Recently we announced a new arrival to our family of sector-specific pods. The Consumer pod will now sit alongside our Future of Health, Future of Money and Deep Tech teams. But ‘consumer’ is a broad term, so what will this new pod’s remit be?
In short, we’re interested in how technology permeates our everyday lives: how we live, work, travel, play, rest and recuperate. Our other three pods back teams deep in the roots of health, money or deep tech. These companies’ trajectories often reach the consumer end of the chain, but for those startups that are front and centre consumer-facing, the end-user being the consumer, we want to provide a home specifically for their needs.
With health, money and deep tech, it’s easy to talk about the UK as a powerhouse of innovation. No surprises there. But UK-based consumer-facing companies are no less world-beating. In fact there have been more UK unicorns in the consumer sector than health and deep tech, with VC investment in European consumer start-ups rising from €4.4bn in 2014 to €16.6bn in 2019 (Tech Nation Dealroom.co).
The other macro consideration is the evolution of the ‘consumer’. 2020 has seen a quantum shift online driven by Covid, along with still-emerging, but far-reaching changes in consumer behaviour. Ocado, Asos and FarFetch – each one a UK consumer unicorn – are the inheritors of lost face-to-face business. The ability of online operations to engage with their customers has reached new levels of sophistication. Customer ‘delight’, not just satisfaction, is the new benchmark, and tech-based consumer startups are able to achieve it through intelligent, individually-tailored relationships.
As investors, we are not new to this sector. Since our foundation in 2008, we’ve been alongside the pioneers who built companies like Zoopla, Graze, Secret Escapes, Depop and Trouva. We’ve learned time and again what it takes to create companies like these. Knowing the people who did it, and continuing to work with many of them, has given us the deep experience needed to back the next generation of consumer entrepreneurs. Close, personal connections of many years with pioneers such as Maria Raga of Depop and Alex Chesterman of Zoopla and Cazoo have given us a front row seat in the journey of consumer-focused startups. It’s the people, more than the market or the product, who execute on a great idea and make it a world-beating success.
Signs of success
What does a good consumer company look like to us? Differentiation isn’t enough, nor is defensible IP – essential as these are. What we’re looking for is unnatural levels of customer loyalty and engagement: that early pull from customers that proves the Product Market Fit. NPS is an indicator, but we prefer the Customer Happiness Score. It’s a better proof point of the founder’s obsession with their customer’s experience. Our recent portfolio company, tails.com (acquired by Nestle in 2018) provided a powerful example of customer-centricity by hiring veterinary nurses, not call centre workers, to answer customers’ questions. Any consumer-facing company we’ve invested in, from used-car company Cazoo to ‘most trusted’ pet insurers BoughtbyMany, have similar stories of going above and beyond, putting the customer at the centre of everything they do.
Seeing around corners
As we’ve said, the evolution of the consumer – their changing habits and needs – is moving at pace. This means that as a team we need to have the broadest and deepest possible vision to be of maximum use to the teams we back. We’re based in both London and New York which gives us the understanding of the complexities and subtleties of the Europe/US transfer process. Great consumer pioneers will pop up in all kinds of sectors so we need to be both down on the ground, and up high at a clear transatlantic vantage point in order to spot them early. To this end we’re expanding our team to further enrich our knowledge base and our most recent joiner, Millen Wolde-Selassie, as well as Karan over in New York, bring their own experience as founder/operators in the consumer space.
This is the right time to back those pioneers ambitious enough to create the next generation of world-beating consumer-facing companies. Our team is ready for the challenge – and the exhilarating ride – that surely lies ahead.