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Jun212012

3 Things Venture Capitalists Look For When Investing In Direct Selling Startups

 I recently heard Jason Stoffer at the 2012 DSA Annual Meeting in Dallas this month.  He's a great speaker.  He was very open and engaging in his style.  His slides were extremely informative, as I ended up taking the most notes from his talk.  Jason is a Partner at Maveron, a venture fund founded in 1998 by Howard Schultz, the founder and CEO of Starbucks, and Dan Levitan, the banker who took Starbucks public in 1991. (The name “Maveron” was coined from the words “maverick” and “vision.”)

As a venture capitalist, I am looking to discover and help build the next billion dollar consumer brands. Direct selling has created a number of large global brands and we believe the best is yet to come, as direct selling companies leverage social media and other technology to build their brand and develop closer relationships with their field and their end consumers.

Cauldron of consumer passion around the product

It has to be a product that early consumers love. We go to parties, speak to customers and the field and monitor a company’s  social media presence to get a sense as to just how passionate early customers are.

Can the company “bridge the chasm” from early adopters to a broader market

 While early passion and traction is important, we look at whether the company’s product has the ability to “bridge the chasm” and reach a broader set of consumers. To do so, we find the need for the company to have a product or a marketing message that is highly differentiated. Sometimes it can come from creating a new category, like Scentsy did with candles. It can come from great product, as per Silpada. Or it can come via unique and groundbreaking methods around marketing, recruiting or PR.

It’s all about the Leadership

 Scaling a company from obscurity to ubiquity requires a great deal of drive, leadership, creativity and team building. We are looking for great entrepreneurs who have these characteristics.  

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