Yesterday, GGV Capital and Max Ventures held their third annual “Evolving E” conference in New York City, where hundreds of attendees heard from over a dozen seasoned experts in e-commerce on the best practices for each step of the startup journey. The conference featured candid advice from some of the top e-commerce and direct-to-consumer startups and VC firms in the world. Here are the top ten insights for e-commerce businesses that we took away from the event:
- Think outside the bubble
- Help your power users
- Understand the investor’s mindset before you even meet them
- Be choosy about your investors
- Your investors work for you
- Nail it before you scale it
- Know who you’re talking to
- Traditional retailers may not understand your business
- The best way to bridge cultural differences is having boots on the ground
- Overseas supply-chain might be more open-minded than US ones
Lesson 1: Think outside the bubble
Good entrepreneurs know how to reach customers that do not look like themselves. New York-based ClassPass has hired a 50-person team in Missoula, a small city in Montana that currently has a total of 48 ClassPass members and 6 fitness studios. The company also moved the location of its annual employee offsite from New York to Missoula. “How do we sell ClassPass to people who exercise outdoors in their daily lives? How do we supplement their lifestyles instead of being their primary solution?” These are the questions that preoccupy CMO Joanna Lord when she thinks about expanding beyond the company’s core customer group — high-income millennial women living in coastal areas.
Jay Livingston, CMO of Bark, admitted that “We’re a bunch of Brooklyn hipsters marketing to Brooklyn hipsters. But Trump’s supporters love dogs too.” The messaging that your brand sends must appeal to different parts of the country and not be based on your preconceived notions.
Lesson 2: Help your power users
GGV portfolio company Peloton hosts an annual event called “Home Rider Invasion (HRI),” where Peloton enthusiasts get together to cycle and connect with one another. This event started out as a spontaneous gathering of Peloton users. “Some home riders said they were going to invade our office and showed up to our studio. So, we facilitated them,” said Graham Stanton, co-founder of Peloton. The company goes out of its way to be accessible and helpful to its power users, but also recognizes the need to avoid turning their authentic relationships with these users into transactional ones.
Manish Chandra, founder and CEO of GGV portfolio company Poshmark, said the “true north” of his company is to serve and empower its 4 million “seller stylists” on the platform. On Poshmark, there are no listing fees, only an all-inclusive transaction fee, so the company makes money when the seller community makes money.
“Your brand is not what you tell your consumer it is. It is what consumers say it is,” observed Awad Sayeed, co-founder of Pixlee. Thanks to smartphones and connectivity, word-of-mouth has never been more powerful than it is today. Awad urges startups to see word-of-mouth not just as a byproduct, but as a framework for building the entire business, because “one bad experience can result in a damaging Tweet that sends your stock crashing hundreds of millions of dollars.”
Lesson 3: Understand the investor’s mindset before you even meet them
Oftentimes, investors know whether they’ll invest in a startup before they even walk into the meeting, observed Ryan Darnell, managing partner at Max Ventures. Founders need to understand that mindset and work to change it in their favor before they meet the investors.
Lesson 4: Be choosy about your investors
Taylor Greene, partner at Collaborative Fund, advises that early-stage companies pick the seed investors that have “the best network of Series A investors,” so that they can share intelligence on which partner at which firm is looking for what kind of deals. Also, founders should keep their conversations to just a few VC firms that are relevant to their businesses to avoid becoming “the company that everyone passed on” — as VCs do talk to one another.
Lesson 5: Your investors work for you
“Bug your investors. Don’t be afraid to get in front of them and bother them. They work for you,” said Ellie Wheeler, partner at Greycroft. After all, VCs are in the business of serving founders, so entrepreneurs should not feel shy about asking for help and leveraging their investors’ resources. They should also try to keep their investors updated in a regular cadence and get into the habit of asking for help.
Lesson 6: Nail it before you scale it
Founders should avoid getting into a “land grab” mentality and try to achieve massive scale before their businesses are ready, said Fabrice Grinda, co-founder at FJ Labs. Moreover, because of the abundance of capital, entrepreneurs are often in a more advantageous position during fundraising and can afford to take their time.
Lesson 7: Know who you’re talking to
The term “corporate development” can mean very different things to different companies, and it is important for entrepreneurs to understand the style and approach of the counter-party they are talking to. For example, Bustle, a digital media startup in New York and a GGV portfolio company, has a very structured approach to M&A, complete with a framework and a “massive spreadsheet” to help the team evaluate potential acquisition targets, said CFO Deb Schwartz. These criteria include the target company’s intrinsic value, integration value, and management team.
Randy Yang, head of corporate development for digital consumer brands at Walmart eCommerce, said Walmart primarily uses 3 metrics while evaluating brands: NPS (net promoter score), revenue growth, and contribution profit margin. Walmart has also started to incubate its own brands. Just a couple months ago, Walmart launched its first homegrown digital brand Allswell, which sells mattresses and beddings online. “We want these brands to be completely standalone,” Randy said, “The Allswell team is working out of a WeWork like a real startup.”
Lesson 8: Traditional retailers may not understand your business
Carrie Barber, the head of global luxury, apparel, beauty at Credit Suisse, has counted many traditional big-box retailers as her clients. Her advice to direct-to-consumers startups? “Don’t be surprised if you meet a big, traditional retailer and they are not well-equipped to talk about your business model. A lot of them are not set up to evaluate M&As for digital brands.” Nevertheless, Carrie added that it’s never too early for startups to build relationships with potential buyers, and that startups should have these conversations earlier and more frequently than they think.
On Going Global
Lesson 9: The best way to bridge cultural differences is to have boots on the ground
Illir Sela, founder and CEO of Slice, which provides local pizzerias with the tech, marketing, and data to help them compete with big chains, outsourced a large proportion of his operating team to his home country Macedonia where skilled labor is abundant and unemployment rate is high. Slice has become one of the largest employers in Macedonia. But having a globally distributed team with language and cultural barriers comes with its own challenges. Ilir shared how one of his employees at the Macedonia call center once took a call from a US reporter, answering all the reporter’s questions without hesitation, and called himself “our VP of communications.”
The entire Global Entry panel agreed that the best way to bridge language and cultural barriers is to have boots on the ground. Mike Jaconi, co-founder and CEO of Max Ventures portfolio company Button, which operates in 75 countries and generates 30% of its revenue from outside of the US, shared his personal experience. Mike had taken investment from Rakuten for a previous startup and realized that significant language barriers with the Japanese team could only be resolved when Rakuten sent an on-the-ground team to Boston.
Lesson 10: Overseas supply-chain partners might be more open-minded than ones in the US
Natalie Mackey, co-founder and CEO of GGV portfolio company The Glow Concept, which owns the color cosmetic brand Winky Lux, said that when she first started out, US factories were reluctant to work with a new, unproven brand. On the other hand, after Natalie went to China and met with dozens of factories, she found one whose owner was more open-minded and willing to grow with Winky Lux, allowing her to have a much more flexible production schedule. She was impressed by the “innate entrepreneurial spirit” demonstrated by the people that she has encountered in China.
Allon Bloch, co-founder and CEO of K Health, a Max Ventures portfolio company, and the former CEO of both Wix and Vroom, also observed that the entrepreneurial mindset is not exclusive to the United States. However, Allon cautioned, “Take your time when entering new markets. Don’t go into 100 countries at once if you’re not Netflix.”
Special thanks to Robin Li of GGV Capital and Ryan Darnell of Max Ventures for making this event possible, as well as Silicon Valley Bank, Lowenstein Sandler, Pixlee, Cushman & Wakefield, Bowery, Dirty Lemon, Penrose Hill, and Slice for sponsoring Evolving E 2018.
GGV Capital is a multi-stage venture capital firm based in Silicon Valley, Shanghai, and Beijing. We have been partnering with leading technology entrepreneurs for the last 18 years from seed to pre-IPO. As part of this partnership, GGV has developed a program called Founders + Leaders that helps founders, CEOs and other top executives of our portfolio companies navigate the minefields of fast growth with tools and training, similar to the support available for big-company executives.
GGV has invested in 280 companies with more than 30 companies valued at more than $1 billion. 3 of the 5 most popular shopping apps in the US are GGV portfolio companies (Wish, OfferUp, Poshmark). The portfolio spans across US and China with one team investing out of the same fund in multiple geographies. GGV’s global perspective offers unique insights into the latest trends worldwide.
Max Ventures is an early-stage investing firm that backs entrepreneurs who have unique consumer insights and are relentless about getting things done. Since September of 2013, they’ve built a successful investment track record by backing entrepreneurs who possess extraordinary personal and professional skills. Some of their notable investments include Boxed, ZoomCar, Button, and Drone Racing League. Max Ventures also leverages insights from the US market to invest in Europe.
All photo credits to Megan Martin.
Originally published June 20, 2018. Edited for clarity June 20, 2019.