Automation is Coming to Commerce … And Why That’s a Good Thing

When we order something online, we want it yesterday…and for free. For this to happen, after an item is ordered, in the time it takes to stream of a Master of None episode, it needs to be picked and packed in the appropriate fulfillment warehouse, sorted and loaded onto the next departing truck, routed through transportation hubs for consolidation and deconsolidation, and finally put on a box truck for delivery to your home or place of work. Oh yeah — that doesn’t come cheap: probably $10/$15 per order.

Of course expertise in merchandising, pricing and product differentiation have been the table stakes for any commerce provider since the original general store, and whether online or offline they will never stop iterating and competing on merchandise. But giving consumers not just what they want, but how, where, and when they want it is the holy grail — and in the coming years, I believe as a

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Second-Order Market Innovation and The Future of Drones

Lady Gaga at Super Bowl LI; Image courtesy of Intel
One of the most exciting parts of watching a new technology and market develop is observing the ancillary opportunities created that may not have been obvious initially. Often, these second-order innovations present meaningful investment opportunities, as the initial technology has enabled a market to develop and created fertile ground for new, related ideas to take root; sometimes, these ideas are actually solutions to brand new problems that this technology has created. Happy Returns is a great example from my own experience — the team is tackling a problem (convenient, in-person retail and broken reverse return logistics) that never existed before the rise of e-commerce, and is creating real value to all involved stakeholders. I am also watching the rise of the commercial drone industry closely and am excited about drones’ ability to drive huge business value in both the short and long
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DroneBase: Long Term Disruption, Immediate Business Impact

Aerial footage via DroneBase
At the risk of stating the obvious, the very industry of venture capital is about investors taking a chance on companies, industries and markets that are not yet fully developed. That’s because true value creation — the kind of billion dollar-plus businesses — takes time, unbelievable effort, and more than a little good fortune. We are investing on the potential of a market or solution, in most times years before the business will have a scalable product. Sometimes, that means we pick companies with potential for long-term global impact or in companies with a bleeding-edge product that will be a catalyst for making a currently niche market a mass market one. We also invest in a phenomenal founder with the proverbial “unfair advantage” in a category, even if all they have is an idea or an early working prototype. In any of these scenarios, investing for long-term disruption is a
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DroneBase: Long Term Disruption, Immediate Business Impact

Aerial footage via DroneBase

At the risk of stating the obvious, the very industry of venture capital is about investors taking a chance on companies, industries and markets that are not yet fully developed. That’s because true value creation — the kind of billion dollar-plus businesses — takes time, unbelievable effort, and more than a little good fortune. We are investing on the potential of a market or solution, in most times years before the business will have a scalable product. Sometimes, that means we pick companies with potential for long-term global impact or in companies with a bleeding-edge product that will be a catalyst for making a currently niche market a mass market one. We also invest in a phenomenal founder with the proverbial “unfair advantage” in a category, even if all they have is an idea or an early working prototype.

In any of these scenarios, investing for long-term disruption is a

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GOAT raises $5 million to help sneakerheads buy and sell covetable kicks

Footwear is evaluated for authenticity and condition before being shipped to a GOAT customer. Los Angeles startup GOAT (incorporated as 1661 Inc.) has raised $5 million in new venture funding to grow its mobile-only marketplace for used and collectible sneakers. The GOAT app features everything from Adidas’ Yeezys to Nike’s Jordans and Flyknits, in men’s or women’s sizes, new and used condition. Instead of operating like an open marketplace such as E-bay, letgo… Read More

GOAT: In Defense of the Pivot

The “pivot.” If you spend much time in the VC industry or reading tech press, it starts to sound like a cliche. Like a punchline. A last, desperate scramble to make something out of a business that, rightly or wrongly, couldn’t make their model work the way originally thought or how early metrics had indicated it might.
And when you’re surrounded by examples of failed pivots, it can be easy to become jaded about them. For every successful pivot like a Twitter, Instagram, or Slack, there are countless others, high profile and low profile, that never managed to find product-market fit and simply ran out of runway. I sometimes say be careful with pivots, as the referee will blow the whistle for traveling. You can lose your key players, key coaches and influential fans and supporters. And yet, sometimes that pivot can create a clear path to the basket leading to
Continue reading "GOAT: In Defense of the Pivot"

GOAT: In Defense of the Pivot

The “pivot.” If you spend much time in the VC industry or reading tech press, it starts to sound like a cliche. Like a punchline. A last, desperate scramble to make something out of a business that, rightly or wrongly, couldn’t make their model work the way originally thought or how early metrics had indicated it might.

And when you’re surrounded by examples of failed pivots, it can be easy to become jaded about them. For every successful pivot like a Twitter, Instagram, or Slack, there are countless others, high profile and low profile, that never managed to find product-market fit and simply ran out of runway.

I sometimes say be careful with pivots, as the referee will blow the whistle for traveling. You can lose your key players, key coaches and influential fans and supporters. And yet, sometimes that pivot can create a clear path to the basket leading to

Continue reading "GOAT: In Defense of the Pivot"

Who is #LongLA?

This is a list of known firms and individuals with a home base or whose investment focus includes Southern California. It includes Accelerators, Angels, Corporate VCs, Family Offices, Hedge Funds, Seed Funds and Traditional VCs. The list was inspired by @shaig‘s seed fund google doc. Tweet or comment additions, corrections or deletions. “Home base” definition and right to add is at my discretion. Investors w/ known funds are listed under Fund Name (ie: Matt Mazzeo via Lowercase Capital and Michael Eisner via Tornante Company) Google Doc is accessible here. Originally created July 5, 2014 and has been modified many times. #LongLA Tech Investor List

Who is #LongLA?

This is a list of known firms and individuals with a home base or whose investment focus includes Southern California. It includes Accelerators, Angels, Corporate VCs, Family Offices, Hedge Funds, Seed Funds and Traditional VCs.

The list was inspired by @shaig‘s seed fund google doc. Tweet or comment additions, corrections or deletions. “Home base” definition and right to add is at my discretion. Investors w/ known funds are listed under Fund Name (ie: Matt Mazzeo via Lowercase Capital and Michael Eisner via Tornante Company)

Google Doc is accessible here. Originally created July 5, 2014 and has been modified many times.

#LongLA Tech Investor List

Loot Crate: Tapping fandom to build a next-gen commerce company

Fandom is a powerful force, be it affinity to a sports team, an entertainment franchise, a band or musician, a school or university, or even an admired consumer brand. The passion and intense tribal mentality and emotional dedication that exists within and around these communities is something that nearly everyone can relate to on some level (just follow me on Twitter these days and it may seem that all I really care about is the Golden State Warriors NBA Playoff run).
Since my business operating days at eBay, StubHub, and even Live Nation, I have been a huge believer in the power of super-fans and the impact of their passion, even for things that appear to others to be “niche” categories. As a result, businesses that can effectively tap into these unique and sometimes immeasurable fan dynamics can be incredibly attractive. The challenge from an investor perspective is that
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Happy Returns: Solving the biggest challenge facing ecommerce and omnichannel retail

If you’ve ever shopped online, you know firsthand that online returns can be a huge challenge. Unbeknownst to most outside observers, online shopping returns cause all sorts of problems for ecommerce providers too. The process is broken. For everyone.
Specifically, commerce related returns are a costly, inefficient process that zap online retailer margins, tie up valuable inventory, and all too often result in frustrated customers. Adjacent to this imperfect merchant-consumer dynamic are traditional multi-channel retailers, whose offer of convenient, in-person, local infrastructure all too often falls on deaf ears. As an investor, this type of market-wide friction creates a great investment opportunity. But as an operator, I also felt the pain firsthand. When I was the CMO of HauteLook, returns were a problem child for our online-only business. They were relatively high volume because of the fit challenges associated with selling fashion products, and we knew that a friendlier return
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Deliv partners with UPS to help retailers “out Amazon, Amazon”

We are living in an era of unprecedented and ever increasing consumer expectations, with immediacy and seamless user experiences the new normal. But for most legacy brands and businesses, this level of execution is a bar very tough to clear. This is particularly true in the retail sector, where Amazon has cemented not only its “everything store” reputation, but also its position as the clear leader among retailers in terms of rapid fulfillment and scale.
But while traditional retailers have faced obvious headwinds in this environment, they also possess some genuine and sometimes unappreciated advantages. One such advantage is the visibility and local reach afforded by a nationwide brick-and-mortar footprint. Collectively, the Top-50 non-grocery retailers represent more than 125,000 doors (insider term for number of stores) across the US (and $1.3 trillion in — primarily offline — sales). So in an era where “software is eating everything,” the multi-trillion dollar question is, how do
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LA Tech loves its Mayor: What other cities can learn

The technology industry and government aren’t usually natural allies. But here in Los Angeles, our community has built a thriving multi-year partnership with Mayor Eric Garcetti and his innovation friendly administration. A man after my heart, Garcetti is truly #LongLA and has been a champion of entrepreneurs and an active member of the community.
Given this dynamic, it’s no surprise that one of the highlights of Upfront Summit 2016 for me was my fireside chat with Mayor Garcetti. In this wide ranging discussion, the mayor and I touched on what makes LA tech unique, the dynamics of policy making for the On-Demand Economy, the issue of Digital Divides, his usage of Instagram, and even the Los Angeles Rams coming home. To me Garcetti represents a new type of elected official and his relationship with the local tech community is a model for what’s possible in other regions around the nation. From everything
Continue reading "LA Tech loves its Mayor: What other cities can learn"

LA Tech loves its Mayor: What other cities can learn

The technology industry and government aren’t usually natural allies. But here in Los Angeles, our community has built a thriving multi-year partnership with Mayor Eric Garcetti and his innovation friendly administration. A man after my heart, Garcetti is truly #LongLA and has been a champion of entrepreneurs and an active member of the community.

Given this dynamic, it’s no surprise that one of the highlights of Upfront Summit 2016 for me was my fireside chat with Mayor Garcetti. In this wide ranging discussion, the mayor and I touched on what makes LA tech unique, the dynamics of policy making for the On-Demand Economy, the issue of Digital Divides, his usage of Instagram, and even the Los Angeles Rams coming home.

To me Garcetti represents a new type of elected official and his relationship with the local tech community is a model for what’s possible in other regions around the nation.

From everything

Continue reading "LA Tech loves its Mayor: What other cities can learn"

Why Walker & Company is about so much more than just CPG products

For far too long, the global grooming and cosmetic industry has ignored an entire segment of the population, neglecting a massive market opportunity in the process. The health and beauty aisle of the average grocery store and pharmacy overflows with commoditized goods promising to solve a myriad of problems, yet they fail to address the unique needs of people of color.
But as easy as it is to point to a group that represents more than 35% of the US population and recognize opportunity, there’s a reason that traditional CPG companies have proven unable to tap into this market opportunity. Only an entrepreneur and a brand with authentic empathy and insights for this community’s needs could establish the credibility and insight necessary to solve these long-standing problems. Thus creating compelling opportunity for a massive new business. Two years after entering the market to solve these problems, it’s clear that Tristan Walker
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ThredUP is convincing apparel shoppers to think second-hand first; gets an $81M endorsement from…

ThredUP is convincing apparel shoppers to think second-hand first; gets an $81M endorsement from Goldman Sachs

There’s a fundamental shift taking place in the way consumers relate to second-hand goods. In the past, people have purchased “used cars,” albeit reluctantly and with lingering uncertainty around quality. Now, “certified pre-owned cars” are helping ease the fears of quality-conscious buyers, while driving greater margins to dealers. The same phenomenon is taking place around consumer electronics. Gone are the days of buyer-beware transactions, with used gadgets sold as-is and often at a steep discount. Rather, the rise of “factory refurbished” electronics mean that gently-used now applies to cosmetic wear only and consumers can buy with confidence knowing that their product will work as advertised.
In early 2014, Upfront made a big bet that the same behavioral shift would play out in the multi-billion dollar second-hand apparel market, backing ThredUP with one of the largest
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Discovering HopSkipDrive was so game-changing for my family, I had to invest

This afternoon, like in many Los Angeles families, my kids will each leave their summer day-camps and head in opposite directions across our vast and car-filled metropolis to their additional extra-curricular activities. Occasionally, I have had the bandwidth to help ferry our kids to karate school in the Valley or to soccer practice in West LA. But this usually means dropping other responsibilities. For my wife and I, this schlep has become untenable. At the same time, it has become unfairly restrictive to our kids and their desired pursuits. For other families, many of which have far less flexible schedules than ours or maybe are making due as a single parent household, this daily challenge is even more unmanageable.

Things are about to change.

Along with many of our neighborhood and school friends, we discovered HopSkipDrive earlier this year. In just a few short months, they have become known as Southern

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My Wayfair IPO breakdown. Sometimes an S-1 doesn’t tell you everything.

First things first. I am not a Wall Street analyst. I am neither long nor short Wayfair or hold any direct equity position in a comparable company that trades in the Wayfair competitive set. Lastly, for this post, I did my best to make some educated assumptions about the Wayfair business that have not been publically made available by the company. If there are any meaningful data inaccuracies, please know that they are not with specific intent.

wayfairLogo

  • Company: Wayfair Inc.
  • Founded: 2002
  • Location: Boston, MA
  • Employees: 2,104 FTEs w/ 125 open positions
  • Leadership: Niraj Shah (CEO, co-founder), Steve Conine (CTO, co-founder). 3.1 of 5 stars and 80% approval via Glassdoor Ratings)
  • Investors: Battery Ventures, Spark Capital, Great Hill Partners, HarbourVest Partners and T-Rowe Price.
  • Revenue: My estimate is $1.325B for calendar 2014
  • Market Cap: $2.8B (at $35/share)
  • Ticket Symbol: $W (great ticker symbol!)
  • Expected IPO Trading Date: Now trading.

Business and Category Overview:

Wayfair is an incredible ecommerce story. The business was founded in 2002 by Niraj Shah and Steve Conine in Boston as a website called RacksAndStands.com (yes, they started by selling speaker stands and TV stands online). Eventually, the business became known as CSN Stores which was a collection of ~240 niche commerce sites focused on furniture, home furnishings, decor and goods with web domains that included porchgrills.com, bathmats.com and bedrooms.com. Wayfair was bootstrapped until 2011, with business growing to >$500 million in sales. At that time the still founder led ecommerce pioneer took its first outside capital and made the strategic decision to rebrand and permanently redirect all of the sites into Wayfair.com. Leading to what is today Wayfair, a billion dollar plus pure-play ecommerce business with a collection of five home related sites — pretty much a one-stop shop for furniture, home furnishings, decor and goods.

W_IPO_Overview

Wayfair offers the world’s largest collection of online selections of furniture, home furnishings, décor and goods. I would best describe Wayfair as an ‘inventory lite’, Amazon like, online seller of home related goods connecting 7,000 third-party suppliers representing 7 million products with millions of buyers. Wayfair’s has built two clear “unfair advantages” relative to the competition that have enable them to have great success.

1) Complex and sophisticated supply chain, operations and production capability which can efficiently and effectively coordinate the listing, production, presentation, transaction, fulfillment and support for what are literally thousands upon thousands of smallish sellers who have millions of product type available for sale. As you can guess, logistics, fulfillment and customer support for home goods products are challenging given the various categories, shapes, sizes, weights and price points in the home market. Large bulky items, such as living room sofas, dining

W_IPO_BizDiagram
W_IPO_RevenuebyBusinessUnit
W_IPO MarketingSpendAnalysis
W_IPO_EngagementTrends
W_IPO_PurePlayEcommercePeerGroup
W_IPO_ProformaFinancialData
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Ecommerce Unicorns lining-up at IPO starting gate. How to identify one early.

In the spirit of an overhyped Cyber Monday and blown-out of proportion mobile ecommerce statistics, I felt it was time for a little unicorn titled link baiting around the topic.  After all, I am a marketing guy and I wanted to show my eight-year-old daughter that the talk of unicorns are cool even with grown-ups right now as well! Special thanks to @AileenLee, @FredWilson and @CBInsights for making the dinner conversations around the house more interesting the past month.

  1. An authentic founder/team
  2. Early organic growth
  3. Proven/potential operational excellence
  4. Attractive market and margins
  5. Companies that are in a position to excel in a changing world

If you are an early-stage company and fit such a criteria, please reach-out to me directly!

Now for those with some time to read…

I was lucky enough to attend the Goldman Sachs Private Internet Company Conference earlier this month in Las Vegas.  It was a fabulous event showcasing some of the most dynamic and scaling private companies with most of ‘Tech’s Big Hitters’ in attendance (still trying to figure out how I got there). Besides the obvious media conversation about the recent Twitter IPO and the reports about Los Angeles based Snapchat turning away several acquisition suitors (good for you Evan, I am #LongSnapChat and #LongLA), the topic of Zulily’s incredible IPO had the attendees buzzing ($ZU has a market cap of over $4B as of today).

It is interesting that ecommerce related businesses always seem to be either very hot or very cold in the eyes of both private and public company investors.  There are many cases of companies getting lots of props and then all of sudden as soon as you turn around the haters jump-on. Over the past few years we have seen the likes of Gilt, ShoeDazzle, Groupon, Living Social, Fab and many more go from the ‘floor seats’ to the ‘cheap seats’.  The reality is this shit is very, very hard and usually takes a lot of time to prove-out success with many ups and downs.  The ecommerce and retail world changes quickly and the larger players and incumbents are not your typical sleepy bunch. You see the likes of Alibaba, Amazon, eBay, Google, IAC, Rakuten (to name a few) move fast, retain talent, play in big markets, have large balance sheets and can afford to make mistakes and place big bets (ie: invest in drones that can do same-day delivery).

So with all that it is easy to ask “why bother” building a company in/around ecommerce?  That is the easiest question – the answer is according to ComScore in the US alone online sales will grow about 15% increase this year and over the

:)
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My reaction to Zulily’s IPO filing and Flash Sales explained

This week Zulily, the ecommerce flash-sale site targeting moms with products for their kids and themselves, filed their S-1 to go public.   While I knew the filing was coming and I had an idea what would be inside, my first reaction was still……HOLY SHIT.  Without a doubt, the 179 SEC page filing is a must-read for ecommerce investors and entrepreneurs everywhere.  The reason: on one extreme it highlights how well they have executed on an incredibly tough business in just four short years, going from a zero to $600 million in annual sales (my estimates for 2013).  On the other extreme, they have limited profits and have lost $56 million to get to this point in their life-cycle.  In between, there is a ton of interesting and pertinent information.

The intent of this post is not to recommend whether I would invest in Zulily on a go-forward basis.  Regardless of what happens in the public markets, they must be commended on what they have built.  As someone whom competed against them while I was the CMO of HauteLook,  they have done an amazing job.  It does bother me that they tried to block HauteLook IPs and HauteLook employees from accessing their site for competitive purposes, but that is a blog post for another day!  Also, as a new investor for Upfront Ventures, I wish my early deals could end-up like Zulily did for my friends at Maveron (we are a co-investor in a different deal) who STILL owns 24% of this business prior to going public.  Maveron is not a huge VC fund, but this could be one of the great investments outcomes in the ecommerce era.

With all that said…..a little background.  I can remember when we first heard about Zulily in the fall of 2009.  It was four months into my job at HauteLook.  The head our kids business at HauteLook was talking about industry chatter about some Blue Nile guys trying to create “HauteLook for moms”.  The industry might have actually been saying “Gilt for moms”, but we at HauteLook would never say that because we always thought (and to this day believe) we had a better business than Gilt.  Regardless, then came the calls over the next 18-24 months from Silicon Valley VC friends asking me about Zulily (and OneKingsLane for full disclosure) and what I thought.  I always gave them the same honest answer re: Zulily: “love the target market, feel the kids/moms retail space lacks a dominant brand and think the value proposition will resonate.  However, have concerns what was assumed was low average order values and low product margins (a flash-sale problem), thus driving to lower than desired LTVs, high customer Continue reading "My reaction to Zulily’s IPO filing and Flash Sales explained"