1Mby1M Virtual Accelerator Investor Forum: With Gus Tai of Trinity Ventures (Part 2)

Sramana Mitra: The reason why I ask this question is to explain how a VC looks at an investment opportunity. Mark Vadon had his own investment thesis but Trinity Ventures and Gus also had their own investment thesis. The two thesis merged for an investment to happen. I’ve said this many a time. Over 99% of businesses that go out to seek financing actually get rejected.

One of the best examples of that is the fact that Marc Benioff got rejected by 27 VCs and look what happened. It’s nobody’s fault really. If VCs refuse to invest in your company, it’s not like they’re malicious or anything. It’s just that their investment theses don’t align. The question is, how can you understand better what it is that the investors are looking for.

In One Million by One Million, we don’t force entrepreneurs to seek financing. We’re the only incubator/accelerator in the world that actually doesn’t push you towards financing.

Gus, what are some of the more recent e-commerce investments that you have made? You talked about Zulily. Can you talk a little bit about the landscape today? What is the outlook today?

Gus Tai: I’ll start with the outlook. I appreciate your description of the relationship between venture firms and companies and how they choose. Most great companies are not venture-funded. Very few great companies are venture-funded. It’s just a form of financing and partnership. I just want to remind folks of that.

With respect to e-commerce and Web 3.0, we strongly believe that we are on the cusp of yet another wave of a next set of companies that will be very large with Zulily being a recent one of that wave. There are two primary shifts that you could capitalize on. I can talk about the attributes that we’re specifically looking for – attributes that I think are fundamental to any strong e-commerce company. One wave is that consumers are looking for more specificity on how an e-commerce company meets their specific need.

The 90’s was really around search and utility. Amazon is a juggernaut and won. We, as human beings, become bored and want to have novelty; search and utility has moved to discovery and entertainment. If you could have discovery, entertainment, and curation tuned to a person’s mentality, philosophy, or emotional state, you could develop a very strong relationship either as a retailer or as a manufacturer-retailer of that good.

In e-commerce we are looking for things that are much more entertaining, much more curated. Mobile is an important force. You now have the accessibility to browse in a very different way than you did in the past. Companies like Zulily and others have reported that over 40% of their sales are on the phone. That wasn’t true five or 10 years ago. Because we have our phone within our arm’s length, we have the ability to engage with those brands and those brands have a way to engage with you.

There are a couple of other companies that I funded recently. One is called Dot & Bo which is in the furniture area. Another one is called Callisto Media which is in the ebook area. Both of them are looking to have a strong point of view similar to the types of businesses that you used to run that highlights your expertise and speaks a certain language that appeals to a segment.

The question is, are those customer segments large enough to support a company. In both of these cases, I happen to think so. That’s something that an entrepreneur would need to ask or figure out how to prove out.

Sramana Mitra: If you read the book, you will see that there is a chapter on online fashion which opens with my failure in online fashion. I started a company in 1999. It was one of the first online fashion e-commerce company called Uuma. This company didn’t make it.

We had an acquisition offer within three months of starting the company. It was at the height of the dot-com bubble. We hadn’t even launched the website in September. By thanksgiving, we had an acquisition offer from Ralph Lauren. We were early. People were not yet buying clothes online. Timing is everything. This is personalized clothes shopping. It has not been done yet.

Why has it not been done? This is something that I talk about in the book. I want my personalized store. My personalized store should not contain size 12 clothing because I’m not size 12. I’m barely size 2.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Gus Tai of Trinity Ventures
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