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ENTREPRENEURSHIP 2, 1.10 (V) (Optional) The Pitch Process - A VC's perspective (1)

I'm Karl Ulrich, I'm a professor at The Wharton School. And I'm very lucky to be joined today by Eurie Kim whose a partner at ForeRunner Ventures. Eurie, thanks for coming in. » Thank you for having us. » First, just a disclaimer, you were my student » I absolutely was. » I don't think that presents any conflicts at all, but I just want to get that out of the way, you're my student. And it's so great to see you now in this role. » Thank you. » Tell us a little about ForeRunner. What is ForeRunner about? » Sure, ForeRunner is an early-stage venture Venture Capitol Firm. We are dedicated to investing in the evolution of commerce. » Mm-hm. » And, that means all kinds of things, but, effectively, we'll take a consumer lens, to the opportunities we evaluate. And really think about, how the consumer is changing, what the product or service is being offered, and how technology really brings that to the market in a new way. » There are thousands of venture capital firms, especially in this area. What is that makes ForeRunner different? Is it that industry focus? » You know, it is. I mean, we call it a thematic focus because some people will say you just invest in e-commerce. And e-commerce is just one thing, but commerce is everything. Any transaction, any product or service that you might buy. You could be a business customer or you could be an end consumer. And so for us we feel our differentiation is really the lens that we look at, and kind of how we think about this opportunity to disrupt a particular market from the consumer perspective. And then we have a very active management approach, so we spent a lot of time with our founders. I think a lot of firms do try to add a lot of value in different ways, but we find that we are more quality over quantity. So we have a smaller portfolio, it's more concentrated, and we do take a pretty partnership approach to that. » Well speaking of portfolio, give us an example of a company or two that you've invested in? » Picking the babies, which ones should I take? » Yeah, we'll just draw randomly then. » The ones that people will know are in the earlier vintage when my partner first started the firm, so those will include companies like Bonobo, Warby Parker, which is obviously a Wharton alum team, even Birchbox and HotelTonight. So those are sort of the first generation of commerce companies that have really risen to being more well known. I think now what's interesting is it's not just the apparel brands or product brands that we're investing in. We invest in tools and technologies as well. We have a really interesting B to B platform, so business to business platform, that is disrupting the off priced inventory space. So apparel's a multi trillion dollar business, a lot of it actually happens off price, so on sale. And brands and retailers have a lot of challenges figuring out what to do with that inventory. So this team in New York called INTURN is creating a digital platform to connect brands and retailers. To be able to more effectively clear their off priced inventory. » For bulk purposes? » Bulk purposes exactly. So that'san example of something that's maybe not necessarily product based. Within the product world, for instance, people might not think that we're Investors in kind of the health care arena. We have a company called Curology, which is a direct to consumer prescription skincare brand. And now this is disrupting acne and anti-aging medication which ultimately, maybe people would think of as healthcare, but it's actually a consumer brand. So the dermatologist that's started it, has proprietary formulations. I'm really trying to disrupt how people can experience the efficacy of real acne medication, so that's another brand that we've worked with. » I'm sure that when you tell people you're an venture capitalist, that their wheels start turning, they imagine all kinds of things. What do you think is the biggest misconception about what venture capital is that you encounter? » Gosh that's a really good question. You know I think that people don't realize it's actually, it's a very difficult job. Because you're a venture capitalists by nature Because you're so excited about the future and innovation, and supporting new developments. But the majority of our job is actually to say no. » Yeah. » And so when I first started, I didn't realize how hard it would be to be sitting next to someone who's presenting to you their dream. They've worked on it for however long. They quit their job, they put in all their money to bring this to life, and more often than not we have to say no. So it's really difficult part of the business. » Yeah, tell us a little bit about the numbers. You say you have to say no a lot. » Yeah. » So how often do you have to say no? » So we'll about 1000 to 1200 deals a year. I think that's pretty standard deal flow for a venture capital firm or for a particular smaller group. But what's different is that's all in commerce for us. So other firms will do a lot of different types of sectors or market kind of areas. We'll have 95% of ours all be commerce related. And of those we invest in about 1%. » 1%, so you do 10 investments out of 1000. » 10-15. » Yeah, I'll volunteer a misconception. People often think these are vast enterprises, venture capital firms. How many people, how many investment professionals, are looking at a thousand plans a year? » So, in our team we have three investment professionals. Myself, the founder of our firm, Kirsten Green. We have an associate, Nicole Johnson, and so we will be making the final investment decisions. And then we have two other members for our team. Melissa who is in New York and she actually in terms of thinking about how we support our portfolio companies, she has deep expertise across marketing. Whether it is paid channels, branding, how to think about building a marketing team. And as we were growing ourselves as a firm and thinking, what are we really good at and why do founders want to work with us? It was because we had a view on marketing and customer acquisition and so we felt it was really important to add that skill set to the team. And so we all collaborate, it's a very flat organization. Everyone takes part of deals. We're saying due diligence, closing the transaction and then ultimately managing the portfolio. » So to put that in, just to do the arithmetic in rough terms. So you personally will say no to 300 people a year, something like that. That is, if you just take the 1,000, it's about 300. » Yeah, it's 300 or 400. » Yeah, and say yes to 3. » And with that, I would say that we have a pretty robust deal process. » Yeah. » And we'll get in the 1000 to 1500 deals. I would say 80% of those are probably straight passes. » Yeah, before you even do it. » We have to get through them somehow. There's gotta be a lens, and so we have certain themes that we're looking at. We may have just invested in a apparel company. So portfolio diversity wise, we just can't do another one right then after. And so there's a lot of factors that I do think are misconception with venture, is that, well you say you like this kind of business. You've invested in Warby and Bonobos, and so this'll be the perfect deal for you. I think one thing people have to realize is that I've just done a deal in your space, I can't do another one. So, kind of thinking about diversity is one thing that we do a lot. » Yeah, all right, so if you only say yes to ten deals a year, what do you do all day? » [LAUGH] » Tell me what you day is? » Carl, I ask myself that all time time. We're so busy, I don't know why. Let me think here. Let me think about this. » Well this ain't [CROSSTALK] tell us about a typical day. » Typical day I come in. i usually have at least two or three new deal meetings. » Yeah. » Those will be An hour each. » And that would be somebody who's made it through the first screening? » Made it through the first screening, we've received a draft, we're interested, we want to learn more, so we want to meet them, the founder or the team. And that'll be an introductory meeting and we'll have obviously some thoughts and questions. And then with any given week that there's usually a couple of portfolio companies that have compressing issues whether it's strategic planning, or it's prepping for a board meeting or thinking about certain new hires, so we might be interviewing people to help them. Might be doing reference calls. I took a couple of interviews for one of our companies bloom that, which is a flower delivery service here in San Fransisco. But they did a big launch this week, so PR wise, I took a couple interviews of them with journalists. Then we'll do some internal stuff. We have a leadership platform which is only available to our portfolio company leaders, and we'll create original content for that. We will develop sort of a resource database. If you're looking for a PR firm you can just go in there and pull down PR firm and there's all the people that we know of that we've worked with and people in the portfolio have worked with and so we're constantly building out that. And then I would say some of it is thinking about new themes, reaching out to founders in our network we don't do as much outbound sourcing as I think some firms do. But that's the benefit of having a bit of a focus because now people know if you have a commerce related business we're a great place to check in. And our co-investors know that as well. So the day goes by fast, but I would say it's a really, it's a lot of portfolio work. » Yeah. » A lot of just continued thought leadership and pushing our own thinking on what's happening in our space. » Yeah. One of the things that strikes me as hard about your business, is you don't really know how you did for seven to ten years. It's almost worse than being a professor [LAUGH] where it takes us a long time to see any results. So how do you think about the success factors on sort of a daily, weekly, monthly basis? » Yeah, it's a good one. So we do copious quarterly reporting for our own limited partners. We call them LPs. And. » And maybe it would be worth spending two minutes explaining how the industry works. » Yeah. » So if the money you're investing. » yeah. » This comes from his office. » So venture capital firms are, it's capital that will be mainly institutional. It will come from endowment, fund to funds foundations. Sometimes you'll have intercapital firms raise from individuals or strategics. That's a strategy we have even employed throughout the former, which is institutional firms were kind of signing up for a long-term relationship, so that when we raise fund two, fund three, fund four, that they are still around. I think that you can have a lot of amazing people in your fund that are individuals that have capital. But as you grow your business, can you continually put in more money if you're just a family? Maybe not. » Right. » So Kirsten, who started the firm, she has always thought strategically about how do you build a business for the long term, not just one fund today.



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I'm Karl Ulrich, I'm a professor at The Wharton School. And I'm very lucky to be joined today by Eurie Kim whose a partner at ForeRunner Ventures. Eurie, thanks for coming in. » Thank you for having us. » First, just a disclaimer, you were my student » I absolutely was. » I don't think that presents any conflicts at all, but I just want to get that out of the way, you're my student. And it's so great to see you now in this role. » Thank you. » Tell us a little about ForeRunner. What is ForeRunner about? » Sure, ForeRunner is an early-stage venture Venture Capitol Firm. We are dedicated to investing in the evolution of commerce. » Mm-hm. » And, that means all kinds of things, but, effectively, we'll take a consumer lens, to the opportunities we evaluate. And really think about, how the consumer is changing, what the product or service is being offered, and how technology really brings that to the market in a new way. » There are thousands of venture capital firms, especially in this area. What is that makes ForeRunner different? Is it that industry focus? » You know, it is. I mean, we call it a thematic focus because some people will say you just invest in e-commerce. And e-commerce is just one thing, but commerce is everything. Any transaction, any product or service that you might buy. You could be a business customer or you could be an end consumer. And so for us we feel our differentiation is really the lens that we look at, and kind of how we think about this opportunity to disrupt a particular market from the consumer perspective. And then we have a very active management approach, so we spent a lot of time with our founders. I think a lot of firms do try to add a lot of value in different ways, but we find that we are more quality over quantity. So we have a smaller portfolio, it's more concentrated, and we do take a pretty partnership approach to that. » Well speaking of portfolio, give us an example of a company or two that you've invested in? » Picking the babies, which ones should I take? » Yeah, we'll just draw randomly then. » The ones that people will know are in the earlier vintage when my partner first started the firm, so those will include companies like Bonobo, Warby Parker, which is obviously a Wharton alum team, even Birchbox and HotelTonight. So those are sort of the first generation of commerce companies that have really risen to being more well known. I think now what's interesting is it's not just the apparel brands or product brands that we're investing in. We invest in tools and technologies as well. We have a really interesting B to B platform, so business to business platform, that is disrupting the off priced inventory space. So apparel's a multi trillion dollar business, a lot of it actually happens off price, so on sale. And brands and retailers have a lot of challenges figuring out what to do with that inventory. So this team in New York called INTURN is creating a digital platform to connect brands and retailers. To be able to more effectively clear their off priced inventory. » For bulk purposes? » Bulk purposes exactly. So that'san example of something that's maybe not necessarily product based. Within the product world, for instance, people might not think that we're Investors in kind of the health care arena. We have a company called Curology, which is a direct to consumer prescription skincare brand. And now this is disrupting acne and anti-aging medication which ultimately, maybe people would think of as healthcare, but it's actually a consumer brand. So the dermatologist that's started it, has proprietary formulations. I'm really trying to disrupt how people can experience the efficacy of real acne medication, so that's another brand that we've worked with. » I'm sure that when you tell people you're an venture capitalist, that their wheels start turning, they imagine all kinds of things. What do you think is the biggest misconception about what venture capital is that you encounter? » Gosh that's a really good question. You know I think that people don't realize it's actually, it's a very difficult job. Because you're a venture capitalists by nature Because you're so excited about the future and innovation, and supporting new developments. But the majority of our job is actually to say no. » Yeah. » And so when I first started, I didn't realize how hard it would be to be sitting next to someone who's presenting to you their dream. They've worked on it for however long. They quit their job, they put in all their money to bring this to life, and more often than not we have to say no. So it's really difficult part of the business. » Yeah, tell us a little bit about the numbers. You say you have to say no a lot. » Yeah. » So how often do you have to say no? » So we'll about 1000 to 1200 deals a year. I think that's pretty standard deal flow for a venture capital firm or for a particular smaller group. But what's different is that's all in commerce for us. So other firms will do a lot of different types of sectors or market kind of areas. We'll have 95% of ours all be commerce related. And of those we invest in about 1%. » 1%, so you do 10 investments out of 1000. » 10-15. » Yeah, I'll volunteer a misconception. People often think these are vast enterprises, venture capital firms. How many people, how many investment professionals, are looking at a thousand plans a year? » So, in our team we have three investment professionals. Myself, the founder of our firm, Kirsten Green. We have an associate, Nicole Johnson, and so we will be making the final investment decisions. And then we have two other members for our team. Melissa who is in New York and she actually in terms of thinking about how we support our portfolio companies, she has deep expertise across marketing. Whether it is paid channels, branding, how to think about building a marketing team. And as we were growing ourselves as a firm and thinking, what are we really good at and why do founders want to work with us? It was because we had a view on marketing and customer acquisition and so we felt it was really important to add that skill set to the team. And so we all collaborate, it's a very flat organization. Everyone takes part of deals. We're saying due diligence, closing the transaction and then ultimately managing the portfolio. » So to put that in, just to do the arithmetic in rough terms. So you personally will say no to 300 people a year, something like that. That is, if you just take the 1,000, it's about 300. » Yeah, it's 300 or 400. » Yeah, and say yes to 3. » And with that, I would say that we have a pretty robust deal process. » Yeah. » And we'll get in the 1000 to 1500 deals. I would say 80% of those are probably straight passes. » Yeah, before you even do it. » We have to get through them somehow. There's gotta be a lens, and so we have certain themes that we're looking at. We may have just invested in a apparel company. So portfolio diversity wise, we just can't do another one right then after. And so there's a lot of factors that I do think are misconception with venture, is that, well you say you like this kind of business. You've invested in Warby and Bonobos, and so this'll be the perfect deal for you. I think one thing people have to realize is that I've just done a deal in your space, I can't do another one. So, kind of thinking about diversity is one thing that we do a lot. » Yeah, all right, so if you only say yes to ten deals a year, what do you do all day? » [LAUGH] » Tell me what you day is? » Carl, I ask myself that all time time. We're so busy, I don't know why. Let me think here. Let me think about this. » Well this ain't [CROSSTALK] tell us about a typical day. » Typical day I come in. i usually have at least two or three new deal meetings. » Yeah. » Those will be An hour each. » And that would be somebody who's made it through the first screening? » Made it through the first screening, we've received a draft, we're interested, we want to learn more, so we want to meet them, the founder or the team. And that'll be an introductory meeting and we'll have obviously some thoughts and questions. And then with any given week that there's usually a couple of portfolio companies that have compressing issues whether it's strategic planning, or it's prepping for a board meeting or thinking about certain new hires, so we might be interviewing people to help them. Might be doing reference calls. I took a couple of interviews for one of our companies bloom that, which is a flower delivery service here in San Fransisco. But they did a big launch this week, so PR wise, I took a couple interviews of them with journalists. Then we'll do some internal stuff. We have a leadership platform which is only available to our portfolio company leaders, and we'll create original content for that. We will develop sort of a resource database. If you're looking for a PR firm you can just go in there and pull down PR firm and there's all the people that we know of that we've worked with and people in the portfolio have worked with and so we're constantly building out that. And then I would say some of it is thinking about new themes, reaching out to founders in our network we don't do as much outbound sourcing as I think some firms do. But that's the benefit of having a bit of a focus because now people know if you have a commerce related business we're a great place to check in. And our co-investors know that as well. So the day goes by fast, but I would say it's a really, it's a lot of portfolio work. » Yeah. » A lot of just continued thought leadership and pushing our own thinking on what's happening in our space. » Yeah. One of the things that strikes me as hard about your business, is you don't really know how you did for seven to ten years. It's almost worse than being a professor [LAUGH] where it takes us a long time to see any results. So how do you think about the success factors on sort of a daily, weekly, monthly basis? » Yeah, it's a good one. So we do copious quarterly reporting for our own limited partners. We call them LPs. And. » And maybe it would be worth spending two minutes explaining how the industry works. » Yeah. » So if the money you're investing. » yeah. » This comes from his office. » So venture capital firms are, it's capital that will be mainly institutional. It will come from endowment, fund to funds foundations. Sometimes you'll have intercapital firms raise from individuals or strategics. That's a strategy we have even employed throughout the former, which is institutional firms were kind of signing up for a long-term relationship, so that when we raise fund two, fund three, fund four, that they are still around. I think that you can have a lot of amazing people in your fund that are individuals that have capital. But as you grow your business, can you continually put in more money if you're just a family? Maybe not. » Right. » So Kirsten, who started the firm, she has always thought strategically about how do you build a business for the long term, not just one fund today.


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