Kirsten Green, founder and managing partner of Forerunner Ventures, has been an enthusiastic supporter of the direct-to-consumer business model, making early-stage investments in eyewear purveyor Warby Parker, beauty companies Glossier and Birchbox, and luggage vendor Away, among many others. (Her prescience paid off in a big way in 2016 with blockbuster acquisitions of two of her portfolio companies: Walmart bought Jet.com for $3.3 billion, and Unilever acquired Dollar Shave Club for $1 billion.) Today Forerunnner is announcing a new, $360 million fund–one of the largest raised by a woman-founded venture firm–and Green spoke exclusively with Fast Company about the evolving startup landscape, and where and how she plans to invest. Edited excerpts follow:
What’s changed since Forerunner began investing in earnest?
In 2012…you could get some early traction on a relatively small amount of money. I’m not saying that’s not true now, but if you look forward six years later, there are more startups, more money coming into the ecosystem, the job market has gotten tighter, the competition for talent has become greater, the costs are higher, and the bar is higher for meeting new milestones. [But the opportunity for] unlocking scale has also served as a calling card for [attracting] more money. It’s [grown] exponentially in terms of the appetite and the opportunity to put more money to work.
So how do you win in this environment?
Very broadly speaking, we see a customer who has evolved and [who] is driving a lot of new demand. Any company that’s playing into that with a better product, a better service, or a better experience is ripe to benefit. That can be companies like Dollar Shave Club or Glossier that are selling products or creating a new distribution channels…or a company like [mobile banking company] Chime. In many ways people would look at that and say, “That’s a financial services company.” But from our perspective, finances are a big part of the consumer journey. We saw an opportunity to meet that evolving consumer with a new financial-services product.
One of the things we’re increasingly looking at today is supply chain, and how people are thinking about bringing a product to market efficiently and being nimble with their working capital, and what are the ways in which they can design a process and a system where they can have unique advantages? We’re constantly, as a team, working to understand where are the opportunity sets within this ecosystem, What are the points that are begging for innovation or ripe for opportunity, and can we partner with teams that are early to [address those opportunities] and have that be a unique wedge into the market? But [the investment] needs to be in the context of a bigger value proposition that’s important in the scheme of consumer trends, business trends, distribution, landscapes shifting, etc. The overall bigger picture has a longer view, and [there are] near-term opportunities for exploiting these wedges.
Talk more about the bigger picture.
I like this word because it fits: Empowerment. The consumer today has information, and they’re using it, and it’s leading them to make more thoughtful choices. It’s not just about getting xyz product, but it’s about: Who is the company behind that product? How are they manufacturing that product? How are they thinking about pricing and getting that product to me, what are the implications of that on the environment? At the end of the day, all these businesses are [working] in service of the consumer or the end user. The consumer is leading the charge, and if the consumer is anchored around values and things that matter, that’s good for business.
What’s a good example of this?
We spend a lot of time in this country talking about [how] healthcare is broken; one of the bright spots in that conversation is wellness. People willing to spend money on that, they’re investing in learning [about health] and that’s opening up a whole new category of products and services and priorities. Those are kind of new consumer buckets–or buckets that are being expanded in big ways. I think that’s true for experiences, too. People are reallocating dollars towards experiences and I think that there’s a lot of reason to believe that that will continue.
Will you be doing some later-stage investments because of the size of the fund?
What we really like about this fund size is that we can still do the earliest stages [of investment] and have a meaningful impact. We also think we can lead or participate in some later rounds. If I were to describe the sweet spot, I would say early stage, broadly defined: Seed, A, some B [rounds]. Before, with the fund a third of this size, it was harder to do.
How do your successes affect the way you operate as a firm?
Personally, I feel an increasing amount of opportunity and pressure at the same time. [When] we were new on the scene, we set goals on the kinds of company that we were going to back, the kind of partners we were going to be, and the areas where we could add value. I hope we’ve done a good job on delivering on those, and now those become our table stakes, and we need to keep looking for ways in which we can deliver on what people look for from us. And so I kind of use it as a motivation to keep challenging ourselves to be better.