Transcript
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Oh, hello and welcome to the
consumer VC. I am your host,
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Mike Gelb, and on this show
we talked about the world of venture capital
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and innovation in both consumer technology and
consumer products. If you're enjoying this content,
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you could subscribe to my newsletter,
the consumer VC DOT sub stack dot
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com, to get each new episode
and more consumer news delivered straight to your
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inbox. Our guest today is Brian
o'malley, who is a partner at fore
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runner. For runner is one of
the top consumer venture capital firms that tirelessly
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champions founders who delivered the innovation they
demand. Some of Brian's investments include Sunday
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canal and dumpling. They last raised
one billion dollars for their fund. Six
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we discussed how four runners thesis has
evolved over the past few years, what
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is the empowerment economy, which Brian
focuses a lot on, and how he
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thinks about valuation and the venture climate. Today, without further ADO, here's
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Brian. Brian, thank you so
much for joining me today. How are
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You well, Mike? Thanks for
having me. I appreciate the invite.
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No, I really appreciate you coming
on. I've been trying to have someone
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from foreman to come on for the
past two years. So I'm so excited
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to have you on it. So
why did you want to invest in consumer
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and how do you define investing in
consumer today? Sure so, for me,
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My background as an entrepreneur was much
more in the enterprise space, and
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what that meant was that you would
have these big deployments. You would be
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like taking people out to wind,
you try to play golf with the right
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people, and it wasn't really about
who had the best product. And so
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it was incredibly frustrating for me because
there were sometimes where like we should have
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won the deal because we would have
been an incredibly, you know, value
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add service and we lost because we
didn't, you know, we didn't go
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to college with the right person,
or other times where we won the deal
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and we're sitting there trying to implement
the software and it's just totally the wrong
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fit. And so what initially pushed
me over to consumer was just this idea
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that the best products one and I
always loved the idea of like, let's
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evaluate the merits of the product,
let's evaluate how well the teams understand the
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needs of the user, and that
led me into consumer investing what's interesting is
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now, with SAS and with more
of these bottoms up adoption models, that
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line is getting blurred a bit in
terms of how people make decisions and enterprises,
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and so you know, we'll talk
a little bit about our evolution over
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time, but we're ultimately seeing,
at the end of the day, whether
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you're selling to a business where they're
selling a consumer. There's an individual that's
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making that decision and some of their
decision criteria are logical and based on facts
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and some of it's based on emotions
and feelings, and you need to understand
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both those things to understand why anyone's
gonna adopt any product. That's a really
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great point. Why did you decide
to raise, you know, a billion
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dollar fund and just grow more and
more? And obviously I know you still
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do invest in consumer brands, but
think about different certain categories that are software
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in client. So I think part
of it was a function of what our
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aspirations as a team are to be
and the role we want to fill for
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our founders, and part of it
is a reaction to a market where there's
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a lot more dollars floating around.
So our goal is to be the partner
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for the most interesting series any companies. Sometimes we get them a little bit
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earlier at seed. Sometimes we miss
it and we gotta Hustle and catch up
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at series B. But that's really
where we want to intersect folks. And
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if you're looking at round sizes for
the best companies in the million dollar range,
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there's a certain amount of capital you
need to have to be competitive in
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those deals as well as have enough
reserves for those businesses over time. So
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if you look at the billion dollars, behind the scenes, it's really two
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funds. It's a five million dollar
early stage fund and a five hundred million
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dollar growth stage fund. You know, we found that not only is it
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important to be a partner early on, but the best founders are looking for
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investors that have dry powder, that
have conviction to double down on companies when
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they're not obvious to other investors,
and so we thought our best investments we
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want to be able to have the
option to put million dollars in those businesses,
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because that's how we can be less
beholding too the outside market and really
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rest on our conviction that we have
around the companies were investing in. If
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you do lead around Um like,
whether it's Theater Series A. Will you
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still be interested in leading rounds for
their thereafter with the company? Absolutely so.
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I've just had one recently where we
lead the the a after leading the
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seed and that was because, you
know, we have an information advantage versus
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all other investors looking at that company. We know how the team operates,
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we understand the metrics intrinsically, and
so you should be able to be a
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better follow on investor than initial investor
because, especially these days, a lot
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of rounds are happening really quickly.
So you have imperfect information and those early
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decisions, but you have a lot
better information over time. So that was
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one example. Another company that we
lead the seed round in a little over
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year ago, they went out to
raise a series a and it was a
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lot of like we love you butts, you know. It's like, Oh,
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we think you're the best founder in
the world, we think of the
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best company, but like we're not
going to write you a check. And
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in that case, like we thought
the team was working on something really special.
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Maybe they were a little bit early
for the A, and so we
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let a five, six million dollar, you know, kind of in between
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round, and then six months later
they raised the series a from another firm,
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and so in that case we had
enough ownership from those two initial ones
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that we were happy to bring in
another partner to help them grow. So
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this is where you can leverage capital
from an offensive perspective, where in the
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early days of four runner we were
very beholden to third party investors uh to
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be able to follow onto our companies
even if we had conviction, and now
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we love teaming up with other folks. We think that's one of the goldilocks
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things. That sounds sort of silly
about a billion dollars saying that that's not
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like a massive fund, but like
we feel like we're small enough that we
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can still partner with other firms and
really think about what's the right fit for
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founders. At the same time,
if we have conviction around something, we
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don't need to wait for someone else
to invest in the business. We can
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go ahead write that check and help
the founders get back to work that much
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faster. Yeah, I think your
last point really resonates on if you have
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that much conviction, then you can
actually then lead again in the round,
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because, I mean I remember speaking
to an entrepreneur who's now an investor,
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but he was saying when he was
an entrepreneur that the funds, even the
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business was doing well and and had
great traction, the funds that led at
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the c stage, for example,
they definitely wanted to exercise or pro rata
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rights but didn't want to leave the
a. They wanted someone else to kind
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of step up and leave the A, and then that puts on a lot
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of pressure for the founders actually go
out and actually get um the A.
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and it's funny because the actual offer
that they wanted to do for the a
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for the current investor pool was a
much better deal than actually for the investors
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than what they actually ended up getting, since they had to go out to
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outside capital, which I thought was
also quite interesting. Yeah, it introduces
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a lot of external factors and if
you think about it, any one of
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these businesses, there's a lot more
in tras now, but you're still beholding
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too the opinion of like one to
two dozen people, which is kind of
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crazy, right. You're you're looking
at businesses that are ultimately going to serve
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millions of customers and whether one or
two dozen people like you determines your ability
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to raise the next round. And
so we wanted to take some of that
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ambiguity out of the frame. We
wanted to set the metrics with our founders
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in terms of what was most important
and if we can bring someone else into
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partner with us, great, but
part of the fund objectives was being able
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to not be reliant on that third
party source of capital over time. That
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makes sense, so tell us a
bit. I know that one of the
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areas that you're very focused on is, as you describe it, the empowerment
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economy. What is the empowerment economy
in your mind? One of the luxuries
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of being in this job is you
get to pick where you spend your time
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and so, you know, while
we're not like tree hugging double double bottom
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line investors, you know we do
like to focus on areas where it is
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like helping the world, you know, be a little, maybe a little
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bit of a less horrible place.
and Um, the empowerment economy is really
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this idea that technology can help people
get back to the original ideas around the
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American dream. I think you have
a lot of Americans that are feeling like
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the system is set up against them. You know, it's designed for rich
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people to get richer, big companies
to take advantage of them and the government
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to squabble it somewhere in the middle. And so this is really about a
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set of tools and technologies that help
people achieve financial independence. Right. So
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how can they take advantage of investment
opportunities that were maybe only available to people
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who are very wealthy historically? It's
around education, and education not just generically
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like going to school, but around
skills and job training. How can you
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bet on yourself, invest in yourself
and end up with more marketable skills along
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the way? How can you,
as a small business owner, where you're
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competing against the walmarts and the Amazons
of the world, you know, fight
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back and have an offering where people
aren't shopping with you out of the kindness
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of are hard, they're shopping with
you because you have a better selection,
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better offering for them as consumers.
And so we lumped a bunch of things
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into this category around empowerment, but
we think it's really the opportunity for people
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to get back to leveraging technology,
to bet on themselves to make a brighter
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future for Um, you know,
for their families and the people around them.
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So leveraging technologies for small businesses right
where themselves being able to create,
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um a business in order for them
to be to compete against that could be,
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you know, the major retailers out
there or the big dogs per se
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in the market. People will talk
about this like creator economy piece and like
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the word Creator. I think it's
thrown around a lot right now. Every
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like two years ago or years ago, it was all influencer and now it's
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just like it's like find every place, just swap it out. Now it's
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creator, and so that's like a
subset of this. But a lot of
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people have, you know, they've
built an online brand, they've built online
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presence, but they're largely under monetized
because the options they have for themselves are
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are like you tube ads or a
patreon campaign. And so some of this
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is about online enablement, some of
it about is about offline enablement. How
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do you think? What do you
think about, like the pain point specifically
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for maybe a retail shop or Um, just a small business? How do
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you analyze, you know, the
actual pain points for those businesses and where
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opportunities actually could lie? I mean
it's it's funny because adventure smbs used to
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be like the category you wouldn't want
to touch with the ten foot poll.
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You know, they made decisions like
businesses, with all sorts of bureaucracy,
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and they spent like consumers. You
know, it was it was hard and
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they were cheap, and so it
was an area that, like, if
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you wanted along illustrious career adventure,
you didn't, you didn't necessarily go there.
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But what's changed over time is not
the attitude of the S mbs.
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You know, they still are cheap, you know it's still is complicated to
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deployment, to deploy technology. But
what changes the way the startups approached them.
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And so we were early investors in
a business called fair which is a
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wholesale supplier for main street us,
a busines. This is and they didn't
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show up day one with this idea
that like, Hey, we're gonna sell
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you a bunch of products and if
you don't sell them, you're on your
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own tough luck, like buyer beware. They showed up and said, look,
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a lot of these small businesses they
behave like consumers, and consumers have
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gotten used to the idea that if
you buy something online and you don't like
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it, you send it back and
you can return it and, by the
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way, that's free. And so
fairs. Initial Hook was like, look,
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we're gonna send you products we think
you can sell in your stores,
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but they don't sell through, send
it back to us, we'll take it
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off and we want to keep you
as a customer. And that was a
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very different approach that was much more
collaborative, where they were on the same
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side, that they were leveraging to
their technology to understand which products would sell
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in that particular store. They were
doing it not to take advantage of that
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business, but they were doing it
to partner with that business, and so
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we're seeing more and more attitudes like
this. I think toast is a great
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example of a company where they were, you know, selling into these small
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restaurants and the restaurants just got absolutely
hammered with covid and with the change behavior
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patterns. That happened almost overnight and
they quickly revamped their product to be all
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about, you know, kind of
touchless ordering, being more delivery friendly,
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and that was where it went from
like kind of a grind, kind of
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a hard smb business to something that
was really opening doors for incremental revenue for
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these companies, and that's when that
business really really took off. And so
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we think like restaurants are almost the
canary in the coal mine for SMB businesses.
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It's a little bit how like online
travel was a category that adopted a
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lot of technologies earlier than other sectors. We think we can look at restaurants
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because there was a high frequency.
There's a lot of people shopping a lot
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of different places. It naturally happens
three times a day that you eat.
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We think we can look at some
of the evolution that's happened there and then
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apply some of those proxies to other
categories that maybe are less tech savvy but
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have similar pain points as local businesses. How do you also kind of maybe
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describe yourself as an investor? Like
I've had investors on the show that maybe
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are a bit more, I like
to say top down, where they are
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extremely thematic, thesis driven, thinking
a lot, observing what's kind of going
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on in the present and kind of
where they want to spend their time,
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where I have other investors that I
think a bit more, I would say,
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bottoms up, where they really where
the entrepreneur has to really is the
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one that actually brings that insight to
them and then they kind of make that
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decision and they're maybe not as trend
focused per se. Where do you kind
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of follow yourself in the line of
those two things? Sure, I would
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say this is an area that I've
I've like evolved in the eighteen or whatever
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years I've been doing this, and
I would say early on I was like
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very market centric, right. My
belief was that you have good enough market
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opportunities where even, you know,
okay teams could rise to the occasion.
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And, by the way, as
the company got better, you could bring
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on more talent, you could bring
on better people, and a lot of
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those businesses worked pretty well early on. They get twenty million, fifty million
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revenue whatever, but like, they
largely fell apart over time. And that
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was just the challenge that those those
teams struggled to understand what great talent looked
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like and when they found great talent, they struggled bringing those people on board.
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And so they were very successful in
act one, but when it got
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to be act two, act three, they had more challenges. And so
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I would say over time I've evolved
to Um not just caring a lot about
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the team's ability to execute, but
also whether the team is going to be
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a pleasure to work with. Like
that's one of the luxuries we have that
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we get to pick the people we
work with. Obviously they're picking us as
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well, but where you feel like
you have a level of camaraderie that like
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one plus one equals three, like
the interaction of you as an investor then
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as the founding team is going to
be better than each of you operating alone.
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And so I still have like categories
and markets where I'm very predetermined to
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want to do something in because I
feel like there's just a gap, there's
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a pain point that's not being addressed, and so I'll be looking for companies
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in the as categories, but I'm
much more reluctant to jump into something,
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uh, if it feels like it's
going to be pulling teeth the whole way.
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To get alignment with the team.
How do you analyze teams when you're
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conducting due diligence meeting with entrepreneurs?
What are some of maybe tactics in order
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maybe to gain trust or really realized, because I mean especially, you know,
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the last few years the market has
been going so fast. I'd imagine
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diligence is probably only for a few
days and not a few hours. And
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so how do you kind of put
this all together. Yeah, I mean
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it's one of these things that,
like, on one hand is incredibly challenging
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to make a judgment call in these
tight time frames, but incent of the
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cases it's actually shockingly easy, you
know, and that and that's because a
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lot of people who, you know, risk everything in their life they go
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out to start a business, they
don't do the fundamental work to really understand
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their customer right and so they might
have they might have gone to business school
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and wanted to start a company and
like maybe the net world need is one
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more pet insurance business, you know, or something along those lines. But
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when you talk to them you understand
that their level of understanding of the real
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pain points, why people buy,
how they make that decision, how do
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you build lifelong relationships with your customers, that level of understanding is skin deep.
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And so we're looking for folks who
don't necessarily have like twenty years of
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experience doing something, but where they
have a great level of understanding of who
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their customer is and they have a
high level of precision around how to operate
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their business. They understand the might
be earlier, but they understand the metrics
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that matter and they understand what questions
they need to ask along the way,
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and so that's really just like does
this person understand their business in an honest
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way? And then also you can, you can find out what the relationship
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will be like largely by the questions
that they ask us. Right. So
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you'll have a lot of folks where
it's like, you know, you turn
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it over and say, Hey,
what do you want to know about me,
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and it's like what's your fund size? What's your decision process? It's
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on us, like they read a
blog somewhere about what questions you should ask
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investors, versus really getting into the
meat of it, of understanding like Hey,
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like where have you butted heads with
the founder before? Why that happened?
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How to play out? You've fired
someone before? Why did that come
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up? How did that play out? What happens when you've had to shut
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companies down? You know what happens
when you know you have you know a
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crime happened at your your business that
you invested in. Like you do this
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long enough and things happen right.
And so those are the conversations I want
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to engage in because you can tell
that they're actually spending their time to understand
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what sort of a partner you'll actually
be. They're doing their research and so
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often you just find people where you
know they kind of go through the motions,
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but it's clear they're collecting term sheets
and they're just trying to optimize the
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deal. Those are, you know, excellent points. Now you recently wrote
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this article that I really enjoyed reading
about empowering main street and there was one
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part early on you talk about how
you mentioned how open table and yelp achieved
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massive local market share but they weren't
embraced and you talked about how the market
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that they were targeting, it's like
a trillion dollar market, but they are
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only valued, you know, at
several billion. Sum Ability is still pretty
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good. But what did you mean
by that term in terms of embrace,
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and how do you identify if a
company, as you're looking at companies and
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investing and, you know, being
on the board of some of these companies,
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how do you kind of think about
the word embraced in in that context?
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Yeah, absolutely, like we're really
looking for companies where they're partnering up
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with their customers, and so in
the case of of like yelp and open
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table, they had they were they
were sort of a necessary evil for restaurants
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to to work with them, but
they had this love hate relationship where they
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were largely extracting the toll from the
ecosystem for what they're providing instead of opening
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up incremental value and charging for that. So I'll give you an example of
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something that's going on right now.
Like you look at etc, for example,
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they've had these seller revolts and it's
interesting because if you think about etc,
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they are enabling people's businesses, many
of whose businesses did not exist before,
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and they're taking a relatively light take
rate in the grand scheme of things
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for helping something go from nothing to
a business. But the way that they
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phrase it, the way that they've
increased prices over time and the way that
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they don't allow people to opt in
or opt out of some of these programs
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has created this adversarial relationship with their
sellers. And one of the decisions I
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was involved in the coming called hotel
tonight early on. And so we're a
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marketplace right, we need to take
a take rate, otherwise we can't attract
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customers. Bringing one of the platform
and saw hotel rooms, but they did
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things along the way where it was
like Hey, do you want to specifically
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target people through their, you know, area code or there zip, based
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on where their their phone actually is
right now? Do you want to be
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promoted in this particular area around the
top deal? These were all opt in
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options for people to give us a
higher take rate by an exchange they were
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going to move more rooms. And
so in a category like that where you
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had, you know, basically if
they didn't sell the room that day,
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it was going to be completely lost
revenue, if you showed up with a
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take rate, everyone would think that
you had this like agregious level of intrusiveness.
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But if you show up with a
fifteen percent take right and then let
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people opt in for programs that are
going to move more rooms, it's just
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a very different conversation along the way. That makes a lot of sense.
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But if you were starting the next
yelp or open table, what would the
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end you do differently. That'd be
more parting with your customer, maybe more
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alignment as well, and and be
embraced. Yeah, sure so. I
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mean we've got a company called table
twenty two that we invested in, where
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they're not direct comps. We'll give
it as an example, where what they
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do is they help interesting restaurants that
have almost like a brand larger than the
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actual footprint of the store be able
to launch subscription offerings where people can subscribe
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to to pro to food offerings at
those restaurants. And this is really important
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during covid because a lot of those
restaurants weren't open, they weren't seeing as
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many people. But that ideal around. What does being a subscriber or a
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member of a restaurant look like?
That can evolve two interesting things over time.
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In a way where you're reserving certain
tables for people last minute, you're
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giving them exclusive access to, you
know, either special dishes or like a
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wine tasting or something like that,
you know, in the back room.
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And so I think part of it
is is the evolution we've seen in software
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where, instead of charging for every
customer that's showing up, if you're on
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like a figma or something like that, the largely the sale is around an
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upsell premium version of that. And
so, more specifically with open table,
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look, if you said, hey, it's it's completely free for anyone who's
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an existing customer who's been there before. We'll give you table management, we'll
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give you all the reservations on your
site, but if we generate someone who's
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going to show up at your table, you know we're gonna we're gonna take
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a piece of that because that's a
customer that we generated. Right. Hey,
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by the way, if we sell
them up front, and restaurants have
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a huge problem with cancelations, especially
during peak times, Friday Saturday night,
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we're gonna not just get them to
reserve a table, but we're going to
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get them to prepay and we're going
to get them to opt into some special,
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you know, pairing option, which
is a higher revenue per table.
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Like there's upsell opportunities along the way
where everyone is winning and where you're charging
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more from that incremental value. That's
something that I think we've seen have a
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high degree of penetration in the software
ecosystem of bottoms up adoption. You know,
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businesses like Canva or worth, you
know tens of billions of dollars have
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have leveraged that and that's something that
I think more companies can take advantage of
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in the SMB space as well,
especially as the cost of distribution goes down
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um through, you know, through
more bottoms of adoption models. Yeah,
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I mean I think that also,
like one of the main points that I
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that I take it aware is also
being able to charge when there's actually a
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transaction or assale and not just charge
Um, you know, idoly right Um,
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as like a monthly subscription. So
definitely understanding. There's definitely more alignment
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there, because then revenue is actually
coming in through the piece of technology directly,
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which is pretty cool. I mean, you look at a company like
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group on which you know, on
one hand was the fastest company ever to
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get to a billion dollars in revenue
but on the other hand largely under delivered
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on the promise Um that was their
value prop is like, look, you're
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not advertising. A lot of people
don't understand advertising and cost of acquisition.
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As a small, small business,
you know you were paying for someone to
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walk through that door with an existing
transaction and people were willing to give a
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really high percent to do that.
Ultimately, the challenge there is that business
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became or a sales lad versus product
lad, where the incentives originally were aligned
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with their business partners and that got
to be a point where the sales comp
359
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structure was set up in a way
where it wasn't as aligned and you had
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more merchants ultimately to satisfied partnering with
them. But if you look at that
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point of that value prop that they
had, someone will fill that gap at
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some point where you're delivering customers prepaid
in a way where the cost of sales
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goes to nothing for the business and
it's purely incremental margin. Yeah, no,
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that's a really good recap of like
how group on was so successful for
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a few years and then the reason
why they weren't. Ye, in your
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article you mentioned how a lot of
people want to shop local. I think
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this mentioned the article that there was
maybe a bit of a disconnect of what
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people actually wanted to do and then
how they're actually spending when it wasn't the
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case they were shopping, you know, very local. When you kind of
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do your research and you generate these
insights, how do you think about the
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differences between what maybe consumers say and
have, you know, maybe like the
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best intentions at heart, if shopping
local is the best intention, which I
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believe it is, versus maybe how
they're actually spending their dollars? This is
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the willing in all our question here, because there's this big gap between people.
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What people say they're going to do
and what they're actually gonna do,
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and so we see it as our
job not to sit in our venture capitalist
377
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does your office and pontificate about what
people are doing. We see it as
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our job to listen. So we
do a lot of primary research around what
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consumers are actually wanting and what's important
to them right now, but we also
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do a fair amount of verifying and
looking at actual purchase data to see whether
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they're following through on those intentions.
And there's been no category, I would
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say, that's been like more obvious
of a you know, suspect in this
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regard than the sustainability one, where, like, if you listen to everyone,
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they would be driving their Prius is
around and everything is recyclable and then
385
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you go to the park and the
trash cans overflowing with stuff, and so
386
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we we've really had to look hard
at that category because it's strategically important to
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us. It is something that's important
to the consumer. But what people really
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want is they want just as good
of a product and just as good of
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a price with some sustainability benefit on
top of that. They don't want the
390
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trade offs necessarily, and so I
think the same as the case when it
391
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comes to shopping locally. Look,
you want to support that business, you
392
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want to be able to have a
local affinity where you go in, they
393
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know, it's like cheers, right, they go in, they know your
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name. You get that level of
service. But you don't want to pay
395
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more to get that product. You
don't want to be faced with different return
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expectations for when things you know,
if it doesn't work out, how they
397
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get sent back. You don't want
to be faced with less inventory that's available.
398
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And so that's where I think there's
an opportunity for technology and for startups
399
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that are like well funded to be
able to fill some of those gaps between
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the experience people have gotten accustomed to
form big box retailers with massive technology arms
401
00:27:03.079 --> 00:27:08.519
and massive ability to invest in operations, and the local person that they like,
402
00:27:08.720 --> 00:27:11.319
are cheering for and want to support. How, then, do you,
403
00:27:11.359 --> 00:27:15.359
though, think about, maybe it's
the elephant in the room, but,
404
00:27:15.359 --> 00:27:18.400
but, but, price sensitivity.
Right, when you have, you
405
00:27:18.440 --> 00:27:22.720
know, small shops probably tend I'd
imagine that for some of these products,
406
00:27:22.759 --> 00:27:27.119
it probably is more expensive than you
know, say it like the Walmart or
407
00:27:27.119 --> 00:27:32.680
targets that they're going to going to
do, going to which I mean that's
408
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part of why, I'd imagine,
Walmart wiped out a whole bunch of small
409
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businesses right just due to like price
sensitivity. As investor, is someone that
410
00:27:40.960 --> 00:27:45.000
is very bullish on small medium businesses. How do you also think about that,
411
00:27:45.039 --> 00:27:48.079
that consumer perspective on price sensitivity,
to make sure that these businesses survive?
412
00:27:48.599 --> 00:27:52.799
I think bookstores is a great place
to look, right like Amazon.
413
00:27:52.920 --> 00:27:56.319
That's the category they started and you
can find any book you'd ever want to
414
00:27:56.359 --> 00:28:00.559
read on Amazon. But what's interesting
and maybe non obvious is that over the
415
00:28:00.680 --> 00:28:06.279
last decade the amount of independent bookstores
has almost doubled. So it's not this
416
00:28:06.440 --> 00:28:10.960
like declining trend. If you look
at that and correlated it's really when borders
417
00:28:10.960 --> 00:28:15.000
went out of business. So there's
there's been this whole wave of like targeted
418
00:28:15.119 --> 00:28:18.880
specialty retail, the sports authorities,
toys R us is of the world,
419
00:28:19.519 --> 00:28:25.359
and those businesses have largely failed,
very frequently because investors and getting too much
420
00:28:25.400 --> 00:28:27.759
debt and, you know, not
having management teams innovate. But as that
421
00:28:27.839 --> 00:28:32.519
wave has gone away, you end
up with like one of two things.
422
00:28:32.880 --> 00:28:36.880
I either already know what I want, I wanted delivered and I wanted easy
423
00:28:37.200 --> 00:28:41.319
and the Amazons are going to do
great for you on that behalf. or
424
00:28:41.319 --> 00:28:44.279
in the bookcase, it's like,
Hey, I don't know what book I
425
00:28:44.319 --> 00:28:47.799
want to read. Right. I'm
interested in X. Do you have a
426
00:28:47.880 --> 00:28:51.119
recommendation of a good mystery novel?
I want to go on the store and
427
00:28:51.160 --> 00:28:53.359
I want to flip through some pages
and see, you know, see what
428
00:28:53.359 --> 00:28:57.279
it looks like before I buy the
book, because that's ultimately like saving a
429
00:28:57.400 --> 00:29:03.720
dollar or two here and there.
Is less valuable to people than wasting their
430
00:29:03.720 --> 00:29:06.759
time on a book that's not relevant. I'll give you another example. My
431
00:29:06.799 --> 00:29:08.160
son, of one of my both
my kids actually, but my younger son,
432
00:29:08.200 --> 00:29:11.319
play soccer. He needed some new
cleats, you know. So what
433
00:29:11.359 --> 00:29:15.039
do we do? We go online
to the Nike Dot Com and, like
434
00:29:15.119 --> 00:29:18.720
we buy some cleats and they look
awesome, right. They show up and
435
00:29:18.799 --> 00:29:22.160
like they're just not comfortable period,
right. And if you think about soccer
436
00:29:22.160 --> 00:29:23.839
cleats, like they've got to be
comfortable because you're gonna be wearing them running
437
00:29:23.839 --> 00:29:26.599
around trying to kick ball. And
so we went down to the local,
438
00:29:26.720 --> 00:29:30.559
like specialty soccer store, which,
by the way, is doing a lot
439
00:29:30.599 --> 00:29:34.799
better now that there's no like sports
authority to compete with them. They had
440
00:29:34.880 --> 00:29:38.519
much broader inventory, they had a
guy there who like knew how to fit
441
00:29:38.599 --> 00:29:41.279
them. They've got balls in the
store that you can kick around and play
442
00:29:41.319 --> 00:29:45.319
around with and like we weren't going
to leave the store, you know,
443
00:29:45.519 --> 00:29:48.640
without him buying something. Now,
on the flip side, will say,
444
00:29:48.640 --> 00:29:52.279
like their inventory was pretty poor,
and so that's the kind of thing if
445
00:29:52.319 --> 00:29:56.240
you think about, like, what
have ghost kitchens enabled for restaurants? Well,
446
00:29:56.240 --> 00:30:00.680
why isn't there like ghost warehouses?
You know, they are able to
447
00:30:00.680 --> 00:30:03.440
work with these local stores where the
local store sells the stuff but the right
448
00:30:03.440 --> 00:30:07.359
product is shipped to you along the
way. And so I think there are
449
00:30:07.440 --> 00:30:11.000
blends, you know, both the
online type business with partnering up with the
450
00:30:11.079 --> 00:30:15.799
Local Specialty store. That's going to
create opportunity for entrepreneurs. But where,
451
00:30:15.839 --> 00:30:19.359
like there are some products where you
want advice, you want to try it
452
00:30:19.400 --> 00:30:26.079
out. Um, those are are
better locally than getting delivered via, you
453
00:30:26.160 --> 00:30:30.519
know, via fed extrack or via
Amazon prime vehicle. I really like how
454
00:30:30.640 --> 00:30:36.200
you phrase that and positioned it,
especially with the Amazon example with books,
455
00:30:36.200 --> 00:30:41.039
how Amazon replaced the big box stores
the borders, the Barnes and nobles where
456
00:30:41.079 --> 00:30:47.880
almost those are like a combination of
having not infinite but almost a lot of
457
00:30:47.920 --> 00:30:52.519
skews right, and a lot of
variety and probably great prices, combined with,
458
00:30:52.720 --> 00:30:55.559
you know, actually being able to
actually go into the store and actually
459
00:30:55.640 --> 00:30:57.880
go kind of be able to wander
and see which book you want to actually
460
00:30:57.880 --> 00:31:00.880
purchase. That's now split where.
Now if you want to like, if
461
00:31:00.920 --> 00:31:03.599
you know what you want to buy, you can just go online Amazon and
462
00:31:03.640 --> 00:31:07.279
maybe buy it, or you want, you know, do on price and
463
00:31:07.359 --> 00:31:08.799
you know it's convenient, easy,
and then it's like hey, if I
464
00:31:08.799 --> 00:31:14.079
want to actually browse somewhere or go
then, I or actually or you know,
465
00:31:14.160 --> 00:31:17.880
in your example about cleats, go
and actually try on choose, you
466
00:31:17.920 --> 00:31:21.359
actually go then to your local store
in order to actually try it on.
467
00:31:21.519 --> 00:31:23.599
That's really cool. That's really cool. Yeah, it's it's interesting because you
468
00:31:23.599 --> 00:31:26.559
look at like a sports authority and
in a lot of ways, I think
469
00:31:26.599 --> 00:31:30.920
there they were like solving for nothing, right, like you either want to
470
00:31:30.960 --> 00:31:36.960
have like kind of infinite inventory,
infinite convenience, or you want to have
471
00:31:37.039 --> 00:31:41.480
someone where it's like curated and where
their opinion it matters, and those stories.
472
00:31:41.519 --> 00:31:44.920
You went in there and they would
be out of stock of some things.
473
00:31:44.920 --> 00:31:48.279
They weren't necessarily the best price and
like, God help you if you
474
00:31:48.319 --> 00:31:51.839
want someone to open the little like
dressing room and actually try something on,
475
00:31:52.079 --> 00:31:53.599
you know, like you couldn't find
anyone. And so it's like no,
476
00:31:55.000 --> 00:31:56.880
people talk about the death of retail. It's like what's kind of the death
477
00:31:56.920 --> 00:32:01.920
of crappy retail? Like, you
know, it's not well run businesses where
478
00:32:01.960 --> 00:32:06.559
the consumer is top of mind to
everyone in the store. Those companies are
479
00:32:06.559 --> 00:32:09.640
actually doing quite well. Like people
love shopping. It's just shopping sucked for
480
00:32:09.680 --> 00:32:14.079
a while. So how do how
do we return back to a great experience
481
00:32:14.119 --> 00:32:17.000
for people, especially under the backdrop
of all the supply chain challenges we're having
482
00:32:17.079 --> 00:32:22.960
right now? Yeah, we're actually
customer service actually matters again. That's cool.
483
00:32:22.000 --> 00:32:27.759
That's cool. Have you made any
changes to your thesis or just maybe
484
00:32:27.839 --> 00:32:32.720
how you invest during covid or maybe
what was your reaction or, you know,
485
00:32:32.960 --> 00:32:37.279
as a result of covid in terms
of how you think about your thesis,
486
00:32:37.279 --> 00:32:39.759
in terms of where you're where you
actually invest? I mean, I
487
00:32:39.759 --> 00:32:45.039
think a lot of investors early covid
had this like the world has forever changed.
488
00:32:45.200 --> 00:32:49.799
You know, thesis and we're all
going to sit on our houses forever
489
00:32:50.039 --> 00:32:52.400
and like hang out with our friends
over resume and and all that kind of
490
00:32:52.400 --> 00:32:57.000
stuff. And so you know,
we definitely saw the shift of e commerce
491
00:32:57.000 --> 00:33:00.960
purchasing. We saw, you know, new technology around education, around grocer
492
00:33:01.079 --> 00:33:06.839
delivery, being adopted and we we
made some investments along the way. Now
493
00:33:06.880 --> 00:33:09.880
we will say part of our conversation
with those founders was like look, covid
494
00:33:09.920 --> 00:33:13.519
is gonna go away at some point. Just taken longer than a lot of
495
00:33:13.599 --> 00:33:15.720
us thought. But it's like how
do you build a durable business leveraging the
496
00:33:15.759 --> 00:33:21.759
audience you generated during covid but in
a post covid world where things will likely
497
00:33:21.839 --> 00:33:24.599
return back to some sense of normal? And so I think largely, if
498
00:33:24.640 --> 00:33:29.880
I were to summarize it, I
would say our thesis hasn't changed that much
499
00:33:30.240 --> 00:33:35.200
due to covid Um. But you
know, there are behavior patterns that are
500
00:33:35.279 --> 00:33:37.079
much more familiar today than they were
a few years ago. Like if I
501
00:33:37.119 --> 00:33:43.559
were to tell myself three years ago
that my my son and I keep bringing
502
00:33:43.720 --> 00:33:46.839
up, but like I would want
to phone predominantly so he could use the
503
00:33:46.960 --> 00:33:51.720
Qr code to read Menus at a
restaurant I told you you're crazy, right,
504
00:33:51.759 --> 00:33:55.039
like r codes, like nobody uses
qr codes, but I think the
505
00:33:55.160 --> 00:34:00.119
Qr code was kind of like the
dark horse winner of covid where even my
506
00:34:00.200 --> 00:34:02.119
parents are like pulling out their phone, uh, you know, looking at
507
00:34:02.160 --> 00:34:06.000
qr codes and they don't know how
to do anything on the phone. Right.
508
00:34:06.039 --> 00:34:07.199
They know what to call, call
my brother, and maybe that's about
509
00:34:07.199 --> 00:34:12.599
it. So I think there are
some technologies that become more prominent. I
510
00:34:12.639 --> 00:34:19.800
think people became a much wider demographic, became comfortable ordering things with their phone.
511
00:34:20.239 --> 00:34:23.119
But at the end of the day, the objective around human connection,
512
00:34:23.599 --> 00:34:27.760
the objective of people wanting to get
out and do things, I don't think
513
00:34:27.760 --> 00:34:30.800
that's changed that much because I think
that's more intrinsic. There's are really great
514
00:34:30.800 --> 00:34:35.679
points. I also wanted to ask
what is one book that's inspired you personally?
515
00:34:35.679 --> 00:34:38.119
In one book that's inspired you professionally? Sure, I mean my personal
516
00:34:38.119 --> 00:34:42.599
and professional lives are kind of intertwined, so this might be this might be
517
00:34:42.599 --> 00:34:46.000
a cop out, but like,
I recently read the Wright Brothers Book by
518
00:34:46.159 --> 00:34:51.079
David McCullough, and I don't know
if you've read that one, but it
519
00:34:51.199 --> 00:34:53.920
was just really refreshing right. I
think we're living in a time right now
520
00:34:54.199 --> 00:34:59.639
where there's a lot of founders,
ventro capitalists, whoever, that talk a
521
00:34:59.719 --> 00:35:04.440
big game on twitter and uh,
you know, don't really put the work
522
00:35:04.440 --> 00:35:07.719
in and don't really deliver in reality. And if you look at the study
523
00:35:07.880 --> 00:35:13.079
of the rights, I mean these
guys were just cranking right like. They
524
00:35:13.079 --> 00:35:15.360
were largely dismissed. A lot of
people told them what they were doing.
525
00:35:15.400 --> 00:35:21.599
That just wasn't possible and they just
like stuck to the facts, they grinded
526
00:35:22.199 --> 00:35:27.079
and, you know, they ultimately, we were successful propelling man forward and
527
00:35:27.199 --> 00:35:30.599
it really got back to you know, some of like feeling good about America,
528
00:35:31.079 --> 00:35:34.280
you know, at a time when
that's harder, and just like that
529
00:35:34.519 --> 00:35:37.960
ingenuity that was their turn of the
century that we see in so many of
530
00:35:37.960 --> 00:35:42.079
the founders that we back, but
we don't see as much more broadly in
531
00:35:42.159 --> 00:35:45.719
society. And so that was like
a really refreshing book that I just read.
532
00:35:45.039 --> 00:35:47.519
And then, professionally, the book
that I always love that if people
533
00:35:47.599 --> 00:35:51.559
haven't read that would definitely check it
out. It's called shoot dog and that's
534
00:35:51.559 --> 00:35:54.880
really the story around Nikes founding and
like one of the privileges we have in
535
00:35:54.880 --> 00:36:00.599
this industry is just being able to
shadow and be alongside amazing founders as they
536
00:36:00.639 --> 00:36:07.559
go from solving these niche small needs
to building transformational brands and transformational businesses.
537
00:36:07.960 --> 00:36:09.880
And that was just a great story
about how, you know, someone who
538
00:36:09.920 --> 00:36:15.440
loved running, who wasn't getting the
right shoes, started working with a Japanese
539
00:36:15.440 --> 00:36:19.840
company and then just you know,
the rest is history, but incredibly inspiring,
540
00:36:20.000 --> 00:36:22.639
very easy to read and just helps
you understand the plight of the entrepreneur
541
00:36:22.719 --> 00:36:27.880
where it's like a one hand you're
raising millions of dollars from investors but the
542
00:36:27.920 --> 00:36:31.119
next hand you're picking up paper towels
at Costco and like just this like job
543
00:36:31.199 --> 00:36:36.360
that is basically everything that needs to
get done at any given moment in order
544
00:36:36.400 --> 00:36:38.840
to push the business forward. It
was very refreshing on that fun and I
545
00:36:38.880 --> 00:36:43.159
would recommend people check it out.
No, totally, totally. Shoe Doog
546
00:36:43.280 --> 00:36:46.440
is definitely a number one rated book
here on the PODCAST. Yeah, but
547
00:36:46.480 --> 00:36:49.119
no, no, no, no, no, no, no, but
548
00:36:49.239 --> 00:36:51.920
the right brothers book. You're only
the second person that brought up the right
549
00:36:51.960 --> 00:36:54.639
brothers book. So okay, that's
awesome. That's awesome. Yeah, my
550
00:36:54.679 --> 00:36:59.039
final question to you is, what's
the best piece of advice that you've received?
551
00:36:59.639 --> 00:37:02.440
It's it justine. I would say
that you get a variety of advice.
552
00:37:02.519 --> 00:37:07.840
Like the thing that resonates with me
that I will tell others is is
553
00:37:07.880 --> 00:37:13.000
really to focus on who you're partnering
with in Your Career, not the what
554
00:37:13.679 --> 00:37:15.599
as much. And so a lot
of times you'll have people that will say,
555
00:37:15.639 --> 00:37:19.519
Hey, I'm gonna go work at
the startup because it's really hot,
556
00:37:20.159 --> 00:37:22.960
or hey, this you know,
venture firm is offering me a job,
557
00:37:22.039 --> 00:37:24.840
maybe I should go check it out. And I tend to think that the
558
00:37:24.880 --> 00:37:30.960
people you work with tend to be
more important to opening doors in the future
559
00:37:30.400 --> 00:37:34.480
than than the what. Right.
So my last startup I worked at,
560
00:37:34.480 --> 00:37:37.000
I talked about some of the drama
earlier on, but like that business ultimately
561
00:37:37.039 --> 00:37:40.000
failed. Like we sold the IBM, but it was like a far cry
562
00:37:40.079 --> 00:37:44.800
from our ambitions much earlier in the
life of the company. But the person
563
00:37:44.920 --> 00:37:47.199
who I worked for, this guy
any Palmer, he took a liking to
564
00:37:47.280 --> 00:37:52.159
me. He really cared about relationships
and he ultimately opened the door for me
565
00:37:52.280 --> 00:37:57.119
to to get an adventure which was
transformative for me from a career perspective.
566
00:37:57.400 --> 00:38:00.440
And so it wasn't that that company
was successful, but the people I worked
567
00:38:00.440 --> 00:38:04.440
with. I learned a ton from
them and they ultimately opened interesting doors.
568
00:38:04.519 --> 00:38:07.760
Other folks from that company went on
to work at salesforce, went on to
569
00:38:07.760 --> 00:38:10.559
work at dropbox, went on to
work at other interesting venture firms, and
570
00:38:10.639 --> 00:38:15.480
so you look at these you know
people will talk about the paypal mafia right
571
00:38:15.480 --> 00:38:19.519
that's sort of the most prominent example, but there are these little pockets of
572
00:38:19.599 --> 00:38:23.440
networks of great people that go from
one company to the next where not only
573
00:38:23.480 --> 00:38:28.559
are you working with folks where they
understand what excellent actually looks like, but
574
00:38:28.639 --> 00:38:32.199
the level of training insight you get
just by shadowing those people is kint a
575
00:38:32.320 --> 00:38:36.800
much more beneficial than, you know, just showing up and being at facebook
576
00:38:36.800 --> 00:38:38.559
at the right time. I really
like that. Well, Brian, thank
577
00:38:38.599 --> 00:38:40.440
you so much for your time.
This has been a lot of fun chatting.
578
00:38:40.800 --> 00:38:43.800
Happy to do it. Thanks for
having me. Appreciate it. Thank
579
00:38:43.840 --> 00:38:46.800
you and there you have it.
It was such a pleasure having Brian on
580
00:38:46.840 --> 00:38:51.639
the show. was really a treat. Follow him on twitter for more insights
581
00:38:51.760 --> 00:38:54.960
at O m a l. If
you enjoyed this episode, I love it
582
00:38:54.960 --> 00:38:59.199
if you write a review on the
apple podcast. You're also welcome to follow
583
00:38:59.239 --> 00:39:01.639
me, your host, on twitter
at Mike Gelb, and also follow for
584
00:39:01.679 --> 00:39:15.760
episode announcements at Consumer VC. Thanks
for listening, everyone. Oh Oh,
585
00:39:17.679 --> 00:39:29.119
Oh, oh,
