The Exchanges

Q Before we move on, though, I do want to address the final tenant to successful portfolio management, being reserve allocation. So with that in mind, and combining that with the significant time it takes to build brands, How does For Honor think about both reserve allocation and the investment decision-making behind those reserves?

A Yeah, so as a guideline, you know, we, we're similar to many of the other firms out there where we're earmarking reserves at about a two-to-one rate, so our initial investment is sort of 30% of our total dollars, and then 60% saved for reserves, or 35, 65. Now, that's just a guideline, and in venture, it's all about outsized growth in a relatively short period of time, so Once we see a business is gaining traction, we make a decision on whether or not it warrants more than its fair share of reserves. And similarly, if a company is underperforming, then, you know, we're more transparent with the founders early on about our potentially appetite or lack thereof of putting in more money. So that company's allocation of reserves might be freed up for other portfolio companies. So it's, you know, it's an art, not a science.

AI assessment note: “we're earmarking reserves at about a two-to-one rate”

Q Why does voice present a big challenge for companies in the future?

A Well, as I mentioned just before, a couple of questions before voice is a new platform and many products are going to run the risk of getting commoditized. So when you say, Alexa, I want toilet paper, does it care what brand of toilet paper you get? You know, probably not. It's probably a circumstance where you're just going to have the last brand that you ordered, or maybe it's the cheapest one that's out there. But in that type of environment, we think it's even more critical to have a brand and to have that direct consumer relationship so that you're one of the products and services people ask for by name. So Google Home or Alexa, I need some Warby Parkers or Alexa, call me a Lyft. It's something that's going to be called out by name versus by product.

AI assessment note: “voice is a new platform and many products are going to run the risk of getting commoditized”

Q Before we move on, though, I do want to address the final tenant to successful portfolio management, being reserve allocation. So with that in mind, and combining that with the significant time it takes to build brands, How does For Honor think about both reserve allocation and the investment decision-making behind those reserves?

A Yeah, so as a guideline, you know, we, we're similar to many of the other firms out there where we're earmarking reserves at about a two-to-one rate, so our initial investment is sort of 30% of our total dollars, and then 60% saved for reserves, or 35, 65. Now, that's just a guideline, and in venture, it's all about outsized growth in a relatively short period of time, so Once we see a business is gaining traction, we make a decision on whether or not it warrants more than its fair share of reserves. And similarly, if a company is underperforming, then, you know, we're more transparent with the founders early on about our potentially appetite or lack thereof of putting in more money. So that company's allocation of reserves might be freed up for other portfolio companies. So it's, you know, it's an art, not a science.

AI assessment note: “we're earmarking reserves at about a two-to-one rate”

Q And then final question, what's your most recent investment, and why did you say yes?

A Oh, it's a great question. Actually, we just wired, um, an investment yesterday, which is called Shop Shops, and this team is leveraging that live streaming video technology that I mentioned before, and they're bridging online customers to offline shopping experiences. Right now, the company is focused on bringing store live stream hosted shopping events in the U.S. to customers in China who purchase online through these shows. So think of it as like a QVC plus as a, you know, plus a farfetch but cross-border. And the reason we said yes is the founder, Leah Wu, is a force of nature. She's got an amazing background to do exactly this company. And, you know, with how fast the world is shrinking, her approach with shop shops is, is really on the forefront of multiple trends.

AI assessment note: “we just wired, um, an investment yesterday, which is called Shop Shops”

Q your process that makes you lean into one brand over another. I asked many mutual friends about this, and kind of how you distinguish, and they all had the same question, so I'm thrilled to start with this. But before we dive in, there's buzzwords commonly thrown around in our industry, so let's start with nomenclature, and how do you define digitally native, vertically integrated brand? Let's start with that.

A So the digital native portion of the term we see as just the brand is born online. It typically focuses on the millennial consumer or the consumer who's otherwise digitally native themselves, so this is the consumer set that honestly doesn't know what life was like before the internet and before the phone. The vertically integrated part of the term refers to the fact that The brand both makes and sells their product and they have complete control over the product development process, as well as the customer experience, which is actually the most important part, you know, and for most, if not all digitally native brands, the customer is their obsession. They know who their customer is, what she buys, what she wants, how they can serve her better. There's a real sort of one-on-one relationship, which otherwise in generations past didn't exist, you know? And so before brands might come to life, they might use a wholesale partner, like a department store, The department store sells to the customer like me, and the brand knows nothing about me, and so the advantage that digitally native vertical brands have is that they own this customer relationship, they own their data, and that means that they can react faster with product experience, with the overall offering, and certainly with service to make sure that they're meeting and exceeding their customers' expectations, so it's a real…

AI assessment note: “digital native portion of the term we see as just the brand is born online”

Q you dig a layer deeper when you, when you get kind of presented with an opportunity and it all looks very brand orientated and good. How do you dig one layer deeper? Is it through kind of going to the company itself and seeing the ethos three layers down, or is it through assessing supply chains? What is it for you that suggests kind of true brand, not selling product?

A Most of the time it has to do with the founders and it's the authentic passion and Mission that these founders are bringing to the brand, which ultimately translates to an experience that I think customers start to have that emotional connection to. I think there are examples where a brand has come later on in a company's life and it's still worked out, but the ones that we're more inclined to support in these earliest stages are ones where, you know, like an Emily Weiss, who's the founder of Glossier, a beauty brand that's one of our earlier investments, You know, she lives and breathes beauty. She is the arbiter of beauty. She is somebody that people look up to and aspire to, you know, sort of know what she's doing and thinking and using in the beauty world. And so that type of control over that messaging really moves the needle for brands in the earliest stages.

AI assessment note: “Most of the time it has to do with the founders”

Q your process that makes you lean into one brand over another. I asked many mutual friends about this, and kind of how you distinguish, and they all had the same question, so I'm thrilled to start with this. But before we dive in, there's buzzwords commonly thrown around in our industry, so let's start with nomenclature, and how do you define digitally native, vertically integrated brand? Let's start with that.

A So the digital native portion of the term we see as just the brand is born online. It typically focuses on the millennial consumer or the consumer who's otherwise digitally native themselves, so this is the consumer set that honestly doesn't know what life was like before the internet and before the phone. The vertically integrated part of the term refers to the fact that The brand both makes and sells their product and they have complete control over the product development process, as well as the customer experience, which is actually the most important part, you know, and for most, if not all digitally native brands, the customer is their obsession. They know who their customer is, what she buys, what she wants, how they can serve her better. There's a real sort of one-on-one relationship, which otherwise in generations past didn't exist, you know? And so before brands might come to life, they might use a wholesale partner, like a department store, The department store sells to the customer like me, and the brand knows nothing about me, and so the advantage that digitally native vertical brands have is that they own this customer relationship, they own their data, and that means that they can react faster with product experience, with the overall offering, and certainly with service to make sure that they're meeting and exceeding their customers' expectations, so it's a real…

AI assessment note: “So the digital native portion of the term we see as just the brand is born online.”

Q you dig a layer deeper when you, when you get kind of presented with an opportunity and it all looks very brand orientated and good. How do you dig one layer deeper? Is it through kind of going to the company itself and seeing the ethos three layers down, or is it through assessing supply chains? What is it for you that suggests kind of true brand, not selling product?

A Most of the time it has to do with the founders and it's the authentic passion and Mission that these founders are bringing to the brand, which ultimately translates to an experience that I think customers start to have that emotional connection to. I think there are examples where a brand has come later on in a company's life and it's still worked out, but the ones that we're more inclined to support in these earliest stages are ones where, you know, like an Emily Weiss, who's the founder of Glossier, a beauty brand that's one of our earlier investments, You know, she lives and breathes beauty. She is the arbiter of beauty. She is somebody that people look up to and aspire to, you know, sort of know what she's doing and thinking and using in the beauty world. And so that type of control over that messaging really moves the needle for brands in the earliest stages.

AI assessment note: “Most of the time it has to do with the founders and it's the authentic passion”

Q for me, but I'd love to, before moving into a quick fire, speak maybe more about the macro today, and my first big question is, you mentioned some of the incredible companies from Dollar Shave Club to Bonobos, So I'd love to hear if you think this is maybe a consolidatory environment, or do you really think there will be this crop of next-gen e-commerce companies that don't sell out?

A Yeah, so we're definitely in an exciting time in the market where big incumbents are not only just realizing that they're losing customer market share and mind share, but they're actually starting to finally take action against that fear and concern, and that's leading to marquee acquisitions like the one, you know, the ones we mentioned before, where traditional companies are looking to infuse New blood into their businesses, not only gaining access to a new sort of this digitally native consumer that they don't know, and they don't speak the same language of, but also to bring in new talent that has that digital native thinking that they need to reinvent the rest of their business. So that said, I definitely think there will be other companies that decide to go the distance. Um, like we, what we just saw with the Stitch Fix IPO with Katrina Lake, who's the founder and CEO. And you know, there's several companies hitting real scale. I'm guessing some will be taken off the table by big incumbents who need to Bring that lifeline to stay relevant in their own companies, but some will IPO and maybe even become acquirers of their own. So I think in the next few years, we will start to see some of the larger private companies hit their exit events, and I don't think that all of them are just going to, I wouldn't even say selling out, because that seems like somewhat of a negative co…

AI assessment note: “I definitely think there will be other companies that decide to go the distance.”

Q Can I ask you though, sorry, Rebecca, and this is open to everyone, I get you and I love that idea as a seed investor, but how on earth do we play when it's like coming up on six on 30? I've had many rounds around, like three on 15, and then Andreessen come in and go, here's six on 30.

A But I think the good founders have seen the, the story play out. You get a big round and a big raise and Maybe somebody shows up to help you. Maybe they don't. But if you're a founder that understands what you're building and what type of people you want to partner with, then you do see that people are taking a lower price point valuation in the beginning with the understanding that they want help. They want the help that you have to offer. And hopefully you've got some specialization at your firm or at least yourself as an independent partner. Um, and that's how it used to be. You were picking somebody that you were going to be working with For the next 10 plus years. And certainly all of us who did seed investing 10 years ago, like I'm still on many of those boards. Enough has happened with the, the rise of all the money coming in, all the exuberant valuations, all the flame outs. And now you're left with people who still want to do this, still want to start companies, even though it's hard. And I think they're more thoughtful about how to build the board and the, you know, trajectory and the journey that they want to be on.

AI assessment note: “people are taking a lower price point valuation in the beginning with the understanding that they want help”

Q Can I ask you though, sorry, Rebecca, and this is open to everyone, I get you and I love that idea as a seed investor, but how on earth do we play when it's like coming up on six on 30? I've had many rounds around, like three on 15, and then Andreessen come in and go, here's six on 30.

A But I think the good founders have seen the, the story play out. You get a big round and a big raise and Maybe somebody shows up to help you. Maybe they don't. But if you're a founder that understands what you're building and what type of people you want to partner with, then you do see that people are taking a lower price point valuation in the beginning with the understanding that they want help. They want the help that you have to offer. And hopefully you've got some specialization at your firm or at least yourself as an independent partner. Um, and that's how it used to be. You were picking somebody that you were going to be working with For the next 10 plus years. And certainly all of us who did seed investing 10 years ago, like I'm still on many of those boards. Enough has happened with the, the rise of all the money coming in, all the exuberant valuations, all the flame outs. And now you're left with people who still want to do this, still want to start companies, even though it's hard. And I think they're more thoughtful about how to build the board and the, you know, trajectory and the journey that they want to be on.

AI assessment note: “people are taking a lower price point valuation in the beginning with the understanding”

Q Can I ask, do you always follow on to preserve the company in terms of signaling, or is there a case of kind of being very open and saying, we are not going to follow, period?

A No, we, it is not a foregone conclusion. Every investment, including follow-on investments are considered new decisions, and we revisit the thesis on the investment and make sure that our rationale for investing in the beginning is still intact, or if the company has pivoted in some way, that that all makes sense and we still want to continue investing. I mean, that's obviously difficult if there's a team that feels like if Forerunner doesn't continue investing, that is going to signal something in the market. But we have that conversation super early where the team is able to either understand that and Work accordingly to come up with a different plan, or we're obviously really happy to have conversations with other investors if it is a sort of a forerunner reason why we're not investing, but not anything to do with the company. So for example, there's one company that we invested in last year who pivoted into a strategy that to be honest is not in our core sweet spot. And so it's the best thing for the company, but we're not the best investors to continue investing in it because it just doesn't match our focus area. And so the founder is super appreciative of our time and Our support, and we've been really active in helping her get more funding elsewhere.

AI assessment note: “No, we, it is not a foregone conclusion. Every investment, including follow-on investments”

Q Speaking of kind of unit economics, I'm really intrigued by kind of customer acquisition today, and I find it generally more over in the consumer space, just with the incumbency advantages, meaning that the distribution channels are more expensive and more crowded. How do you think about kind of customer acquisition for brands and consumer investments that you make and potentially it getting more and more difficult?

A Yeah, it really is. And I think that all companies would love to believe that there's some silver bullet. And, you know, when we talk, talk to a lot of founders that come in and they're thinking, oh, we want to hit some critical mass inflection point, like, you know, Casper or Way or Warby Parker, you know, they named these different companies. But if you look at those companies, it's not one thing that they're doing. They're doing everything well. They're doing paid acquisition. They're doing social media marketing. They're doing branding. They're doing all kinds of Different types of activations to connect with their consumers, and so it is a situation where you as a team needs to be very flexible and forward-thinking about what new acquisition channels there are, because the existing channels you just have to do, and you have to do efficiently, but that's never going to get you a breakout success. You need to do more than that to be able to start pulling ahead.

AI assessment note: “it's not one thing that they're doing. They're doing everything well.”

Q for me, but I'd love to, before moving into a quick fire, speak maybe more about the macro today, and my first big question is, you mentioned some of the incredible companies from Dollar Shave Club to Bonobos, So I'd love to hear if you think this is maybe a consolidatory environment, or do you really think there will be this crop of next-gen e-commerce companies that don't sell out?

A Yeah, so we're definitely in an exciting time in the market where big incumbents are not only just realizing that they're losing customer market share and mind share, but they're actually starting to finally take action against that fear and concern, and that's leading to marquee acquisitions like the one, you know, the ones we mentioned before, where traditional companies are looking to infuse New blood into their businesses, not only gaining access to a new sort of this digitally native consumer that they don't know, and they don't speak the same language of, but also to bring in new talent that has that digital native thinking that they need to reinvent the rest of their business. So that said, I definitely think there will be other companies that decide to go the distance. Um, like we, what we just saw with the Stitch Fix IPO with Katrina Lake, who's the founder and CEO. And you know, there's several companies hitting real scale. I'm guessing some will be taken off the table by big incumbents who need to Bring that lifeline to stay relevant in their own companies, but some will IPO and maybe even become acquirers of their own. So I think in the next few years, we will start to see some of the larger private companies hit their exit events, and I don't think that all of them are just going to, I wouldn't even say selling out, because that seems like somewhat of a negative co…

AI assessment note: “I definitely think there will be other companies that decide to go the distance.”

Q And kind of finishing on incumbents, and before we dive into the quickfire, what incumbent could we not talk about but Amazon? Your partner, Kirsten, they do more to make the market than to harm it. So I'd love to hear your thoughts on the effect of Amazon. What do you think about it and how it affects your strategy and thinking?

A So, I mean, Kirsten, obviously, it's a contrarian viewpoint because everyone else is Afraid of Amazon and, you know, hair on fire because Amazon's around. They're formidable. There's no questioning that, and we do have an eye on what they're doing. We think about, you know, the fact that they're launching new fashion brands and that they're probably surpassing Macy's now for number of dollars sold for apparel in the U.S. But you have to keep in mind that Amazon is here, and they have advantages in terms of the billions of eyeballs that they've got on their website, and so you can either just try to run and hide from them, or you can try to Have the thought exercise of how could we leverage Amazon? How could we get access to that incredible user base and maybe convert them into our own experience? And it's not easy and no one's figured it out, but we're challenging our own internal team, as well as our founders and the portfolio to just think differently and, and sort of turn that question on its head a bit to see like, how would you use Amazon to your advantage versus feeling really threatened by it? You know, and even more so with new distribution channels that they're creating, like for voice and You just can't stick your head in the ground like an ostrich. You have to start pushing thinking and being sort of flexible to the new ways of doing business.

AI assessment note: “we're challenging our own internal team, as well as our founders and the portfolio”

Q I mean, tied to this kind of strain of conversation, I have a question from Nicola Shasta. Does Forerun actively think about whether a potential investment would be something an incumbent CPG or retailer would buy, or is that not a kind of mindset that's on the table? We do.

A We do have the thought exercise around what is the competitive landscape look like as we're thinking about an early stage company and what is that company disrupting? We keep in mind the incumbents strengths and weaknesses and whether there might be an ability to have sort of potential acquisition options down the line. But we really are looking to back founders who are striving to build huge lasting businesses. So plotting a quick M&A plan is not really on our minds, but you know, I'd be lying if I said we don't think about it. So just in terms of a base case, What is a plausible way to see this business monetize in the future? Sure, we, you know, keep that in mind.

AI assessment note: “We keep in mind the incumbents strengths and weaknesses and whether there might be”

Q We mentioned a way, uh, multiple times in the interview, a question from Jen Rubio, founder. She asked, what's been your biggest learning about what it takes to be a great board member?

A Well, that's a good question. I think the most important thing I try to keep in mind of being her board member is that it's my job to help the founders think strategically about next steps for the business, because it really is hard to do that when you're in day-to-day operations, you're sort of Eyeball deep in challenges that are happening every minute of the day. And so, you know, with all of the companies we're involved in, there's often patterns we can see or stages of growth we can foreshadow that I believe it is really helpful to share with founders so that they can just stay ahead and avoid common pitfalls. The other lesson is obviously that every great relationship period, but certainly a board member founder relationship is always rooted in trust and great communication. So ultimately you want to be able to share the good, the bad, the ugly with your board member. You want to be able to get help before things get Bad. And you want to share your victories. And I think that building a business is super hard. And so founders need support and it's easy to feel like you're all alone and you have no one to support you. So as a board member, I really try to be my founder's greatest advocate and confidant so that they can talk about anything with me, whether it's good or bad.

AI assessment note: “it's my job to help the founders think strategically about next steps”

Q Speaking of kind of unit economics, I'm really intrigued by kind of customer acquisition today, and I find it generally more over in the consumer space, just with the incumbency advantages, meaning that the distribution channels are more expensive and more crowded. How do you think about kind of customer acquisition for brands and consumer investments that you make and potentially it getting more and more difficult?

A Yeah, it really is. And I think that all companies would love to believe that there's some silver bullet. And, you know, when we talk, talk to a lot of founders that come in and they're thinking, oh, we want to hit some critical mass inflection point, like, you know, Casper or Way or Warby Parker, you know, they named these different companies. But if you look at those companies, it's not one thing that they're doing. They're doing everything well. They're doing paid acquisition. They're doing social media marketing. They're doing branding. They're doing all kinds of Different types of activations to connect with their consumers, and so it is a situation where you as a team needs to be very flexible and forward-thinking about what new acquisition channels there are, because the existing channels you just have to do, and you have to do efficiently, but that's never going to get you a breakout success. You need to do more than that to be able to start pulling ahead.

AI assessment note: “it is a situation where you as a team needs to be very flexible”

Q We mentioned a way, uh, multiple times in the interview, a question from Jen Rubio, founder. She asked, what's been your biggest learning about what it takes to be a great board member?

A Well, that's a good question. I think the most important thing I try to keep in mind of being her board member is that it's my job to help the founders think strategically about next steps for the business, because it really is hard to do that when you're in day-to-day operations, you're sort of Eyeball deep in challenges that are happening every minute of the day. And so, you know, with all of the companies we're involved in, there's often patterns we can see or stages of growth we can foreshadow that I believe it is really helpful to share with founders so that they can just stay ahead and avoid common pitfalls. The other lesson is obviously that every great relationship period, but certainly a board member founder relationship is always rooted in trust and great communication. So ultimately you want to be able to share the good, the bad, the ugly with your board member. You want to be able to get help before things get Bad. And you want to share your victories. And I think that building a business is super hard. And so founders need support and it's easy to feel like you're all alone and you have no one to support you. So as a board member, I really try to be my founder's greatest advocate and confidant so that they can talk about anything with me, whether it's good or bad.

AI assessment note: “it's my job to help the founders think strategically about next steps”

Q Can I ask, do you always follow on to preserve the company in terms of signaling, or is there a case of kind of being very open and saying, we are not going to follow, period?

A No, we, it is not a foregone conclusion. Every investment, including follow-on investments are considered new decisions, and we revisit the thesis on the investment and make sure that our rationale for investing in the beginning is still intact, or if the company has pivoted in some way, that that all makes sense and we still want to continue investing. I mean, that's obviously difficult if there's a team that feels like if Forerunner doesn't continue investing, that is going to signal something in the market. But we have that conversation super early where the team is able to either understand that and Work accordingly to come up with a different plan, or we're obviously really happy to have conversations with other investors if it is a sort of a forerunner reason why we're not investing, but not anything to do with the company. So for example, there's one company that we invested in last year who pivoted into a strategy that to be honest is not in our core sweet spot. And so it's the best thing for the company, but we're not the best investors to continue investing in it because it just doesn't match our focus area. And so the founder is super appreciative of our time and Our support, and we've been really active in helping her get more funding elsewhere.

AI assessment note: “No, we, it is not a foregone conclusion. Every investment, including follow-on investments”

Q So now we have the nomenclature locked down, so to speak. I'd love to hear, what do you fundamentally look For in those brands, you've backed some of the kind of enduring all-stars. So what do you look for in those brands and what are the core considerations?

A So not all digital native vertical brands are well-suited for the venture route. And granted, that's a statement to all companies. Not all companies are well-suited for the venture route. In fact, most aren't. You know, you can be a very successful company or digital brand and not take a dime of venture capital. But, you know, if you do want to go the venture route, I would say the most important consideration we're looking for as venture investors is Whether a specific brand has the potential to be much, much larger than the products they're selling today. And we think about whether the brand has the potential to become a real lifestyle brand and whether they can connect with consumers on a broader set of needs than just individual products and really sort of speak to an ethos that the consumer is going to live and breathe. Um, and so in this way, it really matters whether a company is building a real brand or whether they're just selling products. And I think to some people it's intangible and we get that a brand is not just a logo and a color scheme, but it really is an entire mindset Of your company and how you want to do business with your consumers.

AI assessment note: “the most important consideration we're looking for as venture investors is Whether a specific brand”

Q I mean, tied to this kind of strain of conversation, I have a question from Nicola Shasta. Does Forerun actively think about whether a potential investment would be something an incumbent CPG or retailer would buy, or is that not a kind of mindset that's on the table? We do.

A We do have the thought exercise around what is the competitive landscape look like as we're thinking about an early stage company and what is that company disrupting? We keep in mind the incumbents strengths and weaknesses and whether there might be an ability to have sort of potential acquisition options down the line. But we really are looking to back founders who are striving to build huge lasting businesses. So plotting a quick M&A plan is not really on our minds, but you know, I'd be lying if I said we don't think about it. So just in terms of a base case, What is a plausible way to see this business monetize in the future? Sure, we, you know, keep that in mind.

AI assessment note: “I'd be lying if I said we don't think about it.”

Q And kind of finishing on incumbents, and before we dive into the quickfire, what incumbent could we not talk about but Amazon? Your partner, Kirsten, they do more to make the market than to harm it. So I'd love to hear your thoughts on the effect of Amazon. What do you think about it and how it affects your strategy and thinking?

A So, I mean, Kirsten, obviously, it's a contrarian viewpoint because everyone else is Afraid of Amazon and, you know, hair on fire because Amazon's around. They're formidable. There's no questioning that, and we do have an eye on what they're doing. We think about, you know, the fact that they're launching new fashion brands and that they're probably surpassing Macy's now for number of dollars sold for apparel in the U.S. But you have to keep in mind that Amazon is here, and they have advantages in terms of the billions of eyeballs that they've got on their website, and so you can either just try to run and hide from them, or you can try to Have the thought exercise of how could we leverage Amazon? How could we get access to that incredible user base and maybe convert them into our own experience? And it's not easy and no one's figured it out, but we're challenging our own internal team, as well as our founders and the portfolio to just think differently and, and sort of turn that question on its head a bit to see like, how would you use Amazon to your advantage versus feeling really threatened by it? You know, and even more so with new distribution channels that they're creating, like for voice and You just can't stick your head in the ground like an ostrich. You have to start pushing thinking and being sort of flexible to the new ways of doing business.

AI assessment note: “how could we leverage Amazon? How could we get access to that incredible user base”

Q So now we have the nomenclature locked down, so to speak. I'd love to hear, what do you fundamentally look For in those brands, you've backed some of the kind of enduring all-stars. So what do you look for in those brands and what are the core considerations?

A So not all digital native vertical brands are well-suited for the venture route. And granted, that's a statement to all companies. Not all companies are well-suited for the venture route. In fact, most aren't. You know, you can be a very successful company or digital brand and not take a dime of venture capital. But, you know, if you do want to go the venture route, I would say the most important consideration we're looking for as venture investors is Whether a specific brand has the potential to be much, much larger than the products they're selling today. And we think about whether the brand has the potential to become a real lifestyle brand and whether they can connect with consumers on a broader set of needs than just individual products and really sort of speak to an ethos that the consumer is going to live and breathe. Um, and so in this way, it really matters whether a company is building a real brand or whether they're just selling products. And I think to some people it's intangible and we get that a brand is not just a logo and a color scheme, but it really is an entire mindset Of your company and how you want to do business with your consumers.

AI assessment note: “the most important consideration we're looking for as venture investors is Whether a specific brand”

Q That is the dream with the breakout success term there, because I want to discuss the inflection points within brands, and when a brand goes from kind of small and struggling to To that inflection point and curving up to the right of a breakout brand, how do you distinguish between the two and really kind of look to analyze that inflection point?

A So we've all seen in the market that there are some brands that just somehow become what feels like an overnight success. I would say from an investment standpoint, we sort of are lucky enough to see many of these brands before they even launch, and so everyone has to start from somewhere, which is zero, but I would say when you think about some of the brands that come to mind that everyone sort of has top of mind as the best direct consumer brands, they actually reach clear product market fit, certainly with their consumers in terms of consumer love within their first year or two of business, you know, and it's typically really hard for a brand to start breaking out several years after being in business. I've seen it happen before, but it requires a founder to be extremely disciplined on limited resources, limited capital to be able to get a brand to maybe profitability. So that they can continue growing steadily, and then maybe at a certain point, they start to see some more momentum. But the ones that you're thinking about in the market that we all know of, whether it's Warby, or Casper, or Glossier, or, you know, a recent investment of ours away that's been really breaking out lately, those are happening very early days, and it is very obvious when it happens. It is a clear difference from the existing sort of pack.

AI assessment note: “reach clear product market fit... within their first year or two of business”

Q That is the dream with the breakout success term there, because I want to discuss the inflection points within brands, and when a brand goes from kind of small and struggling to To that inflection point and curving up to the right of a breakout brand, how do you distinguish between the two and really kind of look to analyze that inflection point?

A So we've all seen in the market that there are some brands that just somehow become what feels like an overnight success. I would say from an investment standpoint, we sort of are lucky enough to see many of these brands before they even launch, and so everyone has to start from somewhere, which is zero, but I would say when you think about some of the brands that come to mind that everyone sort of has top of mind as the best direct consumer brands, they actually reach clear product market fit, certainly with their consumers in terms of consumer love within their first year or two of business, you know, and it's typically really hard for a brand to start breaking out several years after being in business. I've seen it happen before, but it requires a founder to be extremely disciplined on limited resources, limited capital to be able to get a brand to maybe profitability. So that they can continue growing steadily, and then maybe at a certain point, they start to see some more momentum. But the ones that you're thinking about in the market that we all know of, whether it's Warby, or Casper, or Glossier, or, you know, a recent investment of ours away that's been really breaking out lately, those are happening very early days, and it is very obvious when it happens. It is a clear difference from the existing sort of pack.

AI assessment note: “they actually reach clear product market fit, certainly with their consumers in terms of consumer love”