E30: How Kirsten Green Built Forerunner Ventures

26:52I think I saw you had kind of an anchor LP that you'd known for a while. Maybe I don't quite have the story straight, but how did that come about? How did you do it? So before I had an institutional fund, I had an angel fund. So I had these SPVs that I did over a handful of years. Then I had this, okay, this is what I want to do. I want to invest in these kind of companies. This is the kind of partner I want to be. Here's how I imagined setting up a portfolio. And that lived in my mind as much as anything. I had somebody who had been very successful in his career as an investor that I'd known for 20 years.

27:29And we had kind of, you know, over the years, we had conversations about me coming and working for him, etc. And I think, you know, he was planning for kind of like another chapter in his business and mentioned to me what a great time it would be to get involved and start. And I mentioned to him, like, actually, I've just really kind of landed on what I want to do. And there's this opportunity in early stage investing. Consumer is really waking up to a whole new way of doing business. They're driving a lot of this trend alongside the innovation on the technology side. And I think there's a chance to invest in some game changer companies.

28:05And that conversation turned into a three-hour discussion, which he then committed to being my first angel investor. And you'd known him for 20 years. I'd known him for 20 years. So this wasn't a Zoom call. And then I went back and like really put pen to paper and came up with a business plan and came up with a portfolio model and came up with like what are the resources or things I'm going to need to try to be successful and commit to a set of goals for myself as much as anything, right? Because I think at that point I was making the decision to kind of go at it on my own path as opposed to throw my hat in the ring and hope somebody would take a chance on me and hire me, right?

28:45because that was still maybe a possibility and I hadn't explored that really. I'm glad you did. This conversation had a lot of momentum and I had a lot of energy behind it. And fortunately, the plan that I laid out like furthered my conviction and my investors, Sandy's. And so I had an angel fund that I invested over the course of a year and a half, at which point I was also thinking about like the next stage. So knowing that like this wasn't going to be the way that I was going to continue to grow the business that I was going to need to leapfrog into the institutional market. And so I could do some work while investing the angel fund on like, what, what does the institutional market look like?

29:24And what do I, what do I need to look like to be appealing to them? And I think Turner, like this was actually at, in a lot of ways, it was sort of how I'd been thinking for the last decade. You know, I'd been taking every conversation and trying to turn it into like, what's the next opportunity after this conversation? You know, I met with you today. It's great. I learned something like now I can go learn about X, Y, Z because I have a little bit of perspective. I can ask better questions over here. And I could take that to ask more questions. That led me to a consulting job, eventually led me to the conviction to invest in a company.

29:55Investing in a company kind of broadened. Over time, I could feel more confident in understanding more dynamics about business to expand the purview of what I was investing in. So I think it's like very much stepping stone and happen is the opposite of overnight yeah so it's always you are always thinking about the next step but it's like 20 year journey i mean it's not something that happens immediately you're in the moment you're learning things but you're always thinking about what comes next and i think before i got comfortable with that i was uncomfortable with that if not frustrated with that right but if i hadn't allowed myself to lean into that i might have not ever learned how passionate or turned on I felt by early stage investing.

30:40I might have taken a job and things might have played out very differently. Maybe good, but I'm happy they played out this way. And I think that, you know, that same philosophy has really underpinned foreigners growth for the last decade too. Just to kind of level set, how big were the SPVs and then how big was the angel fund? The first SPV was a million and a quarter. Okay. That's, it's a decent, decent size. Do some a lot of hustling$25 ,000 checks, let me tell you. It's kind of like raising a pre-seed round today for a founder. Collect all the checks. Exactly. Exactly. And one of them was 10 million.

31:18Oh, wow. Okay. And then the very first angel fund. Oh, the very first angel fund was five. Okay. And big chunk was from the friend, mentor, partner that you'd known for a long time. Yes. Okay. And then what was the composition like? And actually, I don't think I invested the whole five before I went out and raised the institutional fund. So I think ultimately ended up being a little bit over$3 million in that first fund. Oh, so you did not call all of it? Oh, interesting. Okay. To me, it was a business building exercise. It was a proof of concept and it was my first time really engaging with the venture ecosystem, right?

31:55Most all of this has happened outside of that even though i was living in san francisco san francisco you know it's always been a financially centered economy also travel but financially centered economy and and and startups but back in the late 90s early 2000s there was an incredible boom in the public market of small cap mid-cap stocks and those businesses were all different kinds of businesses and a lot of the banking was happening here. And so I had been able to do these things that we talked about, like, with a rich ecosystem around me that weren't deep ties into just tech. But now you kind of got over to the venture side, which has been really rooted in technology, and there's all kinds of really qualified reasons for that.

32:44But that was out of network for me, largely. And so my job really was, like, to understand this ecosystem, figure out, could I be relevant in it? How to make myself relevant in it? And then was there a value prop that maybe I could build a team around that was also relevant? And once I gained conviction in that, then it was an exercise in, okay, how do I go about fundraising? What should I fundraise? How should I go about fundraising? So how did you get into the ecosystem? A definite framework for working for me always has been like fewer things better, like quality versus quantity. And my fewer things better thing at the time period was I'm going to make these angel investments.

33:28I got to make some great angel investments. I got to work with great founders. I got to show up and be a good partner to these founders and hopefully good founders, no other good founders. And I start to build a deal flow wheel. In addition to that, good founders would have other good investors around the table. And so that thesis played out. And in that first angel fund, I had a chance to meet a lot of people at firms that we know of that are reputable and start to build relationships. And at the time, I was ambitious to do this. So I was intentional about doing that as well, knowing who else was around the table and how I could show up and contribute and start building some relationships.

34:12And as much as anything, it was to learn. I just wanted to learn too. I wanted to one, further confirm that I wanted to do this. second, further confirmed that I had a right to do this. And then it was about the how. And then you raised, so was this 2010 that you did Angel Fund? Angel Fund 2010. And then the institutional fund was 2012. Okay. And yeah, you said it was about a year and a half. Yeah. And you said you kind of raised it before you were really done deploying. How did that go raising it? How did you meet them, convince them? What did the conversations look like? Okay. So now, not to miss the context, I've been doing this in some way, albeit maybe a circuitous way but i've been out there like driving my own efforts to make things happen for almost a decade yeah right so isn't this has become like a muscle of like okay i got to do it on my own how do i figure out how to do it and i always think that in you know back in 2012 the market was different than today plenty of similarities but there were some differences It was really there had been an evolution of the venture market after 2008.

35:17And this idea of the lean startup had sort of been a big topic in Silicon Valley. And there was a number of emerging managers that started before the crash on the lean startup, after the crash, because the market was reorganizing. and so I always you know kind of think like the good news was there was a handful of people that had already done some version of what I envisioned doing the bad news was it was still a handful of people and those people were largely qualified or endorsed because they'd been part of Silicon Valley right so I still had to kind of fight that tape but there were some people to look up to both in in in the firms they were building and in their path to fundraise and and so I made every effort to get to know those people.

36:05Unfortunately, they were kind to me and gave me some, you know, told me their stories, how they'd started their businesses and what their approach to fundraising was and offered suggestions on how I might think about fundraising. And I left all of those conversations feeling inspired because nobody told me the same story. Everybody did it in a different way. Everybody did it in a different way and everybody had a bit of a different piece of advice to me. So what I concluded after all of that was I would just do it my way. Okay. Right? Which is, you know, I think if I had to describe myself other than an investor, it would be a student.

36:43You know, I like the mosaic approach of learning. I think we apply that a lot as we think about what's going on with consumers as our kind of North Star and setting up our investment thesis. And I think about that in terms of how I thought and learned about venture to begin with. It was like all these different people's experiences and stories that they told, the different experiences that I'd had along the way kind of added up at some point to make sense to me in the way that I decided to move forward. Like I couldn't have come up with this path myself. I came up with it after the benefit of all these conversations and learnings and experiences that I'd had.

37:17But at some point it becomes your own too. And so, you know, this good news that there was an identified universe, there was also an identified universe of LPs. So my thought was, if I'm going to do this, I'd like to build a team because I didn't want to do it alone. I really love sitting around the table and debating with people. I think that you get better with other people's challenges and inputs. And I think from public market days, even like the power of portfolio diversification and diversified thinking was something that I was really interested in. So I wanted that in doing this. And with that in mind, I was like, I have to build, I have to think about building a team or building a firm or something like that.

37:58And And so I wanted institutional investors, and I thought I'm going to have to convince somebody to give me a shot as a new manager and not as somebody who maybe came from the more likely path or what they're used to seeing in venture. So at least I'll go to LPs that have already decided that they're willing to take risk on first-time managers. Because at least that will be off the table. Like, they're willing to do that. Now I just have to work on getting them to believe that my pitch is compelling. Because that is a tight funnel, just somebody who invests in venture and then also new emerging managers.

38:35So again, I call that good news, bad news. Bad news, it was a tight funnel. But good news was it was a short list that could be actioned against. And literally, I mean, I probably in my file have this list somewhere, but there was maybe 10 institutions on it. Wow. But also the other edit I had was what's the hardest, quote unquote, hardest kind of LP money to get? Because if I'm going to go do this and prove myself out, like at least if I get that, then I can do dominoes on the other things. Yeah. So what is the hardest? I don't know. I mean, we can, you know, people can, I don't, you know. But at the time I concluded that the hardest was like, you know, endowments that had like VC, like had been entrenched in the VC business, in the VC industry since it had started.

39:16And I think their experience made them a receptive audience, but it also made them a hard audience because they had access and they had knowledge. And they'd seen it all. They'd seen it all. They know what good looks like and what not good looks like. And you convinced one, right? I did. Did you more than one or was it really one big one? No, I had more than one. Oh, more than one. Okay. So how did you do it? I think actually, if I think about this question, sincere answer is, is like, if I've convinced anybody of anything, I did it because I was working to convince myself of it too. And so I knew that like, okay, I'm going to set up something that has a process around it that demonstrates being thoughtful.

39:58I want to make sure I'm challenging the rigor of my own investment criteria, diligence process, follow through all of that. But so even when I was doing my angel investments and I didn't necessarily need to, I was writing memos. And it was for my own conviction. Like if I could organize my thoughts on paper and I could read it back to myself and I was like, yeah, I'll buy that. I felt better about what I was doing. That allowed me to start this initial institutional fundraise process with like 20 investment memos. So I put up a diligence room, you know, and I put up a PowerPoint presentation on here's my thesis.

40:37Here's where I see the market going. Here's why I'm credible in this space. Here are the investments I've made. If I can, you know, if I am fortunate enough to have enough assets under management, I can start to build a team. Here's the kind of people I want to hire. And, you know, it was probably overkill, but it was work that I had been doing and it was, you know, it was work that I could do. And at least it could showcase that like I was really committed in a way that I was being this thoughtful about it. And I think that resonated, right? I didn't come in there with like a flash of the pan story or thinking that I was ultimately backable.

41:12I mean, I believed I was backable because I know I was responsible and really dedicated to doing it. But I wanted to try to make the decision as easy as I could for people. Well, I think you did one thing that made it easy. I heard that while you were raising the fund, the very first investment that you made was Dollar Shave Club, which was a good investment if I'm remembering. I'm not entirely sure it made my fundraise easier, though. Really? Because, you know, since you brought up Dollar Shave Club, I have to, you know, give credit to that investment and to that founder, Michael Dubin, who did such an exceptional job building a business that I think everybody was interested enough in to give him angel checks, but nobody wanted to give him an institutional check.

41:52Really? I think they, you know, I think it was like with good reason. Like you're going to go after razors. It's a commodity product. You're going to compete with, you know, the biggest conglomerates on the globe who have huge marketing budgets, huge reach and resources in all shapes and forms. And it's men's personal care. And it's men's. It's men's online. And like your video is rocking. But like, maybe that's one thing you've got, you know, I don't know. Well, you hadn't even seen the video. I hadn't seen the video. I hadn't seen the video. But I did have a really super first conversation with Michael.

42:27So somebody had actually like loosely like pitched me the deal or told me about the deal. And I was like, no, for all the reasons I just told you. It's all hard. All startups are hard. This is why I don't need to do this one right now. And then I don't know if it was two or three days later, I met Michael. And he was like, wait, I know your name. You're the one that didn't want to meet me for my deal.

42:50and from my perspective all you needed to do was spend half an hour with michael and decide that like he was someone you wanted to be in business with but he was the real deal and you know he didn't change the dynamics of the the challenges that i just pitched to you but if anybody could break through those, work around them, challenge them, I believed he could. And that is exactly why startup investing is so exciting and fun. That is always the truth. That is always the truth. It is so easy to out diligence yourself out of every single opportunity. But at some point, some part of the process, the founder, I don't know, compels you in a way where you're like, we're going to go for it.

43:40And hopefully it's going to work, you know, but it's going to be very different than we think it is today. And so we've got to, we've got to be nimble and we've got to, you know, execute and change to, to meet the moment. And I think that's when you're really trying to understand who this person is, that is taking on this ambition and this challenge. And I, I knew that Michael was like the real, the real deal. And so I felt really lucky that he was willing to take me along with Aileen Lee, you know, as co-lead investors in his, in his seed round. But I then had to answer for that because LPs were like, what is this?

44:16What is this? That's what they said. What did you say? How did you answer that question? I said all these things I'm saying to you. And I think that like, you know, probably everybody could have continued to debate the merits of it with me. But I think that like what it showcased is a thought process that I had around something criteria that I was putting through an openness to recognizing what the challenges were, not being totally turned off from those challenges, but hopefully practically thinking about how we could rise to the moment against those and then having the conviction to go for it on something.

44:48So I do ultimately think that it was a positive lever in a fundraise, but not in the way, not in the easy way. Yeah. It probably gave you a case study of this is a forerunner investment. All the things you just described and we did it. We had an opinion or we were compelled before anyone else. And then, you know, it's like a body of work. And I think, you know what, it's been 12 years. You have to do that every day, all the time. Yeah, that's fair. So how did that one go? Are you allowed to say numbers on that investment and the Dollar Shave Club? Yeah. Well, it was a$4 million, dollar maybe a four and a half million dollar pre-money valuation that exited just less just shy of for one month over four years later for a billion dollars of cash okay so it was okay yeah so how much of the company did you own oh goodness turn you want me to start doing math not enough so if you would have a bigger fund could you have probably written a bigger check Well, so I didn't have a fund.

45:54Oh, that's true. It was. I hadn't raised the fund. I went to Sandy and I was like, I need a loan to make this investment. So did you then put it into the fund as the fund was raised? I definitely always put it into the fund, but it was like a warehouse deal for the fund. Okay. Can you explain how that works for people who aren't familiar? Yeah. Made the investment with the intention and the commitment that it was going to go into the fund. And then when the fund had to close simultaneously, the shareholder of record was changed from whatever entity name I used, that was some version of me, over to the fund version.

46:35And then you kind of pay back the person who funded that investment, whether it's you personally or another party. And then usually there's like kind of some interest or something like that. I mean, sometimes there is, sometimes there isn't. I can't remember if there was there. I will say like on all these topics, like my mantra has been to keep things simple so i have kept like most everything about forerunner straightforward and simple i haven't tried to do jazzy things on the side with interesting unique structures and stuff i think in general like i admire people who who do that and and eke out extra benefits for that but i think more times than not it can eat into what you're doing and And instead, you know, I've kept things kind of clean and easy.

47:16So it was a basic lend me the, I think it was$250 ,000 to, you know, to co-lead this deal and I'll put it into the fund when it closes. Okay. And it was a$41.7 million fund. That's just what I saw on whatever. That's not an even number. Like, were you going for that? Like, was it? I was going for 40. For 40. Okay. That's always a good sign. Yeah. Oversubscribe people. I actually have been pretty regimented around setting a cap on the fund and keeping that and being careful about how I'm marketing it along the way so that you don't have too much overage because that just disappoints people who've then done a lot of work and then you don't have room for them.

48:00It sounds great. I guess it would be fun to tell people you were five times oversubscribed. You have five times the interest and turn people away before you're getting down to the nitty-gritty because that's disrespecting people's time, I think. But hitting something exactly on the nose, like it's always been a little bit. Yeah. Well, I think too, it's like if you tell someone I'm raising a$40 million fund and like they have their own return expectations based on the size of the fund and all that and like even the strategy too, doing consumer. And then you suddenly say, hey, we raised a$100 million fund.

48:32We're not even doing consumer anymore. They underwrote something completely different. I mean, think about if you do that, if that happened to you as an angel investor And the founder came back and they were like, by the way, I upsized around. It's all good news. And you're like, yeah, kind of, except for it changes the dynamics of the situation. And I would prefer to have the chance to evaluate whether that's good or bad relative to what I was looking for for doing. I have never changed the fundraise target mid-process. So how do you approach fundraising then? And maybe an interesting segue would be fun too.

49:03Yeah. Sounds like it was 75.8. 75, yeah. Okay. So how did you go about figuring out what you're going to do for a Puntoo, approaching that? I think that was the end of 2013. So it was maybe two years-ish later. So the first one was June of 2012. The second one was December of 2013, which was a little bit ahead of maybe what would have been ideal. But I was due to have a baby in March of 2014. So it was, and I was like, I prefer to not be trying to run a fundraise process on my way into the delivery room or on my way out. And so fortunately people were understanding of that and allowed me to do it a bit early.

49:43And then you kind of kept investing the first fund. Yeah. We didn't activate that until sometime later in the back half of 2014. Okay. And then how did you go about setting up for that second fundraise, the second institutional fund? Actually, you know, I would say that like all the fundraisers have had more similarities and differences in how we've approached them and how we've set them up. So starting from like just a planning perspective, first thing is sort of like take a look at the market and think about what's going on in the market. How has the market evolved since the last time you did this exercise?

50:13Like what does it take to, you know, lead a seed deal? What does it take to lead a series A deal? What's the set of opportunities at those different stages, you know, try to figure out like it within, within a small range of reason relative to where you are as a firm, like what the sweet spot is. Like what is something reasonable that makes sense? But first I'm thinking about it from the perspective of like, where would I like to compete? Right. And then I think from a bottoms up perspective, what does that mean I need to do? So how many deals, what prices, what checks do I need to be writing?

50:45And then what team do I have to bring that to bear? And you're trying to find a sweet spot between those two, right? And I think that just like a startup, you don't want to get your organization too far ahead of your mandate and your capabilities. You certainly don't want to stretch too far ahead for what you're needing to deliver by getting too much money at two-hive evaluation relative to where you are on a product basis, right? Not too different than building a firm. I think we were always trying to find that sweet spot between the two. And that really informed what the fundraisers were. The overlay on that was the original goal going into it was I would like to build a firm that can be around for a long time and I would like to earn the right to invest in the best, most exciting, promising companies regardless of what stage they're at.

51:36In the early stage, right? So it wasn't like I want to be a seed fund and consumer. It was that I want to be able to play across the spectrum within reason, but to have our choice of the best companies that are coming out of the market at the time. And so each time, that exercise led to a little bit of a different dynamic in what the fund was, and we scaled up our fund size. I think now we'll continue evaluating that, but I think we're at the sweet spot. We like how we're capitalized as a team and a firm now. But for so many ways, like the first decade was about laying the foundation to be able to do that.

52:15And each of those fundraisers were part of laying that foundation. It was like every time there was a fundraise, it was a milestone to mark and pause and say, okay, where are we as a team? What's working with our team? Where do we think our strengths are? What do we need that we don't have? And how do we think about that against the backdrop of the market and where we'd really like to be investing? Yeah, it seems like generally you kind of, just in terms of how I'm thinking about the fund sizes and the strategies, all that kind of stuff, did you change, like in terms, because you increased the fund sizes, were you basically writing bigger checks than having like some follow on reserve and then also just being able to say as we go later, just the checks are bigger?

52:54Is that generally the thinking? So the thinking was we have always had a, what I think is an edited portfolio. so 20 to 25 companies per fund. So even at the early stages, it's pretty tight and concentrated. We always had some allocation for reserves. Until recently, we always ended up having less of an allocation than we wanted, ideally, because as we were investing, the market was continuing to kind of evolve, and rounds were getting bigger, right? So in order for us to kind of have the type of position in a round that we thought made the fund dynamics work. We needed to size up the size a little bit.

53:36If I step back and just think in a kind of perfect world, I sort of think about allocation in like roughly a third, a third, a third, like a third for your initial investments, a third for your initial follow-ons. Of course, they don't go equal a dollar per company because some companies like break out faster than others. Some companies decide not to go on, you know, but like kind of that's relative size. And then a third or some, you know, again, relative somewhere around that for what I think of as lean in positions, which allows you to create some concentration in your fund. But you need to do that before it's too late and it's a growth investment and not an early stage investment.

54:15So that that all doesn't always align. Right. Which is which is the difference between a fund model on a piece of paper and then how things play out in the real world. So a lot of ways like the market did the work for us because I think, you know, you took a 40 million dollar fund. it was not hard to say why a$75 million made sense. It was not hard to say why a$125 million fund made sense. Those were all seed funds. When we went from the$125 to the$350, that was, we are now ready to lead some Series A's. So we were then changing the, and we had started to lead some Series A's in Fund 3. We were undercapitalized to do that, but we did it because we wanted to demonstrate that.

54:53How did you do that process? Because that's something I've always kind of, I just try to figure out how do I land that where you kind of start to take the next step, but you're not quite. You're not like perfectly capitalized for it. I mean, okay. So I'll give you, I'll give you my example because I think my step up company in fund three was fair. Okay. So I invested in the seed round, but in a small way, um, that whole fabulous qualified team at FAIR had a pretty good network and they'd also all worked with Keith Raboy before. And so he was their first investor and I really wanted to get in on it.

55:33I felt like that business model was like sweet spot for what I knew in the market and I could provide something different than the rest of the people around the table. And I was able to invest in the seed round, but I said to them, I'm really here to do the A because I can't, you know, I can't do the seed because of the setup you have. That's not enough. And this is like my sweet spot, you know? So by the time the series A came around, it had already gotten competitive, but I'd had the chance to build the relationship and build some trust between myself and the founders and the other people around the table.

56:03And it worked out that I was able to lead the A with a smaller check or be involved in the A in a meaningful way with a smaller check. Yeah. Cause usually a series A, it's like 20 % ownership or maybe a little bit less generally is what happens. I think in this, in this case, like you know you got to find these unique situations but this was a good one because like keith had done the seed and then he wanted to buy up into the a but because he already owned at the seed could make room for me right so like it was just one of those situations like that was like a situation kind of built for where i was in in the journey and and then once and you know there's probably two or three other ones like that because that was that was what i could do and the size fund that I had.

56:48And so then you go and you can talk to your LPs about like how you built credibility to be in that conversation at the Series A, what you had done for the company since then. And if you had had enough money, could you have taken the whole thing? Or with the experience you have now, next time it comes around, can you take the whole thing? So that's a process too. And again, like convincing myself as much as LPs, you know, because I think it's, you know, even from the earliest days, like I'm building a business that I want to be successful for all kinds of reasons, not just to please other people, but for myself too.

57:20And so I've got to make sure that like I'm building like the best, most responsible version of it so that I can do well with it. So anyway, so then, you know, then I was able to parlay that into a fund that looked more like a series A and seed fund. And then the move from 360 to 500 was like largely market driven. And we also added a partner. Okay. Yeah, it was Brian. Yeah. Okay. And then that was 2022, February of 2022, at least the date that I saw a lot of Zoom involved. Did you raise that mostly on Zoom? There was two funds that were on Zoom. The approach to LP side of fundraising, you know, LPs are really partners in your business.

58:03You want to build a long-term business. You're thinking about these as long-term relationships. You're thinking about continuing to demonstrate various aspects of your business. build trust, build confidence with them and so similar to the portfolio strategy I've had a pretty concentrated strategy on LPs, never having over indexed towards one because you don't want to put yourself in that situation but not having so many that you can't make time to sit down and have a meal with them or call them and so really investing in building relationships and then thinking every time who are the two or three that you want to add because it's just good hygiene to like, not everyone can stay around forever.

58:46And that way you can always kind of have like the appropriate demand on the sidelines that you're not trying to call in the middle of your fundraise process. So it's a lot of relationship building. I think we tried to be thoughtful about like what kinds of investors we were talking to and how they were thinking about their business to understand what the long-term prospects were, right? So there's I get the chance to talk to plenty of people that are starting their own firms. And sort of like my experience when I was interviewing people who started their own firms, and now I look at it from the other side and see people who are doing it.

59:20There's no one way to do it. Everybody's got to do their own way. And there's a lot of ways that you can line this up and be successful. So this just happened to be the approach we took. But we thought a lot about the mix of LPs and who was in it for the long haul and committed to the sector versus maybe who was getting in and like making sure that we weren't like over indexed that way because that would create risk you know just it's a portfolio approach just like your fund your lp that your lp base is in a portfolio approach just like your fund and your lp contacts are founders just like your founders you're backing so it's just like a lot similar in in both the ways that we thought about it so i think that allowed us in most every fundraise instance to have fundraise before we were fundraising because we were kind of knew where we were going to go.

1:00:09You said something about dedication to the sector or interest in the sector. This is a question. This is the most common question that came up when I told people we were talking. I think Dave Ambrose of Bungalow, Semel Schott, Haystack, have you ever met Semel? I mean, some people say consumer's dead, no exits over the last three to five years in consumer. Do you agree? I don't agree. I actually have this blog post that I've been working on, which is where did all the consumer investors go that I probably need to work on getting out. But listen, some of the biggest companies to come out of Silicon Valley are consumer first companies.

1:00:48Amazon, Apple, these businesses get, you know, they're, they get to a scale where they get into all kinds of things but they started very much in the consumer centric zone some of the most successful venture-backed ipos have been consumer businesses doordash instacart airbnb so there's plenty of big companies that get built in consumers which makes a ton of sense given that consumers drive two-thirds of the economy they're you know trillions of dollars of spending power in the hands of consumers. They vote with their dollars. They are the customers for the business, whether you're a business to consumer first business or whether you're a B2B business, because somebody is selling to somebody at the end of the day, right?

1:01:33So you might be further up the food chain or closer to the consumer. Nevertheless, what's going on with consumers is like ground zero for like what is the potential for the business, right? So when we think about consumer, we think about that engine. We think about what is going on with that base of demand and what is that their health and what are their needs and what's changing out there that business needs to evolve to to meet. Then we think about where is business set up to meet that opportunity and where is it not and we're looking for the overlap between it's not and the consumer need right and then really importantly, like what's changing in the dynamics of doing business to make now a good time to introduce something new.

1:02:22So you've already, you've already identified the demand. You've already, you know, came to some conclusion around the white space opportunity. Now you're talking about like, we do better business today. Is there some disruption in the industry and how business is being done? Is there some technology that's going to reshape how this particular business comes to life, but it's something different that's like the why now, and that has to do with first mover advantage, right? So, I mean, we're really thinking about those three things coming together, and over the course of Forerunner investing, we've invested, I don't, I had this number like last year specifically, but it's like 70 % of that money has gone into consumer-facing businesses, and 30 % has gone into B2B businesses.

1:03:06So, we also invest in B2B businesses because, Because again, like that's just the root cause, the consumer for the demand. But to specifically talk about the consumer, I actually have a blog post that I'm sitting on that I haven't put out, which is like, where did all the consumer investors go? And it's a take on what's going on with consumer, you know? And I mean, I will tell you that we have hearty debates around our table on a regular basis about which deals are going to make it into the fund because there are more things that we're interested in and that we like than we can do. So like in my version of the story, like consumer investing, how we think about it is alive and well.

1:03:46When I look on the funds that we've invested over the last 10 years, you know, all the funds have the kinds of winners that you would like to have in your funds, I think, right? Some of them are early and it's too early to tell. And we did all of that with the same perspective that I just shared with you. That hasn't evolved or changed. So I think this year there's a handful of what people, when people say consumer companies, I think they traditionally think of product businesses, you know, or product businesses. And then on the tech side, like the social businesses or whatever, I think that there are businesses that have been built in the last handful of years that are now at a stage where they're interested in going public.

1:04:25And there are some of those that will look to do that. There are some that are at scale for M &A. So it takes time for those businesses to be built. And so I don't think, I think it's too, I think it's premature to say that there aren't any big exits out of this last generation. But I think some proof points in like true hardcore, I guess, like explicitly consumer can still be had. But along the way, there have been, there have been wins. I think you just need to pick your spots really carefully. And I would say all of the same things about any aspect of investing when you slice down a sector, right?

1:04:59So, and people, things go in and out of favor. And in the last cycle, we've been in a really huge software adoption cycle. And it's been enhanced by the pace of innovation on the software side. It's been really enhanced by the user's adoption of software. I would argue that software investing has been really challenged in the most recent past because most companies are looking at it and saying, how many software tools do we have? Are we using them all? Like, how many seeds do we have? How should we think about that? So do I think SaaS is dead? No. No measure. But like, you know, is it going to be as hot as it was two years ago?

1:05:35It might take another four or five years. Things go in and out. Like the markets move like that. So I think as an investor, it's okay with me to be really interested in a space and have a point of view on a space that not everybody is as convicted in right now. Yeah. It just changes the competitive landscape. That being said, this is an ecosystem driven business and you cannot invest in a vacuum. You know, we need to think about like, what do we invest in early that someone else later is going to buy? So you do need to think about like the downstream or want to invest in. So you do need to think about the downstream impacts.

1:06:05But one thing I really appreciate and like about this market right now is that traction and like real business model proof points matter. And I think that if you have those, you get people's attention regardless of what sector or space you're in. You like that because people are. I like that because then it's less of a debate on around like that's hot or that's hot or I, you know. or less maybe about like whether it's going to play out in a certain way in five years based on what else we've seen play out. It's more about like what's right in front of you right now and how do we think about like the controlled growth or the ability to kind of control the dynamics along the way, right?

1:06:48And I think when you have a business where you challenge it to be metrics forward and you want to prove those things out before you get on a heavy set of spending on marketing or infrastructure building, like you're just, you're just in a, it's a different dynamic and different businesses will, will look interesting and appealing then. How did you stay disciplined? Maybe not swaying too much to certain themes, like let's say consumers on sexy for a while. How do you stay focused on that core mission and not get caught up in, I won't name anything specifically, but a new thing that might seem like the next thing and maybe don't get too caught up in it?

1:07:25Like how do you stay focused? One, I think that by nature of being early stage investors, you should be really excited about what's next and what's new and what's happening, right? So we are always like open for business on that realm and really excited about it, right? But then you do need to say like, practically speaking, I'm trying to build a portfolio that's dynamic and I have to have an assortment of types of businesses, both in terms of like the business model, who they're serving, how they scale, and kind of like what the risk profile of them is. And that's just good portfolio management.

1:07:58And I think that, you know, maybe this goes back to like my days, you know, my kind of my initiation days as an investor and having that hat on always, like that's always been a discipline that we've had at Forerunner. But one other thing I think that captures discipline around that topic is there's more money than there are good deals or investments to make. Like, you know, venture is far from being a cottage industry. It is a full institutional game. There is money coming into this ecosystem from all kinds of capital sources, and it's a competitive market. It's always been competitive, certainly for the best deals, but, you know, there's a lot of money, and there's a lot of innovation.

1:08:42Like, innovation ebbs and flows, too. But it takes a lot more than innovation to make a company great, right? And then you're talking about teams and execution, all the things, right? So arguably speaking, it's more competitive on the money side to get the good deals, right? That being said, there are way more good deals than we can do at Forerunner. We aren't trying to do every deal. We're trying to build edited portfolios. We're trying to be good partners. We're trying to set ourselves and the teams that we invest in up for success. So we think a lot on all these different dimensions, like the portfolio management side that I said, and what's new and changing in the market.

1:09:19We also think a lot about where are we set up to be really great partners and deliver something that is a good experience to the founder. We're knowledgeable at your table. And so I think when you put all those things together, there's a set of companies that come into view. and that's where we focus our attention. Being an early stage investor, how much do you focus on TAM and market? Do you do a bunch of analysis and this is how big it is or is it more of... If you get too strict on the TAM, it's a backward looking metric. A lot of times you are in the path of progress, you are opening up new markets and new opportunities.

1:09:57I think you can assess how big is the need? How big is the audience for this? Of course, we sit at a seed investment and we think like, what is the upside case here? And we allow ourselves to dream big that this nugget of an idea and the ambition that the founder has said is possible to deliver this kind of an outcome. And also this could happen, that could happen, this could happen because it's dreamy and it's fun to do that. And if you have a great team, they're probably are gonna try to go off into some of those areas. But a lot of times you're talking about something that's gonna play out over the course of half of a decade, a decade or longer, right?

1:10:32So getting too caught up in what the TAM is today is not something we over-index on. That being said, there's a base size market you have to have for it to make sense to have a venture business that could have a scaled liquidity event. Yeah, that's fair. So it sounds like maybe synthesizing all the things you said over the last 20 minutes. Dollar Shave Club is an interesting example where when you think about the TAM, I don't even know how you define all those numbers, but it's like men and maybe even it's women too. Also, do they expand outside? And then also when you talk about changing, shifting consumer behaviors, it's like, well, men used to not really care about personal care, but are they, is that changing?

1:11:15Again, that's another thing. There's an incumbent that's set up. Sure. They're massive. They're one of the biggest companies in the world, but they sell in stores, not in the internet. And that takes different infrastructure. That's been their advantage, but that might, you know, that might not, that doesn't give them the right advantage for how things are changing. Yeah. So switching gears on questions a little bit, if you are meeting a founder for the very first time, do you have a go to really concise question or framework that you work through to just get right to the point and really understand what they're doing?

1:11:45I think these conversations are not one size fits all. No business is one size fits all and no founder is. So I think it's important. Like I come in assuming that anything that there is a lot of things that I can learn asynchronous. There's a lot of data I can ask for that I can go through that I can have detailed follow-up questions. There's a lot of industry market work that I can do on my own. What's precious that I can only do with this person in the room is understand something about them. Who are they? Why are they doing this? What are their strengths? How well do they know their strengths?

1:12:20You know, how to, So I try to use the opportunity to create a personal moment, you know, to sort of like how is it can I learn something about who they are as a person? What's their what's their worldview? What's what gets them, you know, what gets them excited? What irritates them? And I think a lot of times that starts with something that's like disarming and it's not so different than any conversation you would have when you were with somebody socially and you wanted to start a conversation and make them feel comfortable talking to you. So maybe that's something trivial or maybe it's something important.

1:12:52Maybe it's something specific to their company or their industry or maybe not. But I try to allow minutes to get into the conversation and then really think about what can I accomplish in this conversation that I cannot do in an async way or in some other format. What do you think is your unfair advantage as an investor? Maybe you communicate this to people a lot. Maybe you don't. why do you think you're so good that that tee up is intimidating but you know what the first thing that comes to my mind is Turner I love what I do I love what I do and so people don't I think people might love what they do maybe that works maybe they use that to their advantage or maybe they don't I think for me it allows me to be engaged be interested be always on thinking about that company in whatever conversation I'm having or whatever I'm reading or whatever new thing I learned to just sort of have that kind of element of like business is not just at a certain hours in the office, but it's just like, it's, it's something that's kind of permeates like so many different aspects of your day and your conversation and your thinking.

1:14:02And if you show up to founders like that, cause that's how founders are about their business. And I think if you show up to founders like that and you know how to edit that input in an appropriate way, like that can set you up for a good partnership. So you're kind of always synthesizing in a sense? Yeah. I mean, I think, you know, if you, if you are in tune enough and you like it, you are interested in the business enough, you're interested in the problem, you're interested in the solution that they're offering, you're connected to the people, like all things flow a lot easier from that. And I think that at least for me, like the, the successes, and maybe this is also like how I, how I describe successes, but that I have are where a founder just texts you a quick question, like, what should I do about this or that?

1:14:49Or, or this just happened. This is a great win. It's just, I think the sign that like, they understand that like you care in a way that they care, particularly at the early stage, like you need people like that around the table. You need people like that around. Yeah. I kind of describe it as founders as the shower test. I mean, it doesn't have to be the shower, but just like if you're, nothing's going on or like when your mind is wandering, would you like to think about what they're doing? Right. And can you piece things together and just say like, Hey, I had this idea. I have, I have an edit for that these days too.

1:15:19Like, like, you know, I don't think I'm the right partner. If I'm not losing sleep over the same things you're losing sleep over naturally. So forerunner does really well and you're investing in good things. You don't get any sleep. Yeah. I don't sleep. Thank you so much for listening to this conversation with Kirsten Green, founder and managing partner of Forerunner Ventures. Thank you, Kirsten, for coming on the show. If you're building something that touches consumers, first, definitely talk to me. But second, I can't think of a better investor and thought partner than Kirsten and the team at Forerunner.

1:15:51If you don't want to miss future episodes of the show, subscribe to our newsletter, The Split, in the show notes, and you'll get new episodes plus the transcripts in your inbox. If you want to support the show, share this episode with your favorite consumer founder or investor. If you're on YouTube and want more content on charting your own venture firm, you'll see tappable boxes to watch prior episodes with Semlisot Haystack and Nicole Wishoff at Wishoff Ventures. Similar to this conversation with Kirsten, we go deep on how they started and scaled their respective firms, and I think you'll enjoy.

1:16:20Thanks again to Kirsten for coming on, and thanks to you for listening. I hope you enjoyed. See you next episode. Terpentine VC is a podcast from Terpentine, the network behind Moment of Zen and Econ 102. If you liked the episode, please leave a review in the Apple Store or rate us on Spotify.