Sramana Mitra: Could you take us through a bit of the thinking for your portfolio strategy in B2C? Both trends that you’re seeing as well as where your bets are.
Ravi Mohan: Every new communications platform yields huge new B2C companies. With the internet, you ended up with Facebook. Mobile hasn’t quite gotten there yet. I guess you did have WhatsApp and Instagram. We do look there, but it’s hard to understand which ones will kick off and which ones won’t.
Although they’re very good areas for entrepreneurs to build businesses, we tend to be more conservative around backing those types of businesses,because we aren’t sure which ones will win. Within Shasta in consumer, we’re looking at three areas. We’re looking at subscription-based businesses that are offering products and services that people can subscribe to. We have multiple investments in this area. One is dog food that’s delivered. They make human-like food and customize it for the type of dog and deliver it to the house. That’s a premium subscription service.
We have a contraceptive service for women called the Pill Club where they can consult a doctor online and get birth control delivered to them on a subscription. The third one that we’ve made is Imperfect Produce, which takes excess produce from grocery stores that don’t look the way the grocer wants to present the food, and deliver it to people on a weekly basis. For example, a carrot that’s not perfect or oranges that might have blemishes on it. They are put into the basket that someone subscribes to.
Sramana Mitra: Interesting.
Ravi Mohan: We are looking at subscription companies that fulfill a real need and that have the ability to have a high margin and a brand. That’s one category. The second is financial services – the new types. We have invested in Mynt, which was a web-based Quicken that shows you how much money you have to spend this month and manage your money better.
We invested in an online banking company called Simple, which lets you setup a deposit account online and have mobile applications that help you do your basic banking in a better manner. More recently, we’ve invested in a company called Tally, which lets you consolidate your credit card debt on your phone and bring down the cost that you might pay in term fees and interest. We keep looking in that area for using technology to disrupt the incumbents and find valuable consumer services that people would want.
The third area that we’re looking at is personalized medicine through genetics. We have a small investment in a company called Color Genomics. We look at other types of genetically-oriented or DNA-based ways to customize medicine that can be delivered to the individual. Those are the three areas that we deal with in consumer.
Sramana Mitra: You didn’t say non-subscription e-commerce. Is that a correct observation that you’re not doing non-subscription e-commerce?
Ravi Mohan: We do that, but it’s not a focus area. We have made investments in Stance, which is a branded company making socks and now getting into other categories. We’ve made an investment in a company called Poppins, which makes office furniture and office goods that are design friendly. Think of them as, “I don’t want to get IKEA, but I don’t want to spend $50,000 for a desk. I’m going to get something that looks nice and fits my brand without having to spend a lot.”
Poppin doesn’t have an official subscription component. When they land accounts and they equip an office, it leads to a lot of follow-on orders from the same customer as they might equip other offices. The primary reason we like subscription businesses is the ability to create a long-term customer relationship and the cost of acquiring new customers is very expensive. The key is can you offer a good service that customers keep buying more things through you. That does not need to be exclusively done through subscription, but it’s easier to do it with subscriptions.