Kiva Dickinson (Selva Ventures) – Best Time To Start A Brand, Why First Mover is So Important in CPG, and Why VCs are Scared of Getting it Wrong

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*This episode features two conversations with Kiva*

Kiva Dickinson is the managing partner at Selva Ventures. Selva Ventures invests in emerging brands that make their consumers’ lives better. Some of their portfolio includes Haus, Mud Water, and Three Wishes.

Prior to founding Selva Ventures Kiva was a Partner at CircleUp, where he joined during the launch of the Company’s first discretionary equity fund CircleUp Growth Partners.  While at CircleUp Kiva led Series B investments in Nutpods and Liquid I.V., working closely with both companies following investment.

Thank you Alex Pattis for the introduction!

You can follow Kiva on Twitter @kivadickinson. If you are a founder and working on something innovative, have a question you’d like to hear VCs or founders answer on the show you can DM and follow the host @mikegelb. You can also follow for episode announcements @consumervc.

One book that inspired Kiva personally is How Will You Measure Your Life by Clay Christensen. One book that inspired him professionally is Thinking in Bets by Annie Duke.

On this episode, you will learn – 

  1. What attracted Kiva to VC? How Selva came together? His due diligence process. How he thinks about competitive vs. non-competitive categories? How does he think about the future of retail and O2O strategy for companies? How has DTC changed retail?
  2. How does he think about portfolio management and construction when it comes to return on investment? How does he think about geography when it comes to starting a brand and investing and why did he choose the bay area to set up shop? What is one thing that he would change when it came to venture capital?
  3. What’s one company that is in his anti-portfolio – you had the opportunity to invest in, didn’t and in retrospect wish you did? What’s your most recent investment and what makes him excited about it? What is one piece of advice he has for founders of consumer companies?
  4. His reaction to coronavirus
    1. Is he shifting strategy away/towards companies/verticals?
    2. Is he pausing investments in a particular space?
    3. Is he concerned about some current portfolio companies’ ability to raise?
    4. Is he having to adjust to new work protocols (remote working, etc) and if so, is that having an impact?

Madeline Keulen (Victress Capital) – Knowing Your Why, Analyzing Contrasting Trends, and Building Brands

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*Please note that this episode was recorded before the coronavirus global pandemic*

Madeline Keulen is Vice President at Victress Capital. Victress Capital is an early stage venture capital firm that provides visionary and diverse founding teams in the consumer space with capital and resources for growth. Victress has backed 21 innovative companies led by tenacious founders including Alyce, Daily Harvest, Harper Wilde, Rae, and Summersalt. 

Prior to Victress, Madeline developed her consumer expertise as an operator, experiencing first-hand the importance of customer-centric values while working at Apple and The Walt Disney Company. She then moved to Oliver Wyman, where she focused on partnering with leading consumer product and services businesses on strategic growth initiatives, operational improvement, and post-merger integrations.

You can follow Madeline on Twitter @mkeulen and check out her blog mkeulen.com To follow along behind the scenes of the show, you can follow @mikegelb and @consumervc.

One book that inspired her professionally and personally is How Will You Measure Your Life? By Clay Christensen. A couple other books that inspired her professionally are Sam Walton’s Made in America and Phil Knight’s Shoedog.

On this episode you will learn – 

  1. What attracted Madeline to startups and venture capital in the first place? How was she able to break into venture? A bit about Victress Capital? What she looks for at the seed stage? Her diligence process?
  2. Boston’s startup ecosystem. What is the value of a brand? How to think about competitive advantage and moat? How she thinks about contrasting trends? Is this the hardest period to build a brand in today’s climate since it seems so easy to launch a brand?
  3. How the DTC channel has changed? Why she is so bullish on consumer? What she would change about venture capital? Advice for founders in secondary and tertiary markets. The importance of knowing your why.

Logan Langberg (Imaginary Ventures) – DTC 2.0, Multiple Channels of Distribution, and Paid vs. Organic Growth

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*Please note that this episode was recorded before the coronavirus global pandemic*

Logan Langberg is a Principal at Imaginary Ventures. Imaginary is a Venture Capital Fund that invests in early–stage opportunities at the intersection of retail and technology in Europe and the US. Some of their investments include Everlane, Glossier, and Daily Harvest.

Logan was previously an investor at Alliance Consumer Growth, a leading consumer growth equity fund, where he invested in and supported Harry’s, LOLA, Honest Kitchen among other innovative consumer companies. It was a blast talking with Logan about food and bev, future of retail and much more.

You can follow Logan on Twitter @LangbergLogan. To follow along behind the scenes of the show, you can follow @mikegelb and @consumervc.

A book that impacted Logan personally is Boris Johnson’s The Churchill Factor. One book that impacted Logan professionally is Brad Feld’s Venture Deals.

In this episode you will learn – 

  1. Why did Logan come down from growth equity to venture capital? What interested him in consumer? How does he think about good growth vs. bad growth? How does he think about optimizing for growth vs. profitability?
  2. What is his investment criteria for companies? What’s his due diligence process? How important is market expertise? How does he think about price in this current investment landscape? What is the reason that PE firms have come down stream? Do founders need to be concerned with over raising? 
  3. What are some metrics that he focuses on the most? How does he think about portfolio construction and returns for each investment? How Logan thinks about the future of retail? What is one thing that he would change when it came to venture capital? What is his most recent investment and what makes you excited about it? What is one piece of advice for consumer entrepreneurs?

Charles Hudson (Precursor Ventures) – The State of Seed Investing, The Early Stage Ecosystem, and Why Consumer Has Been Out Of Favor with VCs

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Charles Hudson is the Managing Partner and Founder of Precursor Ventures. Precursor Ventures is an early-stage venture capital firm focused on investing in the first institutional round of investment for the most promising software and hardware companies. Some of their investments include The Athletic, Goodr and Co-Star. 

Prior to founding Precursor Ventures, Charles was a Partner at SoftTech VC and Co-Founder and CEO of Bionic Panda Games, an Android-focused mobile games startup. He also was the VP of Business Development for Serious Business (acq. Zynga) and Director of Business Development at Gaia Interactive.

You can follow Charles on Twitter @chudson. To follow along behind the scenes of the show, you can follow @mikegelb and @consumervc.

A couple books that impacted Charles professionally are The New Geography of Jobs by Enrico Maretti and Who Gets What and Why by Alvin Roth . A book that impacted him personally is The Wright Brothers by David McCullough.

On this episode you will learn – 

  1. How did Charles make his way into Venture Capital? How did Precursor come together? How does Charles think about the early investment landscape? His due diligence and decision making process. How he thinks about domain expertise. 
  2. Why are there two different seed markets with radically different round sizes and valuations and what does seed look like today? What are some of the differences in the diligence process when investing in consumer vs. enterprise startups?
  3. How he thinks about pivoting in the early stages? How he thinks about portfolio composition?  Advice for founders that are in tertiary or secondary markets or have a network of VCs when fundraising? What consumer trends is he most focused on? What is one thing that he would change when it came to venture capital? What is one piece of advice for founders of consumer companies?

Bonus: Coronavirus – Featuring Robert Gelb (HeySummit) – How early stage investors are thinking about the current landscape?

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I recruited my brother, Robert Gelb, who is the CEO of HeySummit, a virtual summit platform to help me with this episode and to share his perspective as a founder that is currently fundraising.

Any events that have been affected by coronavirus can use HeySummit for 75% off and charity events are free.

I reached out to all past investors that came on the show and future investors that will be coming on and asked them the following questions pertaining to the impact of corona:

* Are you shifting strategy away/towards companies/verticals?

* Are you pausing investments in a particular space?

* Are you concerned about some current portfolio companies’ ability to raise?

* Are you having to adjust to new work protocols (remote working, etc) and if so, is that having an impact?

Below are the responses.

* Are you shifting strategy away/towards companies/verticals?

No more than we already were.

I am taking a very conservative approach. Funny enough the F&B category has seen a major uptick.

More on the B2B side. Just being thoughtful around what are vitamins vs. painkillers for corporations right now. At the end of the day we’re investing in a long time horizon so we’ll get through this, but downstream financing risk is real if buyers aren’t budging in certain categories on the B2B side especially.

No. We’re long term, early stage investors so we look at companies with a 5-10+ year time horizon. While we take the health, economic, and societal impacts of COVID-19 very seriously, especially in the next few months and quarters, our expectation is that over the long run the broad societal and economic impact will be modest.

I wouldn’t say we’re changing our strategy [yet?]. One thing we have been developing a thesis on, even prior to coronavirus, is curation in the consumer environment given how fragmented the various sectors have become with abundance of brand choices. That being said, we’re looking for opportunities that de-risk the exposure to a particular brand, but opportunities to play a broader category based on consumer preferences and behaviors. We continue to look for disruptors in the market that change age-old behaviors, come up with a better mousetrap, are vertically integrated creating strong supply chains or have a lifestyle component (among other attributes). We love businesses that touch 2 of 3 categories – DTC, B2B, retail/wholesale.

Not changing our strategy.  We had always invested largely in high margin software businesses (mostly B2B) and some consumer digital health, and the strategy remains the same. 

 We’re not as much shifting as doubling down on capital efficient businesses and categories. This will be a complicated time for channel strategy and supply chain management, but people still need to eat and drink and that’s what we invest in. 

We are leaning more into companies that are ‘building’ v ‘selling’ immediately.

During booming times companies are rewarded for product innovation and risk. They have the luxury of charging ahead and prioritizing innovation above all. However, when a downturn starts, companies need to shift their orientation to their consumers and really focus on serving their immediate needs. 

In the immediate term, retail and experiential channels will suffer and an over-reliance on digital will continue to rise and therefore so will CAC. We’ve actually already noticed that rates influencers and sponsored content have gone up wildly. So, if you aren’t already differentiated or don’t have a strong relationship with your consumers, then it is certainly going to be a more challenging environment.

Not really. As seed investors, we take a long-term approach. And while there will be some behavioral shifts that come from this, at some point I believe we’ll get pretty close to ‘normal’. That being said, we are leaning more into companies that are ‘building’ v ‘selling’ immediately.

We have looked at past downturns and what sectors perform well – obvious ones like cosmetics and others as well. 

We are not shifting our strategy or pace at all. However, we’re spending a lot of time with existing portfolio companies to make sure they have enough runway to get through what is likely to be a tightening of capital in the world. 

Interestingly, we are seeing that some of our companies are positively effected by the changes in consumer sentiment while others are negatively impacted, primarily by supply chain issues. 

Frankly, companies are going to die – we already have a few that we know won’t make it. We’ll have to put our dollars to work as capitalists. It’s an environment where Founder’s and Vcs will be less aligned than ever. 

Nope – still hugely bullish on consumer. Arguably, there’s even more scope for companies whose products are delivered straight to your door at a time like this. Some of the best companies were built in tough times – and this will be no exception. 

As we think about the uniqueness of this situation, we harken back to the two other times in recent history when there were macro calamities in the past 20 years – in 2001, when the planes crashed into the World Trade Center and in 2008, when the financial markets melted down. In both instances, the personal, emotional, and business impact was significant in the near term. However, the most effective CEOs and investors kept a level head as they steered the ship and creatively found ways to survive and then play offense. For the moment, we are very focused on our existing portfolio and helping them get the financing they need, encouraging lower burn rates, and moderating expectations for growth in 2020.  

* Are you pausing investments in a particular space?

No. We’re long term, early stage investors so we look at companies with a 5-10+ year time horizon. 

We have some exposure to the travel industry. We do believe that this industry will be the last to recover, much like after 9/11, so we’re monitoring it closely and will probably sit on the sidelines in the near-term for this sector. If there was a business that showed some resiliency and was at an attractive value, we’d certainly look at it. Depending on the slowdown and how long things play out, discretionary purchases are likely to decrease so we like to be positioned with necessity purchases.

Not really. But I’d be weary of a company already in growth mode that is immediately effected.

We’re hyper conscious of companies that have a shorter runway, because we just don’t know what the capital markets will look like in 12-18 months. That has done more to shift our stage later than it has to pause a specific space or category. The one thing we’re aware of is that even when the lock-down measures have passed, we don’t believe consumers will revert to business as usual and that will dramatically impact brands that rely on in-person congregation for discovery. Brands that are discovered on-premise or in-store I do think will have a harder time generating attention and therefore will face a customer acquisition challenge. We would not invest in a company that we feel isn’t prepared for that potential new normal.

Clearly, anything requiring travel or in person connectivity is suffering deeply now and we are cognizant of that as we look at new investments

Nope – in fact, I’ll be deploying even more capital this year and next. 

No. 

Importantly, the changed environment will create opportunities as well as challenges. For example, we know we’ve lived in an unprecedented environment that favored high valuations and an excess of capital and waste in the entrepreneurial ecosystem. Resource constraints spur creativity and the days when capital is easily available have come to a close for now. We saw some of today’s most iconic consumer brands started during the last financial crisis and we expect to see the same in the coming months. We are open for business and see an opportunity to invest in high quality companies at valuations that enable higher ownership than we have been able to secure over the last five years.  We look forward to playing offense in the coming months as this situation (both COVID-19 and the financial markets meltdown) begins to stabilize.

* Are you concerned about some current portfolio companies’ ability to raise?

 Yes – certainly thinking about cash efficiency and runway for each of our companies

Yes to some extent. We haven’t seen early-mid stage investors change their activity levels at this juncture, but obviously the concerns and work environment (more remote, less F2F) mean we’d anticipate some slowdown or lengthened deal processes. Early-mid stage investors may also look to allocate incremental capital to existing investments rather than new investments in this environment. For late stage companies that may be raising from “cross-over” type investors, we anticipate the decline and volatility of public market portfolios may reduce some investors appetite for late stage private companies. 

Yes. I think all startups will have a difficult time later this year raising.  Not right now, but my prediction is to give the market another 2-4 months. My advice here would be to raise some money now if you know you need to be in the fundraising market in the next year. 

Yes. Every company needs to have a few plans in place right now. Between supply chain and consumer spending potentially shifting because of Coronavirus and the markets, all companies need to be thoughtful about their runway.

With regard to companies raising their next rounds, it will take longer. But if you have a strong value prop and brand relevance, then you will stand out from the pack. 

One of our portfolio companies at is currently raising capital. The business has really matured and we did $20mm of revenue last year. However, the market could see a pullback and cause some investor concern at this point in time. Fortunately, our other businesses are all in a good place from a cash reserve perspective and don’t have any contemplated raises until the back half of 2020.

Yes. We have carved out some capital to help support some current portfolio companies through hard times. Assuming many firms do this, it’s a little less capital for new deals. And many port cos will have some blips in their financials due to this.

The best positioned companies today are either cash flow positive or had a fortress of a balance sheet prior to this crisis. Raising capital from outsiders will be exceedingly difficult for companies, and companies will have to cut operational expenditures. In many cases, cutting operational expenditures isnt enough and they’ll need outside capital, especially if they seem big drops in demand. VCs will make sure they optimize where they deploy capital as they triage across their portfolios

In short, yes. I would suspect that late 2020 / early 2021 will not be seen as an advantageous time to be raising capital as a consumer startup, so the planning period needs to start now.  Our companies are pushing to extend runway where possible and being intentional about contingencies. It’s a great time as an investor to be doubling down on your portfolio with more capital to help them navigate this period. 

Yes – I think companies raising institutional capital may have it *slightly* easier, as VCs will have to continue to deploy. Individual angels may have been far more affected by the recent market drops – so that will affect pre-seed deals. I also think there’s a bit of a bifurcation in the market – really hot deals are getting money piled into them. Others are struggling a bit. I’ve met a lot of companies who were raising $3m a fortnight ago, but $1m now….

Today, the accelerating spread of COVID-19 has already led the capital markets to tighten significantly. However, while the overall consumer economy is getting battered, the impacts on our portfolio are very company and industry dependent. We are working with each portfolio company CEO to evaluate the impact of the virus on their business, to reassess the required capital to get to profitability, and to help them decide whether they should rethink growth rate and associated burn. Financings will be hard and will have to make tough choices – making sure that we deploy reserves into companies where the return on investment is highest.

* Are you having to adjust to new work protocols (remote working, etc) and if so, is that having an impact?

We invest nationwide and our team is based in two offices so we’ve already been reasonably accustomed to working with founders and with each other using remote tools. Our portfolio companies have increasingly become semi-distributed in recent years as well so in general they’re comfortable interacting with us remotely. Incrementally there is an impact for us in that business travel and F2F meetings have declined for an uncertain period of time. We have a team of 6 people in total, so rather than making firmwide directives we have enabled each person to make the individual choices that they’re comfortable with and make most sense for their situation regarding remote work.

 We already had a flexible work culture – not a huge hurdle for us

So far, so good. Some great tools out there, and many companies are moving fully or partially distributed/remote anyways, so it’s good to eat our own dogfood.

It’s different to do VC calls by ZOOM but certainly not a giant change. It’s harder for companies, especially when there are elements of the company, like distribution centers and photo studios, which are incapable of shifting to remote work

We’re doing business as usual, but working from home. Zoom is becoming my new best friend. I’m doing way more outbound reach out than ever before and if anything we’re more focused on tasks because of fewer distractions.

No. We were always a remote team and have always done all of our founder calls over Zoom. We just don’t go into our respective offices anymore. 

Our team is pretty small to begin with and we’re fortunate to have flexibility to work remotely already (that’s not to say we don’t go to the office on a random Tuesday because we feel like working from home). Because of our small team, we don’t have a facetime culture and share the mindset that as long as the work gets done, it doesn’t matter where each person is. Today’s technology makes things much easier than even 5-10 years ago.

It’s naturally becoming more difficult to form new connections with entrepreneurs.  Zoom is great, but we’re discovering just how critical in-person connection is to establish real trust. That said, I’m also seeing a tightening of existing relationships and Zoom / social media is playing an important role in building solidarity amongst investors and entrepreneurs.  Community is everything in this scenarios and I’ve been impressed by how certain people have stepped up to foster that community.

We’ve eliminated almost all business travel and encouraged our team to work from home if they are so inclined.  We’ve changed our Monday Investment Team meetings from in person to video conference. We have seen dramatic shifts over the past two weeks in behavior. Seattle is on the verge of literally shutting down and we expect this reaction will propagate across more cities in the U.S. in the coming weeks.

Laura Chau (Canaan) – The Five Pillars of Social Media, Moving Towards Status and the Power of Grit

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Laura Chau is a Principal at Canaan. Canaan is an early-stage venture capital firm that invests in visionaries with transformative ideas. Some of her current investments include Coterie, Curtsy, and Jumpcut. At Canaan, she focuses on consumer technology. She previously worked in Deloitte’s Strategy and Operations practice. She has also worked in sales and marketing functions within Kabam (acq. by Netmarble), Branch Metrics and Greenhouse, as well as working closely with Marie Kondo to launch the author’s product business.

Thank you Caitlin Strandberg for the introduction!

You can follow Laura on Twitter @laurachau.

In this episode, we focus on Laura’s chapter in Finding Genius by Kunal Mehta. Here is a link to excerpts of her contribution to the book.

In this episode you will learn – 

  1. What attracted Laura to work in startups and technology? What were some of the learnings while she worked at Kabam that influenced her as an investor and what attracted her to venture capital, specifically early stage investing? In the early stages, when there isn’t much data, what are some of the qualities that she looks for in founders?
  2. What’s her due diligence process? What makes consumer investing challenging compared to enterprise? What is some advice for founders that might live in secondary or tertiary markets? A recap of the five pillars of social media in her “Finding Genius” chapter. At what stage does social media hit saturation? How she thinks about privacy? The future and opportunity in social media? Consumer trends that she is most excited about? 
  3. What is one thing that she would change about venture capital? What is one book that inspired her personally and one book that inspired her professionally? What is her most recent investment and what makes her excited about it? What is one piece of advice that you have for founders of consumer companies?

Ethan Austin (Techstars) – Punched in the Face with a Problem, Analyzing Teams and EQ

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Ethan Austin is the Managing Director of Techstars Western Union Accelerator. Techstars Western Union Accelerator is the premier program for global startups shaping the future of money movement.  Companies participating in the program gain direct access to the world’s best fintech execs, founders and investors covering everything from customer development, global go-to-market strategy, access to capital and biz dev opportunities. You can currently apply Here to be part of their summer cohort. The application deadline is April 5th, 2020.

Previously, Ethan co-founded Giveforward, the world’s first medical crowdfunding platform which was acquired by gofundme, and Deal Gooder, an E-commerce site where proceeds benefitted local non-profits and schools.

You can follow Ethan on Twitter @ethanaustin. To follow along behind the scenes of the show, you can follow @mikegelb and @consumervc.

One book that inspired Ethan professionally is Hug Your Customers by Jack Mitchell. One book that inspired Ethan personally is Arc of Justice by Kevin Boyle.

In this episode you will learn – 

  1. What attracted Ethan to entrepreneurship? Why he is mission driven. How going through Techstars changed his life? How to analyze teams? The importance of distribution. 
  2. The requirements of the Techstars Western Union Accelerator. Some trends that Ethan is focused on in fintech? What is one company in your most recent cohort that you are excited about? What is one thing that you would change about venture capital?
  3. What is one book that inspired him professionally and one book that inspired you personally? What is one piece of advice that you have for founders?