Kirsten Green

In a decade’s time, venture capitalist Kirsten Green has watched retail shift from the golden age of the shopping mall to the dominance of super e-commerce entities like Amazon and eBay. Now she’s investing in the next wave of retail disruptors.

This story first appeared in the March 9, 2016 issue of WWD. Subscribe Today.

“So much of retailing is getting in the head of the customer and what prompts them to part with a dollar. [I wanted to] couple a connection to the consumer with an investment thesis,” the 44-year-old Green said.

She’s had quite a run. Since founding Forerunner Ventures six years ago, she’s invested in Warby Parker, Birchbox, Hotel Tonight, Dollar Shave Club, Glossier, Inturn, Darby Smart, Chloe + Isabel, M.Gemi, Outdoor Voices, Draper James and Curology. The early-stage venture capital firm has raised $115 million in funds and invested in more than 40 companies thus far. Green sits on the boards of Dollar Shave Club, Bonobos, Wanelo, Retention Science and Serena & Lily. “We aren’t sector focused — we’re thematically focused,” Green explained of the firm, which only invests in U.S.-based start-ups. “To say we’re e-commerce-focused would be shortening what we’re doing. We don’t even use the word e-commerce; it’s just commerce. The reality is the customer wants what the customer wants, when they want it, how they want it and where they want it.”

For her, focusing on delivering a customer experience is the strongest place to compete from. Take Dollar Shave Club.

Michael Dubin, cofounder and chief executive officer of the low-cost provider of men’s shaving gear, built a brand for “guys in 2016 who want to be spoken to in a certain way” — and who are more in tune and open with their grooming habits than ever, she said.

“The brands on shelves today speak to their dads or grandfathers. Niche brands exist like that [Dollar Shave Club], but not mass brands. Razors were a way to start the conversation, [but] they didn’t invent the conversation about razors being a rip-off. The company is a lot bigger than that,” Green said.

In its five years of existence, Dollar Shave Club has raised more than $163 million and is said to be valued at $750 million. Warby Parker, which has raised about $215 million since its inception in 2010, has the highest valuation of all — $1.2 billion and coveted “Unicorn” status.

Some argue that tech valuations are meaningless, while others justify the hype.

Green believes that in order to secure capital, a company must justify its ability to productively put a specific amount of money to work. And Warby Parker, which she said has “exceeded on every single front,” is worthy of closing a $100 million megaround of funding in April 2015 and being named retail’s next billion-dollar company.

“When I think about Warby Parker raising $100 million, I would tell you that the reason they can raise $100 million is because they have a business model that says they know how to turn one dollar into more than one dollar,” Green said. “That team is extra savvy and I assume they got the money they needed to build out their vision because they did the work to give confidence to an investor that they were going to be good stewards of that money and create value.”

Green, an angel investor in Warby Parker, recalled meeting with cofounder David Gilboa while he was still attending Wharton Business School at the University of Pennsylvania. She was enchanted with the team’s commitment to disrupting the eyewear industry and most of all, its focus.

All the companies she invests in share common traits: an intimate understanding of their consumer; they’re savvy with opportunities and tools to build a three-dimensional business that straddles the on- and off-line worlds, and they embrace data. Perhaps most importantly, these organizations must be able to combine data with a qualitative understanding of who their customer is and what that customer wants.

“Most product categories are oversaturated. We’ve seen more of every single type of company than what needs to exist. The reality is that it’s noisy out there,” Green said.

Green maintained that the biggest challenge for her team, which is five people including herself, is seeking out products that rise above the noise — and it cannot be a result of spending on search-engine optimization or paid marketing.

“Every sector ends up having its ecosystem, and if you get in the groove of it, you can start working your way through it. I was thinking about what was next in retail from a nontraditional way,” Green said of her start in the venture and retail fields.

She met Bonobos founder and ceo Andy Dunn while he was still at Stanford Business School and invested her own money in Bonobos as an angel investor in 2008. She was attracted to the nontraditional nature of the company and Dunn’s maniacal focus on customer service.

What Bonobos wanted to do from the get-go was defy logic — historically, men don’t shop like women online and Dunn wanted to lead with pants, the most challenging product in softlines in which to gain market share. But this didn’t deter Green.

The same held true for her investment in Glossier. “Something that [Kirsten] told me over and over is that when you’re investing at a seed stage, ideas are very nebulous for companies. She told me that she invests in the founder,” said Emily Weiss, founder and ceo of the direct-to-consumer beauty brand. “It was very important to me to have a female lead investor since this is a female-led beauty company.”

Green led Weiss’ $2 million seed round in 2013 and participated in the company’s $8.4 million Series A last year.

Her leap into venture capital came after she spent a decade in investment banking, first as an equity research analyst and then as a money manager. Green was born at Vandenberg Air Force Base in California and grew up in the Bay Area. She ventured to Los Angeles to attend UCLA for college and returned to San Francisco, where she lives and works.

She started working at Montgomery Securities as a research analyst in the mid-Nineties covering the public market and specialty store stocks. But there was big shift going on — malls were exploding and reshaping how people shopped. Generally speaking, this was largely due to big-box and specialty retail, but the group that really emerged was teen and young adult stores like Abercrombie & Fitch and Urban Outfitters.

Green made a slight career tweak, going from following specialty retail to managing money, during a time where she watched the “entire retail cycle play” out from “being a growth opportunity to what’s riding the wave of the malls to what is this new ‘consumer wanting’ to Amazon and eBay becoming huge companies and crushing everyone.”

She decided to form her own fund because she was obsessed with predicting the Next Big Thing in retail.

Green credits Gilt Groupe, now Gilt, with serving as a beacon for a whole class of entrepreneurs that came after it. Before Gilt launched its brand of flash-sale shopping almost a decade ago, e-commerce was static and most closely resembled a catalogue of products at best. Green believes that Gilt’s creation of “dynamic experiences online inspired a crop of start-ups to rethink the category and be infinitely more adventurous when it came to tackling online retailing.

But Gilt’s parabolic path is the perfect example of how rapidly the retail landscape is being transformed today. The disruptive flash-sale site was sold for $250 million to Hudson Bay Co. Inc. in January — a fraction of what it was once said to be worth. Green blamed its sharp decline in value on a lack of focus. The pursuing of other lines of business such as Gilt City and Gilt Men’s was premature, in her opinion.

“Their proposition had legs,” she insisted. “[But] you have to be incredibly thoughtful about how you get there over time and not get ahead of yourself in thinking about all the other things you can do before you totally capture a sound business model. Gilt got overcapitalized and did one too many things.”

And if there is one thing Green has learned in her years of tracking the retail industry, it’s that focus is key.

“You will continue to see a lot of innovation in that area and better experiences. There’s lots of appetite for more development in that area, but it’s hard to get one going because you have to get a mass of supply to drive the demand. It’s hard to get the supply if you don’t have demand.”

Resale online
“It’s superfragmented. Consignment shops are a totally fragmented off-line industry. All of this [‘I can convert my closet into cash and buy others’ stuff’] is going to keep gaining momentum. There aren’t high barriers to entry, and a few big businesses have been built. We might be far down the pike: The Real Real, Tradesy and Poshmark are here to stay.”

Cons of apparel-based start-ups
“So much of the reception of the product is individual. If you think about an Apple Watch, it’s more function and capability; apparel is personal preference. [Also] there are limitations on how much you can take the demand because you’re on an inventory cycle. With software or an app, you can have unlimited amounts of downloads at any moment in time.”

Subscription services
“We’ve never invested in a subscription company — we’ve invested in companies delivering great experiences and thinking about how they can put their products in a better light. In some cases, they have a subscription element. To me, Birchbox is a beauty retailer. They looked at what was going on in department stores and it was led by sampling and education, and they brought sampling and education onto an online platform via monthly subscription box and editorial tutorials. In that case, the subscription business is a means of engagement and elevating the experience around shopping.”
“I almost think Amazon isn’t a comparison anymore. If you look at Amazon, it’s way more than the retailing business it started out as. I think Amazon Web Services is surpassing retail: There’s a couple of companies I refer to — Amazon, Google, Apple, eBay and Uber — that all started in one vertical and one thing, and did one thing and were excellent at it. Now they have tentacles all over the place and are competing with each other in some portion of their businesses in areas that are growing in importance. That group of companies are the industrial giants of this tech revolution.”