By Hans Tung & Robin Li
Yesterday, GGV Capital and Max Ventures co-hosted its second annual Evolving E NYC Summit in the heart of midtown Manhattan. More than 300 founders, executives, and investors of top consumer companies gathered to share ideas and insights on growth, culture and product. Special thanks to Robin Li from GGV Capital, Ryan Darnell from Max Ventures, Shai Goldman from Silicon Valley Bank and Evan Beinstock from Lowenstein Sandler for their time and effort in organizing, hosting, and sponsoring. While the private event was off-the-record, we wanted to capture some key takeaways from the evening’s speakers to share.
Hans Tung (Managing Partner at GGV) on the new consumer landscape: “Millennials are the new ‘mass market — globally.’” While many recent well-known technology companies and startups started upmarket, most of them had to expand to the mass market in order to reach meaningful scale. Many great startups have succeeded in the early days of expanding to more affluent urban centers, but as we had seen what Alibaba did in China since 2003, US election data from 1980 onwards, or in the revenue curves for our US portfolio since 2013, e.g. Airbnb, Boxed, Poshmark and Wish, the mass market is a must-have ingredient for scale. GGV’s consumer team has been racking up frequent flier miles to NYC. With recent investments in companies like Bowery Farming, Boxed, Bustle, Dirty Lemon, Function of Beauty, Giphy, Lively, Peloton, and Slice, GGV is making a serious commitment to NYC. By marrying Silicon Valley influenced engineering talent to New York’s branding savvy, and its cumulative knowledge in media, finance, healthcare, trading and manufacturing in the tri-state area, we see enormous opportunity in the emergence of web and mobile-first vertical platforms and e-brands that cater to the global mass market from here. We believe U.S. demographic surges in millennials growing into full adulthood will become the new “mass market” and next decade will belong to consumer companies who can win over this new audience — a digitally-native, experience (and value) conscious audience. In addition, with our data and insights from China, we see millennials across geographies have more in common with each other — than they do with their parents. We also see with millennials globally, it’s not just about having an mass market price point, but also about offering an unique experience. The experience IS the product. These components are important part of going global successfully.
Shana Randhava (Executive Director at The Estee Lauder Company) on the newfound power held by consumers: “The way we engage with consumers has fundamentally changed. This has affected where and how we (Estee Lauder) play with brands.” It used to be that companies could work with one or more PR firms, craft messages, distribute those messages in key channels, and control how their brand was perceived in the eyes of their target audiences. Those days are now over. Today’s consumers have access to more information, have the ability to share their own point of view (good or bad), and expect more from the brands they align with — whether it’s along the lines of sustainability, diversity, or other considerations. As a result, larger brands and upstarts need to understand this power shift and also consider how incumbents (who could be acquirers) think about the new landscape.
Justin Sadrian (MD at Warburg Pincus) on what drives M&A in consumer commerce: “Oftentimes, you’ll see companies buy not just a brand, but also the DNA — DNA that the buyer just doesn’t have internally.” There have been many debates about whether consumer commerce companies can generate real multiples on exit at revenue. There are well-known stories with subpar outcomes, and there are outlier companies and results which keep the dream alive. While a startup shouldn’t start a journey with an exit in mind, the reality over the company’s life is that a good company will likely be approached by an acquirer. And, oftentimes when an exit occurs, it’s not just about revenues — it can be driven by other factors, such as the startup’s brand and/or the backgrounds and culture at the team. Larger companies may view M&A as a way to extend their brand reach or add new talent to their roster.
Alexandra Weiss (SVP Marketing at Glossier) on new ways to get the word out: “You want to lean in hard and work with your partners in creative ways because they can become your microphone.” Few commerce brands can grow as organically online as Glossier. When a company is just starting out, word-of-mouth within the industry and general goodwill could be as important — or likely more important — than traditional marketing techniques. In fact, the earliest supporters and industry partners could transform to becoming a startup’s biggest cheerleader, keeping them top-of-mind, mentioning them in other industry conversations, and eventually help create enough buzz for the young company that it puts it on the map.
Jeff Richards (Managing Partner at GGV) on why some key metrics are immeasurable: “There may be too much focus on CAC at the expense of brand-building.” While metrics are critical to investors in the commerce space, and while founders and company builders no doubt need to obsess over them, as well, there are other key attributes required in the consumer world. Perhaps most critical here: Brand. In a noisy world, if consumers have not heard your product’s name, or heard one of their friends talking about your product at the coffee shop, or in their Facebook timeline, or in an Instagram comment, chances are there are other solutions in the market that will satisfy their need. For companies obsessed with getting their customer acquisition costs in line, investing in brand can be frustrating — it’s hard to know when it’s working, it takes a while for the investment to pay off, the investment is up-front in terms of time, attention, and cash, and there’s no great way to measure it with 100% accuracy. If we look back on some of the great new consumer brands today, we will likely see a common thread among them — low cost of acquisition paired with a simple, resonant brand.
Sutian Dong (GP at Female Founders Fund) on what her investment firm looks for in commerce companies: “Consumer behaviors don’t quite change, but the mediums through which they happen do; so video shopping and enablement are very interesting to us.” We loved this insight from Sutian. It’s easy to say that “changing consumer behavior” is aspirational, but what if the venue changes, but not the base impulses? Sutian has a point — today, consumers discover new products and services in different channels, feeds, and social networks. They use products GGV admires such as Ipsy (shopping through YouTube) or Packagd (a QVC for millennials), a new startup by GGV friend Eric Feng, who is now at Kleiner Perkins.
Robin Li (Vice President at GGV) on commerce perspective from the industry leader: ”Starting digital is important. It took Amazon 20 years to go physical.” It’s fashionable for consumer brand startups to start digital and then experiment with physical stores and/or pop-up shops. As today’s early-adopters are likely to be more affluent and urban, it may make sense to have a flagship storefront as a place where fans and would-be consumers could see the brand. Yet, as a cautionary note, we should keep in mind that the industry leader — Amazon — has taken nearly 20 years before going into retail and building an expansion plan.
John Foley (CEO and Founder at Peloton) on his lessons from company building: “VCs would ask, ‘What’s the TAM for a stationary bike?’ No, we are selling fitness….So many marketers like to market, but no one wants to be marketed to.” The audience was lucky to see a private pitch and demo from John Foley, the leader of Peloton, one of NYC’s fastest growing companies. Peloton is quickly becoming a household name around fitness. Foley shared many of his tricks of the trade, the importance of being human in marketing, and going into detail about the precision needed to build a long-term, durable consumer brand.
Ryan Darnell (Managing Partner at Max Ventures) on establishing company culture. “The Founders who we’ve seen build the best cultures had a very clear idea on what type of person they wanted to hire in the early days.” They knew the professional skill set they were looking for and sometimes more importantly the personal skill set. They were very deliberate in their hiring approach, especially early on.
For more content from the Evolving Ecommerce NYC Summit, check out the hashtag #EvolvingE17 and follow us on Twitter and Instagram @GGVCapital.