not just the ideal scenario.

• Branded e-commerce refers to companies selling directly to consumers via digital channels.
• The concept has evolved over time, with original pioneers like Warby Parker disrupting traditional supply chains for customer benefits.
• Direct engagement with customers throughout the brand lifecycle is now possible, changing brand building.

"Branded e commerce basically means companies that sell direct to consumers largely through digital channels."

Henry Davis defines branded e-commerce as companies selling directly to consumers, highlighting the shift in how products are marketed and sold.

• Brand experience encompasses the entire customer lifecycle, not just the purchase point.
• Brands like Supreme and Ralph Lauren create lifestyles that customers buy into, with products being a part of the overall brand experience.
• Digital technology allows brands to engage customers more deeply on a daily basis.

"The purchase point and the use of the product is just a percentage of that customer's engagement with that brand and what the customer is buying into."

Henry Davis explains that the brand experience extends far beyond the actual purchase, emphasizing customer engagement at all levels.

• Amazon has been instrumental in creating the e-commerce landscape.
• It dominates the market share and sets the tone for e-commerce expectations.
• While Amazon excels in distribution efficiency, it may detract from the brand experience.

"Amazon is the reason that ecommerce, in its entirety, is what it is today."

Henry Davis acknowledges Amazon's significant impact on the e-commerce industry, shaping customer expectations and market dynamics.

• There is a distinction between brand loyalty and product loyalty.
• Traditional retail experiences often resulted in product loyalty and shelf hegemony, not necessarily brand loyalty.
• Amazon's focus on distribution may undermine brand experiences, presenting an opportunity for brands to differentiate themselves.

"I think what a lot of brands are about to find out with the advent of Amazon is that they don't have as much brand loyalty as they think they do."

Henry Davis differentiates between brand loyalty and product loyalty, suggesting that Amazon's model may challenge traditional brand relationships with customers.## Market Dynamics and the Future of Startups

• The current market allows both incumbents and startups to access capital easily due to low-interest rates.
• Incumbents have the advantage of borrowing at low costs and benefit from tax shields on interest.
• Startups are receiving more venture capital due to the attractiveness of alternative asset classes.
• The balance of access to capital may shift if interest rates rise.
• Entrepreneurs must decide whether to accept acquisition offers or pursue their vision of growth.
• Incumbents typically acquire what they cannot create themselves.
• Startups with strong competitive advantages may choose to remain independent if they believe in their potential to become major players.

"So cash is basically free right now. If you are an incumbent conglomerate in any space, you can borrow for next to nothing, and then you get tax shields on the interest anyway."

This quote explains the current low-cost borrowing environment for large companies, highlighting the financial incentives such as tax benefits.

"I think if you believe your competitive advantage as a startup is so great that the price that a corporate would be willing to justify paying for you doesn't compensate you for your opportunity cost, you should keep going."

Henry Davis emphasizes that startups with a strong competitive edge should consider their long-term potential before accepting acquisition offers.

"We believe that we're at the vanguard of the next channel."

Henry Davis suggests that Glossier is leading a new trend in distribution channels, which could lead to significant growth opportunities.

• Glossier's following is largely due to its engagement and interaction with customers.
• Expansion decisions are based on customer demands and the desire to fulfill unmet needs.
• Glossier has launched in the UK due to strong demand from its community.
• Expansion is operationally challenging for startups and requires careful planning.
• Glossier prioritizes customer engagement and feedback in its expansion approach.

"Our whole following is based on our desire to engage with our customers and to listen to them and to understand what they want and where they're at."

Henry Davis explains that Glossier's success is rooted in its customer-centric approach and active engagement with its community.

"That's very much at the core of how we think about expansion is understanding what the customer wants you to do."

The quote reinforces the importance of customer feedback in Glossier's expansion strategy, emphasizing the company's responsiveness to customer needs.

• The startup industry, especially in tech, struggles with diversity.
• Fair hiring practices are essential for building a diverse workforce.
• Hiring should focus on talent and capability rather than specific skills or experience.
• A culture of acceptance and inclusivity is crucial for a diverse company environment.
• Glossier aims to address the diversity issue through its hiring and company culture.

"Number one is make sure your hiring processes and your assessments are fair."

Henry Davis points out the importance of fair hiring processes to ensure a diverse workforce.

"We focus very, very much on talent and capability over specific skills and experience."

This quote highlights Glossier's hiring philosophy, which prioritizes inherent talent and potential over predetermined skill sets.

"And then finally, I think, is a culture of acceptance."

Henry Davis emphasizes the need for a company culture that promotes diversity and inclusivity, which is integral to Glossier's ethos.## Inclusivity in Team Development

• Companies should be creative in allowing team growth to be more inclusive.
• Communication within the company should foster a culture of acceptance.
• Continual improvement is necessary in fostering inclusivity and diversity.
• There is a challenge in confronting venture capital firms about their diversity efforts.

We will never be done as a company. We can always, always do better on all of these things.

This quote emphasizes the ongoing nature of striving for inclusivity and diversity within the company.

We ask about their approach to diversity, and we call them out when we get an answer about, yeah, we're trying to hire, but we just can't find the right candidates.

This quote reflects the proactive approach taken to challenge venture capital firms on their diversity hiring practices.

• Henry Davis challenges the notion that there are no qualified minority candidates.
• He suggests that recruitment processes may be inherently exclusionary.
• The company aims to lead by example in creating inclusive hiring practices.

You're either saying in the entire world, there are not minority groups in this industry as clever as we are, which I don't think anyone's intending, or you're saying that you fundamentally have set up your recruiting processes in a way that excludes them.

Henry Davis is critiquing the excuses made by firms for not hiring diverse candidates, suggesting that the problem lies in the recruitment process.

• Henry Davis believes that the future of brand will be entirely digital.
• Physical stores will remain as touchpoints, but the essence of branding will be digital through access and community.
• He predicts that the concept of brand and digital will be as symbiotic as brands and department stores were in the past.

I believe that the future of brand will be entirely digital.

Henry Davis expresses his belief that digital platforms will be central to brand identity and community building.

• Henry Davis enjoys "Anna Karenina" for its insights into human nature and emotions.
• He also reads Human Rights Watch reports to stay informed about human rights issues worldwide.

Anna Karenina. You should read it more than once.

Henry Davis recommends "Anna Karenina" for its deep exploration of human nature and passion.

I read a lot of Human Rights Watch.

Henry Davis values staying informed about human rights issues and supports the work of Human Rights Watch.

• The success of Glossier is highly dependent on its people.
• Henry Davis focuses on hiring, retaining, motivating, and building trust with the team.
• The brand is equated with the people who are part of the company.

Our brand is our people, and our people are our brand.

This quote highlights the integral connection between the employees and the brand identity of Glossier.

• Henry Davis hopes to intertwine his professional life with Glossier's growth.
• The goal for the next five years is to set the standard for what a brand experience should be.
• Glossier aims to expand its customer base, product categories, and international reach.
• The company seeks to build a global CPG conglomerate by understanding and engaging with customers.

We want in five years time to be the paradigm for what a good brand experience is.

Henry Davis outlines the ambition for Glossier to become a benchmark for excellent brand experiences within the next five years.

• Henry Davis looks forward to seeing his children grow and develop opinions.
• He is focused on making Glossier a paradigm of brand experience and a meaningful company.

I hope the next five years for me and Glossier are very intertwined.

Henry Davis expresses his personal commitment to Glossier's success and his role in shaping its future.