First On: Building a consumer company
Today’s interview is a bit of a departure from the normal focus of functional operators within startups, but still comes packed with unique insights into the earliest stages of company building. My guest, Savitri (Savs) Tan, is a venture fund investor with Isomer Capital and previously spent several years running the London core programme of Entrepreneur First, where I had the pleasure of working alongside her and seeing her brilliance firsthand. Savs’s varied experience brought her to the realization that London’s startup ecosystem wasn’t properly serving consumer-focused, non-tech businesses. This spurred her to launch the Life+ Collective, a non-profit community designed to support new and aspiring consumer founders at the very earliest stages of their journey. I asked Savs to speak to us to share the insights that created the Collective and what entrepreneurs can do to move from curious to conviction.
To kick off could you please tell us who you are and how you came to launch this new effort.
So I've been working in VC and tech for the last seven years. I started at Entrepreneur First (EF) as one of the early team members and built out the company building programme as well as the support at seed and pre seed investment. I now work on the other side of the table, though a few steps removed from founders, as an LP at Isomer Capital. We’re a pan-European venture fund of funds. In the same way that founders will pitch to VCs for funding, VCs pitch to us to put our capital into their funds. We invest all across Europe and try to get a diverse spread of local managers who are experts in scaling businesses in their home country and then expand across Europe or the US.
I do a lot of things on the side of my role and I really try to pay it forward. I didn't come into this industry with much of a network. It's something that I've built up over time. But I think often that the social capital element of things is really the hard nut to crack. So I started a community called Life+ Collective for consumer focused founders. Before my work at EF, I worked a lot on launching consumer tech companies as part of a larger consultancy and there are some unique needs for those businesses that existing infrastructure doesn’t serve. I mean, I'm not an expert on consumer companies by any stretch, but I'm interested and I've got the network and I thought I had a shot at really bringing people together.
This past September we launched a new grant programme, which provides eight companies with £20k worth of equity-free funding. The grant is designed to give people permission to experiment as well as permission to fail. We take idea-stage startups, though they could be more advanced, and provide a three-month programme that introduces our founders to experts and current practitioners. We also run wider community events as well.
On your website you use some phrasing, which would suggest that consumer businesses or consumer-focused founders are generally overlooked. I'm curious why you think that might be and if you think this is unique to Europe?
I don't know if it's particular to Europe. That view is mainly from personal observation. It's just really hard to build a consumer company, and I often question if venture scaling is always applicable to consumer companies. But I also know that some of the most valuable companies in the world are consumer facing. My big worry is that these companies will get invested in at an early stage but will have to take a huge amount of dilution to do it. The stakes just feel higher.
A lot of these companies do bootstrap at the beginning, but what if you can't bootstrap? One of my most hated phrases is the “friends and family round”. Most people I know don't have the friends who could basically bankroll an experiment. So what options does a founder have? To be fair, there are organizations like EF or Antler that do help some consumer companies. But is that set up right, for everyone? Does every consumer company have to be a tech company? There's a side to consumer businesses that’s really not about exponential scale. Lots of consumer products aren’t necessary but they're nice. My view, and this is especially true given the last two years that we've all been through, is that nice is really necessary. So why shouldn’t I give those companies a bit of a head start?
This “nice is necessary for everyday life” idea is mentioned several times on your site. I'd love to know a little bit more about what you mean by that and how you came to that insight.
There are loads of products that are just fun People spend money on them because they get a huge amount of value and enjoyment. They’re life-enriching but they don't necessarily solve a problem. You and I know that the B2B world is always about the problem and its solution. In B2C is often the difference between need and want. I felt that we should recognize that and so “nice is necessary” is my snappy phrase to get people to remember. It's just vague enough that people ask questions. If you look at clothes or music, what's the problem solving there? These are things that most people interact with every day and invest a lot of themselves into. I think those things really matter.
If we focus back on the grant for a minute. What makes a good startup for that program? Certainly a consumer focus. Maybe a diverse founder group? Maybe non venture scale potential? What are the key criteria that people could self select into?
The thing I'd say is that this grant itself is also an experiment so it’s not totally clear that I'll run it again. But assuming I do, I'm particularly interested in ideas that stem from culture and heritage. For example, I’m looking at a CBD-infused drinks company (Jamcan) that is using recipes from the founder’s Jamaican heritage. It's not necessarily defensible in a traditional sense but there are elements of these businesses that can scale quite rapidly.
We're also really interested in games that explore deeper things within us. One of the companies from the last batch is called Betwixt. They're creating a coaching method that helps players think through problems in their life and how to overcome them by creating a virtual world.
We're also looking at what I call “taboo tech”. One of our companies at the idea stage is called Luna. They're building a platform for young girls who are about to go through puberty. That stage of life is full of unanswered questions and we're now in a world where kids will Google more than they'll ask their parents. So how can how can we create good sources of information that both support kids, but also support parents in providing that education at home and filling the sex education gap at school?
How did you measure your success for something like the Life+ grant?
We look at a few things. We had over 200 applications, took 25 to shortlist and then picked eight to actually join the programme. One thing we're quite clear on is that if something doesn't work out, either a company decides to shut down or a founder takes a different direction, that is fine. We're interested in learning about what makes a consumer company at the early stages succeed or fail. I definitely want to stress the idea that I want to give everyone the same chance to make mistakes that many people have by virtue of jobs than they have had before or family money. You can check out all the companies and founders here.
And for the core programme, how is that structured and what are the unique tweaks you’ve made?
I had to think quite deeply over the last couple of years to ask myself, what is it that consumer companies need to succeed? The biggest thing was capital. The second thing was a peer group. It's much lonelier, in a way, if you don't have a community around you. It’s important to feel a sense of momentum behind what a founder is doing, even if it's just an idea. And then you need to know about marketing - social media influencing, working with independent influencers, experimenting with different types of ads, etc. We work with some amazing founders in the market now who are super knowledgeable and held a series of great Q&A’s. Honestly it was all very bespoke.
The other side of it is coaching. We've got an in-house coach to do one-to-one sessions with people as well as group sessions focused around different themes - loneliness, managing pressure, goal setting, etc. We’ve also held more company-focused sessions like OKR setting within a consumer product business, hiring at a structural level, developing a founding team, etc. The ecosystem at large doesn’t really talk about how founders can continue to upskill themselves so wanted to bring in an experiment within that focus..
It sounds like you have a pretty wide net of support with experts. Are there any skill sets that you're trying to build in or recruit for with the next batch?
I’d like to lean more into organizational stuff. Strategically who should your first hires be and what profiles should they have? I think that's something which still kind of mystifies founders. I think help with manufacturing and physical product development is definitely something which could be quite interesting. I'm also keen to build a network within food and drink. I see so many people that want to do something in this, but don't know where to start and don't know what the funding landscape looks like. And I'm learning as we go but one thing I've learned is about how common it is to have manufacturers front the production costs and then work within a revenue share agreements.
The other thing really is trying to expose people to different types of funding options. I think venture is sometimes glamorized. Obviously we work in venture and it is great, but it isn't the be-all end-all. In the future, I'd love to find a way for consumer companies to be invested in not unlike the innovation we’ve seen with hardware.
Do you have any perspective on crowdfunding? It seems to make a lot of sense for consumer businesses and yet it doesn't seem like it's really lived up to the promise. Do you have any view as to why that might be? Or maybe you disagree with that?
I don't disagree with that. I think that you have to be solid in why you're doing a platform like that and understand that you have to have a whole marketing campaign attached to it in order for it to be successful. A lot of the reasons to pursue crowdfunding has to do with community and ensuring that you have strong buy-in. Sometimes you have crowdfunding in conjunction with a traditional venture round to show that the product is really sticky and people are willing to actually put money into it. So I think it can be really powerful, but only in conjunction with other financing sources.
If we go back after those three pillars of Life+. With respect to the broader community, so not just the small group of selected companies, what underpins that group? What are the things you do? What are the experiments you want to run?
A lot of it is just about trying to connect interesting founders together and making open a lot of things that aren’t open naturally in the tech ecosystem. We did a whole course with the law firm MJ Hudson, and they did a run through of different types of legals - from term sheets, preparing for investment, what to expect from lawyers and generally demystifying some of the jargon. Everything that we do is about demystifying some aspects of what you and I forget is a fairly opaque world. People feel intimidated by most aspects of finance or law so they don't ask questions. What we're saying, please ask any question you want, it's not stupid. We want to have a very safe space.
I think that this community today is for people who are building their consumer company or curious to build one. So the aim is to create a library of content that you can access everything as and when you want. At the beginning, before the pandemic, we mostly met up over dinners. I would invite like 12 founders and have a discussion. Now that everything's moved online I've seen just how many people from many different cities are getting curious about us. I love doing things in person but I'm very, very keen to continue to include as many people as possible.
What do you hope Life+ evolves into?
I would love for people within the community to feel they can organize themselves and take more control. I think the best communities are ones that don't operate with one person at the center. Just like a fund, that's a key-person risk. If I'm going to take this further it's really about developing that brain trust of people that come to things time and time again. And I think I've got that going, which is really exciting! But I think if this was ever to become a thing it would be that people feel that they are also the custodians of the community.
For people that may not currently be in the tech ecosystem but they're starting to get that itch for starting something, what advice would you have for them?
Well, if you're curious then come speak to us. But more generally, start experimenting with people that you know. Olivia, the founder of that CBD drinks company, started selling in local stores near her or to her sister's friends. That's how she figured out who her customer group was and that's how she got feedback really quickly. The guys who run a muslim prayer app, Pillars, started building in public with their community on Twitter. So I'd say we start with people you know and be receptive to feedback. And also, try to get to that friend-of-a-friend level as quickly as you can because I think you'll get better and more honest feedback from them than you would otherwise.
First On is an attempt to uncover functional greatness by asking the experts themselves. I hope you enjoy the mini-series and with enough interest I may extend this into a more ongoing effort. If you have any functions / roles you’d like covered or have ideas for future guests please let me know.