🎢 Newsletter #38 - Social + e-commerce =?
+ Steve Sloane (Partner at Menlo Ventures)
Hey there! Welcome to my email newsletter. My name is Leo Luo, a student entrepreneur at the University of Michigan. I write about founder stories, trends, investor POV, and unique behaviors in the early-stage consumer startup space.
All my previous posts can be found here.
Follow me on Twitter @_leoluo.
🍽 Today’s menu
Startup story - GIST (Social e-commerce app)
Investor POV - Steve Sloane (Partner at Menlo Ventures)
What I’ve been reading - 5 articles about startups and investing + a shout-out
Who’s ballin’ this week - 6 new fundraising/developments in B2C space
Jobs - 12 full-time jobs and internship postings
Feedback - help me to deliver better content to you
🔥 Startup Story
Social + e-commerce = ?
(Image credit: GIST)
Similar to a lot of people I know, I like to look at reviews when buying products. It can be difficult, however, to trust certain reviews. More often than not, I end up asking my friends for their advice and consequently buy whatever they bought.
GIST(backed by Kleiner Perkins and Accel scout programs) is a mobile app trying to scale this social buying behavior. In the app, you can share the products you love and see what your friends buy. I had an amazing time chatting with Walter, who shared with me details of the journey he took while building this app. Thank you, Juliet, for the intro!
Before founding GIST, Walter was a marketer working on a single problem - making viral content meant to sell a product. He worked for big retailers like Levi’s and startups like Enjoy. He began to notice that social proof (aka word of mouth) sells products way better than anything you can do as a marketer (shout out to my marketing professor for the 4Ps framework lol).
“Let me give you two examples. When I was at Levi's, I created a series of videos, that for under $10,000, beat every ad on the Super Bowl. We orchestrated virality through earned media driven by personal referrals to pick up our content. Then, when I was at Enjoy, I created a MLM party model to sell our initial product for $10 CAC and the LTV was $2500.
Those two programs worked because we stepped out of the way and gave the consumer the ability to sell the product for us. We leveraged individual consumers’ trusted social networks to distribute a product and scale, ” Walter elaborated.
🔑 Walter’s Unique Insight and contrarian view
As Walter looked more into the space, he realized a few things:
WOM is the best channel, but it is underutilized and is like the dark matter of the internet
There is no modality of personal recommendation for shopping online
WOM is productizeable and he has done it himself
“Our non-contrarian view is that e-commerce is growing like crazy and is accelerated by COVID and our contrarian view is that it is not growing fast enough because the e-commerce experience today is not optimized for how we like to shop and discover products and content, which is through social proof and word of mouth. This is what we're seeking to change.”
🚗 Product Journey
First experiment - Google Sheet:
The first experiment Walter did was neither an app or a website. In the early days, his goal was to find the modality of trust online. He found that Google Docs/Sheets was the simplest form of that modality. This realization came from observing a pregnant friend use another trusted friend’s Google Doc to purchase baby products.
He connected with the creators of the list and validated the desire for a digital modality to share what you buy.
(The baby item list his friend used to buy items)
“We started looking at all these different kinds of product lists and communications from Google Docs and realized how powerful they were. So I made a bunch. I'm in San Francisco so I know a lot about earthquake preparedness. I made my earthquake preparedness list.
I decided to send the list to about 30 friends. Within an hour, 29 people had opened it, so on day one, it was already the greatest email ever written in terms of open rate, but then I also found that people were buying the things from the email. The email alone generated thousands in GMV, ” Walter explained with excitement.
Walter and his team continued to build out more content and started to build out a mobile app. They initially decided to focus on the baby list vertical but eventually decided to pivot to a broader idea to target more diverse categories.
(Early wireframes of the app)
Through all the experiments, Walter realized that creators are ultimately the secret weapon and the key was making it easier for them to share product recommendations. Thus, Walter and his team decided to invest in technologies to help frictionlessly capture what people bought.
“That was a non-trivial task. We had to pass a $30,000 security audit with Google. We had to figure out a way to capture everything on Amazon. We made an investment to make the experience just work - ‘I log in, and my stuff is just there’. It was important to do, otherwise no one was going to go through the effort and it would have been no different from simply writing a list, “ Walter explained.
They are currently in Beta and have integrated with most online stores (e.g. Amazon and all stores on Shopify). They started with college students and have found a cohort of organic power users that are engaging with content everyday.
(current UI of the app)
“We want to completely disintermediate advertising as we know it and give brands the things they want the most (sales and a direct relationship with customers) and what customers want the most ( security and the best products). This will look like what I call a marketplace for direct relationships, ” Walter explained.
Check out GIST!
💡 Investor POV
Steve Sloane (Partner at Menlo Ventures)
(Image credit: Steve Sloane)
Steve Sloane is a partner at Menlo Ventures, a stage and sector agnostic VC.
Steve has been interested in tech and entrepreneurship from an early age. During his sophomore year at Princeton, he co-founded a YC-backed startup in the social networking space. After college, he spent two years working as a management consultant focusing on the financial services sector and a year at Insight Partners doing investment due diligence and portfolio support.
At Menlo, Steve invests in Series B/C companies in B2C and enterprise. Some of his previous investments include Chime, Rover, and Carta. I was thrilled to learn more about his perspective on the consumer space, especially on how he evaluates companies that have proven some product-market fit.
🚀 B2C Trends That Excite Steve The Most
Smarter ways to access healthcare
“One trend that I think is interesting is finding smarter ways for consumers to participate in their healthcare - whether it’s cash pay marketplaces, such as Sesame, or smarter health insurance like Sidecar Health. We have reached a point where there are going to be public interventions, but at the same time, there are a number of opportunities in the private market to create more innovative models. A lot of those opportunities are enabled by a fair amount of innovation on the FinTech side.”
🤔 How Steve Evaluates Series B/C Consumer Startups
1. Some off-the-chart metrics
“There have to be some metrics that are off the charts. For Chime, the metric is their retention since the banking relationship is going to look better than any other consumer relationships you have. For Robinhood, their superpower is their distribution strategy. It has such a good product with a low cost of acquisition.”
2. Large market with working economics
“For a Series B/C consumer startup, I am looking for early evidence that the economics are working. You may have it at the series A conceptually, but you probably don't have the same kind of data around those economics until you get to Series B and C.
As soon as you find a consumer company that is tackling a large enough market like banking or health insurance and you believe that the company has a working economic model, you should really try to just get into the company, almost at any cost - as you can see from Airbnb and DoorDash.”
📚 Steve’s Favorite Book
“The Splendid and the Vile by Erik Larson is a great book on Winston Churchill and leadership. A large part of Winston Churchill’s leadership was his ability to project confidence [that you know things would be okay]. Having a leader who is able to have that kind of energy and positivity during dark times makes such a difference in moving past a crisis. I think the same thing could apply to leaders of companies.”
👥 Most interesting Founder Steve Has Met Recently
“Amira from mos.com is the most interesting founder I have met recently. She has a history of fighting for rights and has fled an oppressive regime. She is now tackling a massive problem of college affordability in the US. Her empathy for struggling young people and her ability to build products with young consumers in mind are world-class.”
Feel free to reach out to me if you are an early-stage founder that is currently fundraising right now.
I would love to help and pass on the deck to investors in my network!
👨💻 What I’ve been reading
Investing in Public: Non-Obvious Lessons from 100+ Angel Investments
The 30 Best Pieces of Advice for Entrepreneurs in 2020 (Highly recommended - tons of actionable advice by First Round)
Twitter thread on how to raise a seed fund (compilation of best advice from Twitter)
Your Startup Life, Post-Pandemic (NFX)
It’s Not About Video. It’s About Always-on Triage (a16z)
***Special shout out to another great newsletter - The Takeoff
“My buddy Michael (senior at WashU) runs a newsletter & podcast called The Takeoff. They want to become the go-to resource for students and young professionals looking to learn more about startups, tech, and venture capital.
The Takeoff does a few things: (1) interview leading founders and investors (ex: Sam Altman, Hunter Walk, JMJ), (2) share curated content (for students in particular), and (3) more to come (stay tuned!). You can subscribe below and if you have any questions about The Takeoff, feel free to shoot Michael a dm on Twitter (@mspiro3).”
🏀 Who’s ballin this week
Gainful, a startup offering personalized subscriptions to protein powders and hydration products, is announcing that it has raised $7.5 million in Series A funding
Direct-to-consumer outdoor furniture brand Outer is following up a June seed round with $10.5 million in Series A funding led by Sequoia Capital China.
At-home health testing kit startup Everlywell has raised $75 million, following the close of the $175 million Series D it announced in December
Webflow secured a $140 million Series B after it doubled its customer base last year, raising its valuation to $2.1 billion
Zocdoc founder returns with Shadow, an app that finds lost dogs
😍 Jobs & Internships
Apply - Reddit - Summer 2021 Product Intern (SF)
Apply - Tesla - Product Manager Intern Fall 2021 (Fremont)
Apply - Twilio - Product Design Intern (SF)
Apply - Daily Harvest - Brand Intern (NYC)
Apply - nate - Finance & Strategy Intern (NYC)
Apply - Village Global - Data Science Intern (SF)
Apply - Y Combinator - VC Associate (Remote)
Apply - Retool - Front-End Engineer (Bay area)
Apply - Monet - Developer (N/A)
Apply - Mantra Health - Business Development Manager (NY/Remote)
Apply - Salesforce - Product Analyst (Dallas)
Apply - Goodwater Capital - Consumer Investors (Burlingame)
If you have reached this far, could you please take 30 seconds to fill out this quick survey? It will help me to improve the newsletter and deliver you more interesting content in the future. Means a lot to me ♥️.
**P.S. I have adopted many of your suggestions in the past (e.g. having more bullet points, changing the order of the content, creating an archive for all previous posts, etc) so I hear you!
↺ What you might’ve missed in the last three weeks
01/10 - Story of Shuffle (TikTok for podcasts) + Paul Strachman (Partner at Red Sea Ventures)
01/03 - Story of Run the World (Virtual event platform) + Rex Woodbury (Principal at Index Ventures)
12/27 - Story of Consumer Startups (end of year reflection)
Check out all the startups and investors I have featured in the past on
this Notion board