Spencer is a Principal at Riverpark Ventures, a New York City based early stage venture capital fund that focuses on high-growth, disruptive businesses with proven business models and innovative products and services.
Tell us about Riverpark Ventures and your investment strategy?
Riverpark Ventures is an early stage venture capital firm based in NYC. We are currently on our third fund with ~$150 million in assets under management. We are generalists and have folks on our team with different areas of expertise. I have taken a particular interest in both B2B and consumer marketplaces, as well as eCommerce and the enablement software built around it. I am also a consumer brand geek.
Ultimately we are looking for world-class founders and innovative businesses tackling big markets and solving major pain points. Some of our well known portfolio companies include Thrasio, Candid, Spindrift Beverage Company, Via, Slice, and Ollie.
What is one business characteristic or metric that you think is underappreciated from an investment standpoint?
Payback period is a metric that I think is not talked about enough. How quickly am I going to recoup my costs and start generating positive cash flow? I think this a metric that is universally important whether we are evaluating a software business or a consumer brand.
A short payback period gives a company tons of flexibility. You can choose to fuel the fire with venture capital dollars or you can be scrappy and grow the business on cash flow. I admire a business that would work without a deep bank account but could quickly become a category leader if they do take on capital.
I am cheating a little bit by choosing this metric because it really combines all the elements of what makes a healthy business (customer acquisition, retention, revenue, and margin). But I respect founders who are narrowly focused on efficient use of their capital.
What is a thesis that you hold that most people would disagree with?
I truly believe that there will be a startup that is the next Louis Vuitton, Nike, or Coca-Cola. I think a lot of VCs are cooling off on consumer brands partly because it has never been easier to start one. Companies like Shopify have made building an e-commerce site so simple, yet building a brand with staying power and true brand equity has never been harder. I think we are one of few VCs chasing these types of challenger brands at the earliest stages.
And honestly I get why many VCs don’t chase it. Being an early employee at Facebook or Google doesn’t equip you to predict the next trend in streetwear. People tend to “stay in their lane.”
One of our most recent investments was in Coterie, a premium Lululemon-esque brand for baby care. They have built a really aspirational brand and their product is the best performing on the market. They are tackling the Huggies and Pampers of the world, billion dollar brands that lack any real relationships with their customers. I love finding great operators looking to build customer-first brands in large, sleepy categories.
Riverpark has made a few brick and mortar investments like By Chloe, and some of your brands have experimented with retail stores. How do you view retail going forward?
I have talked about the term omnichannel for a long time. Omnichannel is a multi-pronged approach to sales that allows customers to have a seamless experience whether they decide to shop online or in stores. The biggest issues with online shopping are the high costs of shipping and delivery times. People want instant satisfaction. That is why the “Buy Online, Pick Up in Store” option has become so popular.
While I think retail will change forever, and many legacy brands and department stores will go away, opportunistic brands will find ways to affordably build a retail footprint. Most millennials still enjoy shopping in stores and it is still the preferred method of shopping for older generations. The interaction it provides between brands and customers is high intent and more meaningful. Brands have the opportunity to enhance the customer experience through experiential shopping, cool pop up events, personalization, and informed store associates helping to convert potential customers.
I have always admired the opportunistic strategy of Spirit Halloween. The Halloween industry is about $10B a year and a large portion of those sales happen in a 30-60 day period. Spirit Halloween has capitalized on an over-supply of vacant retail stores to secure preferable short term leases and quickly build pop up stores to capture the massive seasonal demand.
In Soho, digitally-native consumer brands like Everlane and Allbirds have opened retail stores because millions of people per month walk and drive by these locations. While the stores themselves might not be crazy profit drivers, they serve as billboards for all the shoppers in the area and are significant drivers of future online sales.
We are also seeing the rise of modern shopping malls like Neighborhood Goods that expose customers to 50 or 60 brands. This allows smaller brands a cheaper way to give retail a try and gives customers the experience of seeing different brands in person. I think this will definitely be a growing trend going forward.
And, at the end of the day, retail provides a certain amount of convenience that eCommerce can’t match. So from that standpoint, there will always be a place for retail.
What is a particular category that excites you?
Shopify and other tools have democratized the process of starting a consumer brand, leading to an influx of players across virtually every category. As new competitive brands seek out the same customer, the price of social media ads have risen significantly. CPMs on Facebook, for example, have increased more than 10x over the last seven years. Customer acquisition costs have ballooned, extending payback periods and making it increasingly difficult to turn a profit. DTC as a channel in and of itself is no longer innovative, as manufacturing, fulfillment, and branding are becoming commoditized.
Instead, brands compete on acquisition. The new innovation is finding creative channels to drive traffic and conversion. We are looking to invest in companies who are creating these innovative solutions.
On top of that, the VC funding well for early stage brands has dried up. There are certainly exceptions, but the large majority of companies will be bootstrapped. Brands will need to survive off of their revenue and spend as little on CAC as possible in order to turn a profit.
We recently invested in a company called Co-op commerce. Co-op turns a brand’s post-purchase “thank you” page into an acquisition channel by presenting items from complementary brands in a “customers also bought” widget. Think “Amazon’s ubiquitous recommendations” but with high growth brands. Because exposed consumers are high-intent purchasers, Co-op significantly outperforms Facebook ads.
We also made an investment in MarketerHire which allows companies to leverage on-demand freelance marketers across different specialities such as SEO, paid search, influencer marketing, and more. The platform provides companies an alternative to expensive agencies and lengthy hiring processes, while allowing for less commitment and increased flexibility.
What consumer trend do you find the most interesting?
I am so intrigued by how COVID-19 has impacted fitness. You have these boutique studios and fitness centers that have built tons of locations and strong brands. Then, almost overnight, they shut down and we now need to adapt to a new way of working out. As a result, remote fitness brands like Peloton have seen insane adoption. After dropping thousands on the hardware, churn is incredibly low and recurring revenue and margins are very healthy.
Now, multiple other companies are capitalizing on these tailwinds and raising a ton of capital. Mirror recently had a $500 million exit to Lululemon, Tonal just raised a $110 million round led by L Catterton and Tempo raised a $60 million pre-commercial launch.
Asset-light restaurants and ghost kitchens are also an area I am excited about…and investing in. It is really hard to make it in the restaurant world with the exorbitant rents, food and labor costs that most concepts face operating in major cities. This is especially true in the new delivery world where third party platforms can take up to 35% of gross sales. To succeed, restaurant operators are getting creative.
I am excited about what Ordermark is doing with its Nextbite concepts. They provide restaurant operators with fully branded restaurant concepts like Monster Mac, Firebelly Wings, and CraveBurger that are data-driven and designed exclusively for online ordering and delivery. Through Nextbite, one restaurant can actually operate a dozen brands out of the same kitchen.
If you could ask one person for advice, who would it be and why?
I have always admired the way Drew Rosenhaus built his business. He went to the University of Miami where he was close friends with many of the athletes at the school. At age 22, he became the youngest agent in sports. He was able to relate to many of the athletes on a personal level because he had a great personality and invested a lot of time in building relationships. Of course, he was also a very smart guy. A lot of his early clients were top athletes that he was friends with at “The U” or guys that were referred his way. He was a hustler in every sense of the word and now his agency has negotiated over $7B in contracts for athletes like Rob Gronkowski, Terrell Owens, TY Hilton, and Frank Gore.
If you could join the crew from Inception and implant one idea into the minds of entrepreneurs, what would it be?
I think founders today underestimate the importance of having boots on the ground and being where your customers are. If you are a food & beverage brand, you should be at Wegmans or Whole Foods doing demos and meeting customers. And if you are an enterprise software company you should be building a consumer brand. Think about the tools we use at work and how they have migrated to everyday life like Slack and Zoom. Many of the best software businesses have been built with a bottoms up approach, ingraining them into consumers everyday lives.
What is your creative outlet and how does it help you channel your flow state?
I am a fitness junkie. I have tried almost every boutique fitness concept in NYC and am subscribed to Peloton and a number of other apps. Exercise provides me with mental clarity and a sense of bettering myself. I also love working out with other people — fitness is very social and it’s a great way to connect.
I recently picked up golf. The game is so challenging, but when you are progressing it becomes very clear. As a former athlete I have enjoyed getting competitive with myself and working on the game.
What is one childhood memento that you still have and how does it serve you?
Growing up, I always had a really big sneaker and sports jersey collection. I made enough spending money for college flipping jerseys and sneakers. I loved the process — I would spend my free time going on blogs and finding the best deals on eBay and I built booths at local flea markets. I still own a lot of the jerseys to this day so I have a constant memento of my first business.
This experience piggybacked into me joining my friends to build CampusProtein in college and ultimately building a foundation for me to pursue a career in venture capital. It was my first taste of entrepreneurship.
What is one daily ritual that you cannot live without?
I need to workout almost every day, otherwise I feel off. Besides that, I am not a super routine guy.
What is the last:
TV show you binged?
Movie you watched?
On The Basis of Sex.
Song you listened to?
Dreams by Fleetwood Mac.
Podcast you listened to?
Book you read?
That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea by Marc Randolph.
Up Next: Hayden Williams, Partner at BrandProject