Aug 10, 2016 · 26m · 20vc
20VC: Dollar Shave Club's Series A & B Lead Investor, David Pakman on The Requirements For A Successful Subscription Business & Why A Lot of Investors Do Not Like Consumer
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of The 20 Minute VC, host Harry Stebbings interviews Venrock Partner David Pakman about leading Dollar Shave Club's early investment rounds, building defensible direct-to-consumer brands, and the key metrics driving subscription e-commerce success.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 24.4% of the talking time here. How this is scored →
Harry as informed peer 2.3 Guest teaching 4.0 Guest disagreement 0.6 Harry pushing back 0.4
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 21:43 Rejection of 'productivity hacks' framing
Pakman rejects Harry's question about specific productivity hacks, pivoting instead to broad personal mindset and self-improvement principles.
Hardest push from Harry ▶ 11:48 Host challenges guest on Amazon threat mindsetHarry directly asks Pakman whether an investor should automatically view Amazon entering a category as existential ruin during early financing rounds.
Biggest teaching moment ▶ 16:46 Analysis of legacy CPG direct-to-consumer failurePakman educates the host on why century-old CPG firms struggle with direct relationships, using Gillette's weak digital counter-strategy as proof.
Harry holds his own ▶ 11:48 Host presses on Amazon commoditization riskHarry demonstrates keen industry insight by pressing Pakman on how investors evaluate commoditization risk from major incumbents like Amazon.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Guest Background: David Pakman's Career Path to Venrock | 1 | 4 | 0 | 0 | Harry introduces Pakman and asks about his career and initial thesis on Dollar Shave Club. Pakman educates on subscription SaaS metrics, emphasizing churn rate and total addressable market size. | |
| Party Seeds and Investor Hesitancy in E-Commerce | 3 | 4 | 1 | 1 | Harry asks why fundraising was difficult despite strong numbers and probes on party round dynamics. Pakman outlines investor skepticism toward e-commerce margins and Amazon threats. | |
| Leading the Series B Round and Managing Internal VC Conviction | 2 | 3 | 0 | 0 | Harry asks about Venrock leading consecutive Series A and B rounds. Pakman explains the internal partnership pitch required when leading a round without outside interest. | |
| Shift to Consensus Capital: TCV Series C and Growth Scaling | 4 | 5 | 2 | 2 | Harry challenges Pakman on whether VCs must evaluate the Amazon threat during early rounds. Pakman reframes the question using Venrock's proprietary consumer thesis framework. | |
| Marketing Genius and the Unilever Acquisition Rationale | 2 | 4 | 0 | 0 | Harry asks about Dollar Shave Club's marketing strength and the rationale behind selling to Unilever. Pakman explains Michael Dubin's storytelling skills and Unilever's unique acquirer model. | |
| The Evolution of Direct-to-Consumer Brands and M&A Dynamics | 2 | 5 | 1 | 0 | Harry asks about wider macro e-commerce exit potential. Pakman details how structural shifts force legacy CPG companies to buy DTC startups, citing Gillette's weak competitive response. | |
| Hardware Innovation and Automotive Market Disruption | 2 | 4 | 0 | 0 | Harry asks what other consumer categories excite Pakman. Pakman shares Venrock's hardware-plus-software investment thesis using Nest and Pearl as key examples. | |
| Quick Fire Segment: Mindset, Productivity, Incubators, and Pearl | 2 | 3 | 1 | 0 | During quickfire questions, Pakman gently dismisses the notion of productivity hacks, emphasizing broader growth mindset principles instead. |
Statements from this episode (20)
Churn rate is the most critical metric for subscription businesses
“The key metric in all SaaS or subscription businesses is churn rate. The lower the churn rate, the easier it is for the company to grow.”
Massive subscription businesses require broad market demand over niches
“The only way to build really big subscription businesses, Netflix or internet internet access companies is to have very large market demand. So you have to sell into very large markets as opposed to niches.”
Dollar Shave Club showed extraordinarily low early cohort churn
“I flew to LA quickly and sat down with Michael and his team and started to go through the numbers. And I was very specifically focused on, let me see churn. Let me look, let me see what the early cohort churns are. And they were extraordinarily low.”
Multiple Dollar Shave Club seed investors passed on the Series A
“A number of the firms Who were already seed investors either did not engage with the company around its series egg or took a look and passed. It wasn't terribly competitive around for me to win.”
Low margins and Amazon competition make giant e-commerce exits rare
“A lot of investors don't love e-commerce for a number of reasons. It's, it tends, it can be a low margin business. It tends to have low multiples. Amazon is ever present and can compete with you in many, many categories on price and convenience, so it's pretty…”
Dollar Shave Club generated $7M in revenue in its first year
“You know, they did about seven million in revenue in their first year, and they were on track to do twenty million in their second year.”
Over a dozen VCs declined to lead Dollar Shave Club's Series B
“Michael pitched, I don't know, probably at least a dozen firms in the series B where there was some investor interest, but no one who would catalyze around no one who would lead around.”
Dollar Shave Club never missed a board target in its early years
“They never missed a number they put in front of the board.”
Dollar Shave Club revenue tripled from $20M to $60M in year three
“So we went from twenty million in year two to sixty million in revenue in year three.”
Gillette failed to react competently to Dollar Shave Club's rise
“Gillette had not still to this day has not reacted in a competent way that put any pressure on Dollar Shave Club.”
Venrock screens consumer startups against Amazon Basics commoditization risk
“One of the areas of that investment thesis is will Amazon Amazon you by effectively commoditizing the category by launching an Amazon basics or, you know, an Amazon branded commodity version.”
Dollar Shave Club was headed for an IPO before the Unilever buyout
“We were likely to become a public company really as a financing opportunity to add, you know, many more hundreds of millions of dollars to the company so we could expand internationally into more products and into more territories.”
Unilever's acquisition model allows acquired companies to operate independently
“In fact, it's really brilliant at what they do. They buy a company and they say, congratulations, you just acquired Unilever. What they mean by that is, you know, you will continue to remain an independent company and operating, but you now have all of the res…”
Dollar Shave Club sold to Unilever to accelerate global scaling
“Michael and the management team were ultimately convinced that Hey, we can get so much bigger, so much more quickly by working with these guys, then continuing on the independent path, and we like them. So that was really what led to the decision to undertake …”
Legacy CPG brands lack direct-to-consumer capabilities
“Almost all of these hundred-year-old companies do not have any capability to sell direct, and when they try, they aren't very successful. Look at Gillette and their incredibly originally named Gillette Shave Club. You know, not very successful.”
Legacy CPG firms will acquire DTC startups to gain e-commerce expertise
“So I think there is pressure now on all of the large consumer products companies to become DTC, and you can either buy or build, or both. And so, yes, I think we will see more transactions as a way to import knowledge and get, get ahead in this important categ…”
Incumbent car companies lack competence in software and data
“Autonomous vehicles need Really good software and lots of data. Two things that income and car companies aren't very good at.”
Automobiles will increasingly be sold direct-to-consumer, following Tesla's model
“We think cars will be sold direct to consumer the way Tesla is doing it.”