In Ep. 94 of Earned, we sit down with Eurie Kim, managing partner at Forerunner Ventures, the consumer-focused, early-stage venture capital firm that meets consumers where they’re going, not just where they are today. After launching as a $40 million seed fund in 2012, Forerunner has seen massive growth over the last decade, closing its latest Fund VI at $1 billion. With roughly $2.5 billion under management, Forerunner’s early-stage investments have helped skyrocket consumer-favorite brands like Dollar Shave Club, Glossier, Ritual, Outdoor Voices, and many more.
We start the episode by looking back on the past few years in the venture capital market, and Conor asks Eurie whether Forerunner has reconsidered its brands’ exit paths. Eurie then shares how she and the Forerunner team continue to be involved with their portfolio brands after an initial investment, and how Forerunner leverages learnings from each investment to guide its approach with younger brands. Next, we learn what kind of companies Forerunner wants to focus its investments on over the next decade, and Eurie explains why the firm proactively anticipates consumers’ future behaviors and priorities to guide its investment strategy. Switching gears, Conor and Eurie discuss the shift back toward in-person retail, and how DTC-native brands can successfully adapt to that environment, before Eurie shares her thoughts on how the rise of AI will impact the market. To close the show, Eurie unpacks the key business philosophies she believes contributed to Forerunner's massive (25x) success since its launch, before revealing the hard lessons she’s learned along the way.
The following interview has been lightly edited for concision.
“It's never a winning proposition to think that someone else got it right and you didn't, because you just don't know what's happening under the hood”: Eurie Kim’s Most Important Learnings Over the Last Decade
Conor Begley: So now that you've had 10+ years to know whether you got it right, I have three questions. What are the things you’ve learned not to do [when investing] that you’ve changed and adjusted? What do you look for when you're trying to pick a new company? And then third, what's your anti-portfolio? What are the things that you think you should’ve put money into but didn’t?
Eurie Kim: Okay. I'm going to give you an unsatisfying answer to the last question about the anti-portfolio, because that is one thing I don't do that most VCs do. I've never been a “grass is greener” kind of person. I always think my grass is the greenest, my baby's the prettiest. So if you've been in this industry long enough, you'll see that every company, no matter how hot and sexy it is, has massive ups and downs over the decades. Some you think are crazy winners and then they go kaput, some you think are never going to make it and then they’re suddenly the darling as it's IPO-ing, like il Makiage.
So it's never a winning proposition to think that someone else got it right and you didn't, because you just don't know what's happening under the hood. And even in a successful company, people don't make money because it feels successful—under the hood, there's too much preference, or the timing of when you invested was at a high and now it's at a low, and then you sold, and then it's at a high again. So this stuff just takes a long time.
I would say it's about what journey you want to be on. This goes back to the other question you had, which is what are you looking for? It's like, what journey do you want to be on as an investor, as a team? And who do you want to be on that journey with?
When we think about these earliest stage investment opportunities, it's so humbling because you're thinking, we're going to solve a problem that people don't even know they have yet, because by the time they start to know about these companies, we will have been in business hopefully for three to five years to get things going. Sure, there are early adopters, but it's hard to do research and find those companies.
For example, in our customer research we did last year, I was asking about biometric trackers like Oura and Whoop and Apple Health and all of those things. Most average people don’t necessarily know about those companies, and yet you've got multi-hundred million dollar businesses here.
So, what do we look for? We start everything thematically. We start with research. We look at the consumer trends and consumer behaviors and we think, okay, if that is the behavior in this important part of life, whether that's health or finance or personal care, what is the behavior that we're going to meet at the right time? And is this the founder that understands that nuance intimately? Because you cannot figure it out analytically when it's this early. You have to do it from a personal sort of guttural sense that you’re following alongside early adopters, because you are one. You have to believe that ultimately that early adopter can proliferate into a mass market, because you can't just have it be this random biohacking thing on the side. It has to get to the average person.
With The Farmer's Dog, at the time that I invested, it was like $250 a month to buy food for my dog. I love dogs, but even I was like, I don't really want to spend that much. But could you believe that with enough scale, the price point could come down? Obviously. Could you believe that at some point in time you could have a lower price point option? Obviously. So then that’s what we need to get right, and making sure of that is what the early-stage effort is about—proving that part.
And I think as an investment partner, that's what you're trying to help the founder really get a crystallized vision on. And hopefully they're coming in with that crystal vision, but not everyone has it all fleshed out by the time they come here. So you just work on that for the first year or two and the first couple of rounds, seed and A, to figure that out.
“It is a fool's errand to think that your investor is going to be the reason why a company succeeds or doesn't succeed.”
Eurie Kim: And then your other question was, what is something that I've learned not to do in my last 12 years? Again, I don’t know if it's an occupational hazard or benefit, but I love betting on underdogs. I'm the investor who, when everyone thinks there's a hot deal, that's definitely the deal I don't want to do. And that's probably not a good thing either, because there are a lot of good deals that are pretty hot, but I like finding the things that look a little bit weird, or just aren’t so obvious.
What I will say is hard about that is, I think many investors, including myself, invest in what you can see, but it is a fool's errand to think that your investor is going to be the reason why a company succeeds or doesn't succeed. This is all about the founder and the founder's ability to build an exceptional team that can grow over time, and see ahead of all of these different corners.
There is this one company that I just absolutely adore and I'm going to watch it carefully, but at this moment, I can't invest in the company I see—I need to invest in the company I think they see, and those are two separate companies right now. And so I'm learning to say, let me give it another round, because if we start to converge, then I think that'll be a better marriage.
But if you get on a team thinking you're going to change the course of that team's perspective, it's not a winning proposition. Sometimes it still works, but it ends up making for a lot of misaligned expectations and frustration over time. So I think you’ve got to back the team you want to back, and back what they want to build, and ultimately those are the ones that don't take as much of your time. When they win, they win big. You're not the one doing all the work. Your job is to invest in a portfolio of companies, not to invest in one company and then be the CEO or COO.
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