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1Mby1M Virtual Accelerator Investor Forum: With Tod Francis of Shasta Ventures (Part 3)

Posted on Sunday, Jan 21st 2018

Sramana Mitra: Where in the grand spectrum of possibilities, in which markets, which segments do you see venture-scale brand opportunities in?

Tod Francis: I hate to dodge this question, but I think it’s actually hard to sit here and say this category and not that category because it’s about how the entrepreneur sees the execution and how they provide great value to the customer.

I’ll give you an example. I think it would have been hard to predict ahead of time that ordering a black car on your iPhone would be a big category, right? But the way that they had a maniacal focus on the customer around that first step allowed them to go to the second step. Now what we’re talking about is a change in transportation. It would have been hard, in advance, to say, “Let’s start a way to order limos.”

So, it’s back to the vision and execution. It was so great, and we see that in so many other categories. I actually feel that most categories are going to go through tremendous evolution with mobile so I’d rather put an overlay on that. How can mobile change the category? How can knowing where customer location is, being able to understand location, and past consumer habits affect a category? How can delivery systems change that category?

I’d say every category is up for grabs because we’re still at the very early stages of a quick delivery. We are at the early stages in geo-information to allow retailers and commerce providers to know how to service.

We are hesitant about anything that’s playing in Amazon’s category. My definition of Amazon is you sell other manufacturer’s goods at a lower price. It’s hard to out-Amazon Amazon. Between Amazon and Walmart, they’re doing a great job sourcing products worldwide and moving them to customers very efficiently.

Can you do hardware with a completely different twist with immediate delivery to people on job sites? Can you do it with knowledge of other products that they’ve already bought? We’re not looking at hardware and we’re not in hardware. I’m saying can you do it very differently for a precise customer base and nail it better than someone who just offers a wide range of products at a low price.

That’s where the opportunities start to get created. You have to realize that anybody who’s thinking about this business has to think about Amazon, Walmart, and eBay. How can you do something different and better?

Sramana Mitra: So there are a couple of trends in that. One of the case studies we have in the book is blinds.com. They are a very successful top 100 Internet retailer. They have hundred of millions in revenue. I’ve known this guy for a long, long time and he sold the business to Home Depot. So they not only nailed the category but were also able to exit the business to a sizable retailer.

I think that’s another path that is happening right now. A lot of the brick-and-mortar retailers are starting to acquire successful brands and categories. That’s one example. The other thought I have listening to you is that Amazon and Walmart are very good at commodity products. If you are looking at a product that has more differentiation and more of a user experience value or brand experience value, there’s more opportunity to create a brand experience that Amazon cannot create.

Tod Francis: By the way in your blind’s example, I haven’t used the site myself personally, but my guess is they do blinds better than anyone else. That’s an example of taking a category and just anticipating the customer needs and delivering on their needs better than anyone else. My guess is they ship it faster and it comes better-packaged. There’s definitely ways to tick off these categories but make sure you’re doing something special in these categories.

Sramana Mitra: That’s the premise of specialty retail. Speciality retail focuses on a specific category and really knocks the ball out of the park in that particular category. That’s how you build specialty retail businesses. There are a good half a million merchants doing niche e-commerce successfully.

There’re a lot of companies out there that have proved out a category up to a point. They may not be at venture scale but there’re a lot of companies out there that have been able to carve out a niche by doing something somehow.

Tod Francis: For your audience, I’d like to say that you don’t need to be venture-backed. Venture-backed doesn’t need to be the signal of success. There’re a lot of great direct-to-consumer businesses that you can build and own. When you move into the venture-backed model, all of a sudden there’re all sorts of new expectations of outcomes and scale. You can build a niche business that can perform extremely well and you can cash flow it. I think it’s always good to point out there’re a lot of options for entrepreneurs.

Sramana Mitra: The philosophy of 1Mby1M program, as you know, is that we deploy bootstrapped businesses and that’s really what’s differentiated about us as well. In fact, the book is full of this specialty retail companies that are working on these niches. There’s this other eBay seller who went to $6 million dollars selling luxury watches just by himself. Now they’re up to $20 million dollars a year.

Tod Francis: That’s awesome. I think there’re a lot of opportunities like that out there.

Sramana Mitra: The level of opportunities, the diversity of opportunities, the extent of opportunities is very interesting in e-commerce right now. It’s very robust because the consumer has really matured. There are very high-velocity transactions going on in e-commerce.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Tod Francis of Shasta Ventures
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