Approaching e-commerce investments in the age of Amazon

With Amazon as the 800-pound gorilla, many of my fellow investors choose to ignore e-commerce altogether. In fact, the industry hit recent lows in a number of deals and investments. But as Bonobos’ $310 million acquisition by Walmart and Stitch Fix’s IPO demonstrate, there are still plenty of exciting opportunities in this space for investors. In my ongoing hunt for investment opportunities, I recently came across a brand that had garnered significant traction without raising a lot of capital. This traction, however, was across traditional retail channels, not the channel that mattered most to me as a venture investor — e-commerce. Why do I value this direct to consumer channel so highly? For one, e-commerce margins are better (in the 80 percent range versus as low as 50 percent in traditional retail). But it also offers the potential for scale that retail simply can’t match. My grandfather grew his textiles business methodically, one merchant and store at a time — something I greatly admired as a child, given the grit and hustle he put into closing each sale. However, today, with the help of Facebook ads, viral videos like Dollar Shave Club’s classic ad, influencer and celebrity-driven endorsements, sales can boom overnight. People have been shopping online for more than two decades, and we have seen a number of iconic brands originate online. Behind many of these brands are successful venture investors, such as Forerunner Ventures (Warby Parker, Glossier, Bonobos) and Maveron (Everlane, Madison Reed), as well as amazing entrepreneurs and marketers like Kal Vepuri, Divya Gugnani and Rohan Oza, who “just get” consumer branding. They know how to make something cool, at an affordable price point, and how to position their companies for big M&A when the time comes. As these investors and individuals know, billion-dollar acquisitions come from scaling...

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