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A VC’s Formula For Picking Winners Like Birchbox, Warby Parker, And Other Brands You Love

With Forerunner Ventures, her all-women VC firm, Kirsten Green has helped build stellar consumer brands in a digital world.

A VC’s Formula For Picking Winners Like Birchbox, Warby Parker, And Other Brands You Love

Five years ago, Kirsten Green had a feeling that change was afoot in the world of digital commerce. At the time, the Internet was rapidly transforming shopping: Amazon and eBay made millions of products available at rock-bottom prices, while beloved brick and mortar stores like Gap and Pottery Barn were swiftly creating an online presence. Yet, Green felt that brands still hadn’t figured out how to surprise and delight customers in the crowded, noisy online marketplace. And she was fixated with trying to find a solution to this problem.

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Even before the dotcom boom, Green—who spent the early part of her career analyzing retail stocks at Montgomery Securities, an investment bank in San Francisco, eventually working her way up to vice president—had closely observed the way that brands manufactured magical experiences for consumers, wooing them with a charming ambience, atmospheric music, and products that seemed tailor-made for them. One advantage of being a woman in that male-dominated field, she says, was her insight as a female consumer herself. Women drive the vast majority of household purchasing decisions in the U.S., controlling two-thirds of consumer wealth, yet men tend to make the big investment decisions about consumer brands. “Thriving in this industry has to do with appreciating what you bring to the table,” Green tells Fast Company.

Green felt she could contribute to the conversation by translating her personal experiences into terms that made sense to her male colleagues. She would think critically about what drew her and other consumers to a product or brand, then frame these findings as data points. “I was a woman, and younger,” she says. “I started spending a lot of time in the mall, doing a lot of qualitative research, and really watching what consumers were doing. Were they gravitating towards the sales racks, or were they looking at the new fashions? Were they there to shop, or were they there to socialize? I used this as a touchstone for investing, and I was able to map this on to companies that were doing well.”

By 2009, however, Green had begun to think about striking out on her own, and was toying with the idea of starting her own fund. She wanted to focus her energies on building a new generation of Internet brands that did not simply put their inventory online, but truly reimagined the digital shopping experience. As she discussed her plans with others in the startup and investing communities, she found kindred spirits who were equally obsessed with the future of e-commerce. Young entrepreneurs with big ideas would ask to meet her over coffee to chat about possible new business models.

The Birth of Birchbox and Warby Parker

In 2010, Green met two young women at Harvard Business School who wanted to shake up the beauty market by giving women the opportunity to sample makeup and skincare products at home. They had an idea for a monthly subscription box, filled with premium samples tailored to the consumer’s particular beauty needs. Another group of students at the Wharton School came to her with an idea for a company that would drive down the price of prescription eyewear by allowing customers to try on glasses at home; as an added benefit, they promised to donate glasses to people in developing countries who didn’t have access to them.

“This was a signal,” Green recalls of the new retailing concepts, which would soon become Birchbox and Warby Parker. “These people were the best in their schools. They could probably do anything they wanted after business school, but they wanted to bring a new consumer experience to life, leverage technology, and quantify the results. It was everything that I’d been thinking about.” She began to work through her personal network to raise a round of funding to launch her firm, Forerunner Ventures, devoted to early-stage retail startups. Green was able to be a first-round investor in both Birchbox and Warby Parker, and has since invested in 45 companies in the digital commerce space. In 18 of these investments, Forerunner either led or co-led the deal. To date, it has raised $125 million in capital.

Over the last five years, Green has honed her formula for picking companies for her portfolio. “Most things that people want already exist, and with Amazon or eBay there is always someone who is willing to undercut your price,” she says. “But what does work is when a company focuses on delivering an amazing experience. This means having a high attention to detail around the product, thinking about how customers feel when they land on the homepage, considering what the package looks like when it arrives in the mail. I’m looking for companies that are set up to win on those levels.”

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And she’s found them. As she predicted, Warby Parker and Birchbox were hits with consumers and are now multimillion-dollar companies. In the next few years, she helped launch Bonobos, a brand built on the concept that men should be able to buy clothes that fit well, online. She’s funded the Dollar Shave Club, which took on shaving giants like Gillette by offering quality razors at low prices. Some of her more recent investments have included Glossier, a beauty product company launched by Emily Weiss, founder of the popular blog Into the Gloss, and M.Gemi, an online shoe brand that partners with respected Italian craftsmen.

Green is known for being a close partner and adviser to the entrepreneurs she funds. When Glossier launched last year, for instance, Emily Weiss discussed how important Green had been as she navigated the complexities of starting a line of skincare and makeup products in an already crowded beauty market. Green had been instrumental in helping her find the right way to speak to her customers and make them feel that these products were responding to their concerns. “I took so many meetings with investors,” Weiss told Fast Company. “But with Kirsten, I just felt an immediate connection. She treated funding as a collaborative process, and I could tell she was committed to helping me build a great brand.”

Hearing Green describe her work, it’s clear that these close relationships with startup entrepreneurs is what makes her tick. The founders she supports call her at odd hours of the day to share success stories or to ask for advice when things appear to be falling apart. And even though she knows she can’t fix every problem, she takes every call. “I am giddy with enthusiasm when my companies are doing well,” she says. “And my heart hurts when they’re not. Maybe that sounds very cheesy, but that’s the reality of my life right now.”


An All-Women Dream Team

With Forerunner Ventures, Green has built a successful venture firm staffed entirely by women, which is rare in the investment world. (According to a recent research report by the Diana Project at Babson College, only 6% of partners at venture capital firms are women.) But, in some ways, the undersupply of female voices in venture funding has given Green her greatest competitive advantage. One element of her success as an investor, she believes, is that she’s closer in mind-set to the consumer than male investors. She pairs this focus with a more cautious approach to investing, taking a long time to research companies and get to know founders before deciding to make an investment.

Green insists that gender doesn’t overtly figure into her approach to business. “I had no vision four years ago–and I have no vision today–of building an all-female anything,” she says. “I don’t have a gender thesis. I am truly optimizing for the right person for the task, whether that means running a company or working on my team.” However, she does acknowledge that being a woman in such a male-driven industry has set her apart, helping shape a distinct path and allowing her to do business differently from her peers. And there’s evidence to back up the idea that women may have a more nuanced feel for what might connect with a consumer: Recent research has shown that women have a significant advantage when it comes to sensing a person’s tone and reaction through both verbal and nonverbal cues; women have also scored higher on metrics of emotional intelligence.

In Green’s case, she has applied these traits to her study of how consumers react to new products. “What has kept me interested in this work is the importance of understanding human behavior and decision making and socialization,” Green notes. “I realized that I love tapping into the consumer zeitgeist and identifying something that was meaningful.”

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Male VCs may also have less firsthand experience with some aspects of the retail space. If nationwide statistics are any guide, many male VC partners leave the shopping in their household to someone else.

The Right Amount Of Risk

Green grew up in the Bay Area, and after attending UCLA, she returned to her hometown to start her career, because she couldn’t think of a more pleasant or comfortable place to live. She married her high school sweetheart, and they have recently celebrated their 18-year anniversary. She believes that her natural tendency to play things safe has served her well over the course of her career—somewhat paradoxically for a venture capitalist.

While she emerged unscathed from the first dotcom crash, the memories still stick with her. “I very clearly remember back in 1999 and 2000, when the city was booming,” she says. “Everyone was buying stocks in companies that didn’t have revenue or earnings yet. Meanwhile, I was buying the Gap, because I knew how the Gap makes money. I know people were buying their clothes. I didn’t make any money on the way up, but I also didn’t lose the money on the way down.”

This difference in risk taking, for Green, is partly a matter of personality, but may also may be rooted to some extent in gender. Recent research has shown that women are socialized to be more risk-averse than men. In one study, for example, researchers found that men tolerated significantly higher levels of uncertainty in their wages as compared to women. In the investment arena, women have been shown to take more time to make investment decisions and hold fewer risky assets than their male counterparts. At a moment when there are some rumblings over excessive risk taking in the venture capital community, Green charts a relatively conservative course. Before she raised a single dollar to invest in a startup, she drew up a watertight thesis about how technology should reshape the retail sector. “I was always more drawn to safety when it came to investing,” she says. “I wanted to understand the industry first before I figured out how the whole venture ecosystem worked.”

As a result, she has stayed balanced as unprecedented levels of cash flow into Silicon Valley and startups push towards ever higher burn rates. While the idea of “pivoting” has become very common in the startup world, very few of Green’s companies have changed direction in a significant way. Green invests a lot of time early on in ensuring that she has thrashed out the business plan to the very last detail with any potential entrepreneur she might partner with. “We’ve backed founders that have thought so much about the problem they’re solving, and what they want to deliver that they cannot do anything other than pursue this goal,” she says. “Of course they make improvements to the original idea, but we don’t have a lot of companies in our portfolio that pivot.”

Green has never approached being a woman in a male-dominated industry as an obstacle. While she realizes that women have struggled hard to make a place for themselves in finance and venture capital, she’s preferred to stay focused on appreciating the abilities that set her apart, and using these differences to her best possible advantage. It’s a strategy that has served her well. “I think women are amazing,” Green says. “It’s about finding your own strengths and playing to them.”

About the author

Elizabeth Segran, Ph.D., is a staff writer at Fast Company. She lives in Cambridge, Massachusetts.

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