Kiva is the Co-founder and Managing Partner of Selva Ventures, a Venture Capital firm that invests in emerging brands that make their consumers’ lives better.
Briefly introduce us to Selva Ventures and your journey to founding the firm?
Selva Ventures is a Venture Capital firm with the mission of investing in brands that make their consumers’ lives better. To us that means better ingredients, better function and better emotional connection between brand and consumer. We specifically focus on food, beverage, beauty and personal care companies with less than $10 million dollars in revenue. We aim to provide more than just capital by bringing strategic support that is found less commonly at this stage.
I started my career on a pretty generic finance path; I worked in Investment Banking at Barclays in Los Angeles and then went to work in Private Equity at TPG in San Francisco. At TPG I found that, while we were investing in these large retailers and consumer companies, we were sitting out of important trends like eCommerce and better-for-you food and beverage. It’s not that the trends weren’t on our radar, we just couldn’t write small enough checks to act on the interesting players.
So I decided to leave and join a company called CircleUp as a Partner on their investment team as they were pivoting from a marketplace to a venture fund. I spent two years at CircleUp and helped to lead their investments in Nutpods and Liquid I.V.. Our mandate was focused on brands with proven traction, but in eCommerce and alternative retail channels brands were proving themselves as outliers earlier than ever.
I began thinking about this underserved portion of the market as most funds didn’t invest in companies with less than $5 million in sales, and the idea of Selva Ventures started to take shape. We saw opportunity because, as an emerging consumer brand, the investor landscape was occupied by either consumer funds that don’t invest early or traditional venture funds that didn’t understand the consumer products space.
As a result, these companies are often left to raise capital from angel investors and family offices, but angel investors typically have jobs that occupy most of their time and family offices are rarely active members of the consumer ecosystem. We wanted to be that strategic partner that brands could look to as they push to reach the next level. Long story short, we set up shop in 2019 and have invested in brands such as Haus, MUD/WTR and Three Wishes since then.
It has never been easier to start a consumer brand, yet that also means it’s never been harder to start a successful consumer brand. What is a common thread that you see amongst the successful brands you have invested in?
I think a lot of that comes down to the Founder. Since there are so many competitive disruptors chasing the same opportunities, the strength of the founding team is more important than ever. That said, first mover advantage is still very relevant because there still are so many gatekeepers in the CPG ecosystem. Gatekeepers are most notably retailers, and these retailers do not need to carry a handful of brands that do the same thing.
The second element of the first mover advantage is the flywheel that can exist if you develop a brand online. Think about Amazon reviews; while Amazon may be thought of as a less sexy channel, if you are a beneficiary of its algorithm you can end up making a name for yourself very quickly at a national level rather than a regional one. CPG in general has the benefit of capital efficient models once fast-growing brands hit a certain scale, usually in the range of $10 million to $25 million in sales, they approach profitability. At that point, you can use your own cash flow to play offense without having to suffer the distraction and dilution that comes with fundraising.
There is a framework that I like to use in formulating channel strategy. It’s a matrix of three columns: owned channels, discovery channels, and scale channels. The columns are split into two rows: online and offline. The owned online channel is your website, the owned offline channel is your brick-and-mortar retail store. Discovery channels are places consumers become aware of your brand but are not scalable. Offline these could be natural food stores and coffee shops, online they can be subscription boxes or smaller curated marketplaces like Thrive Market. Lastly, online scale channels are Amazon or Walmart.com, and offline scale channels are your club and big box retailers like Costco and Walmart. These are places where brands are looking for people to stock up on their product at scale.
|Online||Company Website||Thrive Market, Ipsy||Amazon, Walmart.com, Instacart|
|Offline||Owned brick and mortar retail||Whole Foods, Erewhon, Credo||Target, Walmart, Costco|
Inevitably, to build a big brand you need to nail one or both of the scale channels, but there can be multiple ways of getting there. For many companies, if you show up at a Walmart or Target without building an affinity, your brand will get lost on the shelf. So, it is important to start by showing up in places where there are fewer products and you can tell more of a story and access early adopters. This will put you in a position of success and let people learn more about your brand. However, there is no way to scale a business to be very large via those channels alone. The challenge — and pathway of success — for many small brands in my neck of the woods is determining how to use online and offline owned and discovery channels to build up enough of a customer base to get into and succeed in a scale channel.
What is a thesis that you hold that most people would disagree with?
One thing that I am highly skeptical of is that the current well known plant-based food and beverage brands are going to be thought of as ‘better for you’, which has driven a lot of the attention that brands like Oatly and Beyond Meat have gotten in the past three years.
Dissecting this further, there are three reasons people buy plant-based food and beverage products. One, for the planet. Two, for animal welfare. And three, for health reasons. People tend to have some weighted combination of those three that drive their consumption decisions.
A lot of what has driven the recent wave of plant-based consumption has been health; but, if you look at the ingredient deck of many of these large brands, they are really not that good for you with their processed oils and added sugars. This flies in the face of a lot of other trends that we are seeing, namely the push to eat cleaner, less processed foods. The case for Beyond Meat is that these health concerns matter less once you’ve transitioned from the discovery channel and have scaled into the mass market. But, I truly believe from a five to ten-year viewpoint they are more vulnerable than most people think.
What category excites you?
Healthier alcohol. There are few things that I am more excited about than how people are changing what they drink when they drink alcohol, or when people around them are drinking alcohol.
Many consumers are drinking less alcohol in general. That can mean non-alcoholic drinks or lower ABV drinks. What is getting a lot of attention is healthier versions of alcoholic drinks. The wave of people running towards White Claw because of its low carbs, sugar and calories has started to premiumize and you are seeing brands like High Noon that are equivalent from a nutritional standpoint but have better ingredients and taste. I think there is massive opportunity for continued innovation and premiumization.
If you could join the crew from Inception and implant one idea into the minds of entrepreneurs, what would it be?
I would say the best relationships with investors are ones where the investor is betting on them, and their advice and governance is fully a matter of trying to add value to the Founder’s decision making rather than mettle or get in the way of the company’s success. But, as an investor, you need the right context to do that, so it is important to see the right information in good times and in bad times.
When founders are looking to fundraise, they should keep this in mind when they select investors. They should ask the right questions and interview the investor the right way rather than only solve for quantitative metrics like highest valuation, lowest dilution and tangible pieces of value-add. At the end of the day, the most valuable investor is one you can deeply trust, so screening for trustworthiness and investing time in that relationship will take you a long way.
What are you interested in that most people haven’t heard of?
I am very interested in probability and odds-based thinking. One of the reasons I joined CircleUp back in 2017 was what they do with data science and machine learning. My parents are both AI professors — I often joke that I grew up in a world of AI before it was ‘cool’. I have always been fascinated by aspects of psychology and technology that combine with things that I am interested in — sports, betting markets, financial markets, etc. — anything that is highly probabilistic. One of my favorite books is Moneyball and one of my favorite career experiences was spending time with Sam Hinkie while he was an advisor of CircleUp. I often read books that try to dig further into the psychology of decision making and how to use data to reach insights that aren’t intuitive.
What fictional character do you identify with?
My favorite movie is Jerry Maguire. I love the character that he becomes towards the end of that movie, and my conceptualization of a sports agent is somebody who absolutely loves the world they operate in but may not have had the capabilities to do what their clients do at the highest level. I don’t have it in me to create the next consumer brand, but I would love nothing more than to be a partner in a success story for someone like Rod Tidwell.
Often, when we are faced with obstacles or things go wrong, we think something is happening to us. But, when we reflect on these moments later on, we tend to find that it actually happened for us. What is one such example you have of this?
I always thought I was going to go to business school to pursue an MBA. My parents went to graduate school (I was born on campus when they were finishing their PhDs), and I loved my time in college both in and out of the classroom. Then, when I applied to the grad schools I wanted to attend I didn’t get in.
At first, it didn’t make sense and frankly it felt unfair. Ultimately, it forced me to think about what I want to do with my life, which I was kicking down the road to figure out while at school. It let me pursue something that was a bit riskier, but which I was genuinely interested in sinking my teeth into. It also made me prioritize staying in San Francisco and prioritizing a relationship with my now fiancée. I sometimes look back and think who knows what I would be without this person who is so important to me, or if I hadn’t taken this entrepreneurial leap that I had the courage to build only because of some obstacle that put me on a different path than I had planned.
What is a memento from your childhood that you still keep and how does it serve you?
Growing up, because my parents were professors and I had no siblings, they would bring me along to all of their academic conferences around the world — many of which were in Europe. I went to these really cool cities and the one thing I always needed to do in each city was to go to the sports stores and buy a soccer jersey from the town’s club. A couple of times I went to the game, but more times than not I would watch the game at pubs or restaurants with the locals. That experience of immersing myself in these local cultures has given me powerful memories of connecting with extremely personal and authentic communities; it’s created a fond memory in each of the jerseys that I still have. It reminds me of the power of travel and getting out of your bubble, and I love going back and looking at them.
What is your creative outlet and how does it help you channel a flow state?
I love music, but I have never been good at creating it or playing it. I am that person who during the five minutes between classes in high school would have his headphones on to squeeze in the last minutes of a track. But, I would say out of all forms of creativity the only thing I have ever felt good at is writing. Writing allows me to be incredibly present and immediate with my thoughts in a way that I can’t get through any other exercise.
What is one daily ritual that you cannot live without?
After the alarm goes off every morning, I spend the first ten to fifteen minute hanging out with my fiancée, where we have each other’s complete attention and can chat, relax and decompress. Especially now during the quarantine, it has been a lot of sharing a small space. We are both very career focused and there are very few times when we are not on a call or Zoom, but that time when we first wake up is sacred to us (and I wish it was longer).
What is the last:
TV show you binged?
Away on Netflix.
Movie you watched?
The Social Dilemma (Netflix).
Song you listened to?
My Shot from Hamilton Soundtrack.
Podcast you listened to?
Book you read?
What You Do Is Who You Are: How to Create Your Business Culture by Ben Horowitz.
Up Next: Matt Lombardi & Kevin Moran, Co-founders of Beam