Sramana Mitra: Is there a counterpart of yours on the enterprise side who also deals with seed stage investments in the B2B businesses?
Daniel Gulati: There are two relevant streams there. We have a sister fund that we are an LP in. They lead the best B2B investments on the East Coast. One of my colleagues focuses on enterprise and frontier tech based out of New York.
Sramana Mitra: In Silicon Valley, you don’t have an enterprise investor in the seed stage?
Daniel Gulati: It’s not to say we wouldn’t make an investment there, but typically we don’t. We don’t have anyone located in Silicon Valley.
Sramana Mitra: Let’s talk about electronic commerce, specifically since we are in the context of that sector in the economy in this interview. Talk to me about how you analyze the electronic commerce universe, sitting in 2017. What are the key trends that you are observing? How are you interpreting those to decide where you would place bets given where we are right now?
Daniel Gulati: I think of commerce just like any other sector. There are waves. Wave one was in the early 2000. That was just to get products online and work through the consumer trepidation around transacting online. People forget that in the early 2000’s, it was actually a big deal to put your credit card into a browser and actually transact. Security was a big thing. Phase one was putting everything online.
Phase two arguably started with Gilt Groupe, which was about discovery-based e-commerce. In that phase, we saw these group of companies where it was about entertaining the consumer and showing the consumer products that had some urgency wrapped around it. It was also a new wave of front-end user experience. You had really rich photography and video. You had the ability to seed products that were tailored to you. It felt like you were reading a design magazine versus shopping. It was the next-generation user experience. That was wave two, which was discovery-based shopping.
The wave we’re in now is around mobile. We’ve seen change from 5% to 30%. The dollars are a little bit behind the views. Conversion rates on mobile tend to be lower and average order values tend to be a little bit lower. For any e-commerce site today, you’re looking at a baseline of, at least, 50% of your e-commerce eyeballs coming from mobile.
When you think about how to sell a $10 product in that environment where you have limited real estate and where the shopper has their attention in six other places, it’s doable. When you think about an item that is $300, we’re still trying to effectively convert that consumer in a mobile environment. You’re really seeing this wave of mobile native retail. That’s the historical context.