Maveron on the Move

Maveron Change of Address Postcard-wo PO Box

Study for Calculus Test Tonight? Let’s Meet Up in the Chat Room!

Anyone over the age of 30 tends to think in terms of the real world vs. the online world; young people make no distinction between the two. Social networks, where youth connect with their friends, research information, hang out, shop, listen to music, and discuss news and events, are the real world to most young people.

The stats speak for themselves:

  • Nearly two-thirds of all online teens aged 12-17 use social networks like Facebook and MySpace on a monthly basis, and almost one-third do so daily. – Forrester Research, “Coolhunting With Teen Social Networkers”, October 2009
  • 22% of teens check social networking sites more than 10 times a day and 51% of teens check social networking sites more than once a day. – Common Sense Media, “Is Social Networking Changing Childhood?”, August 2009
  • In April 2009 alone, teens spent 21 million minutes on sites like Facebook, MySpace, and Twitter. – Nielsen Media, April 2009

The complete integration of social networks into their daily lives is not only impacting how they socialize, but how they learn. A recent article by a teacher and citizen journalist talks about how young people are increasingly using Facebook and Twitter to learn, share ideas, and complete class projects – yet educators are still forbidding use of all social networking due to fear kids are wasting time or getting into trouble online. Some high schools are beginning to experiment with online learning programs and controlled access to social networks to enable students to engage in group learning online, but these schools are still few and far between.

This disconnect between most educators (older people) and students (young people) is starting to narrow, however, with more discussion around how social networking and the Internet can play a key role in education. At Maveron, we’ve been thinking a lot about these issues. Our highly successful investment in Capella University, home of the world’s leading online-only university degree programs, and our recent investment in Altius Education, a provider of technology and services that enable real-world universities to offer programs online, shows how committed Maveron is to evolving education in the next decade and beyond.

College-level institutions have been much quicker to understand the power of online learning and social networking to enable students to collaborate on projects and studying, and reach professors in online office hours sessions. Online degree programs are extremely popular, in large part because young students can learn in an environment where they are entirely at ease: on the Internet. According to the a higher education market research firm Aslanian Group, nearly 12% (2.1 million) of all students at degree-granting institutions in 2007 were enrolled solely in online programs – and that percentage has climbed significantly in the past two years as college costs continue to soar. Enrollment in online higher education is projected to nearly double by 2013.

Altius Education’s first partnership is with Tiffin University. Together, they established Ivy Bridge College, the first online-only, two-year degree program that provides students an accredited path to admittance into a four-year university program.  Ivy Bridge students have access to 24×7 online tutoring and learn with faculty and other students in chat rooms, message boards, and threaded discussion groups. Ivy Bridge refers to its students not as a “student body”, but as an “engaged online community”.

Teens and young adults don’t separate their online and offline lives, so it makes sense that they would comfortably adopt social-networked learning – extending the classroom, study hall, and discussion group into the online realm where they already hang out. At Maveron, we’ll continue to look for promising investments in educational companies that are successfully leveraging the link between social network and education.  After all, for young people, there is no ‘offline’ and ‘online’ – just ‘life’.

Are Your Employees Engaged?

When you’re running a fast-growing startup, it’s sometimes difficult to step back and think about a “softer” side of your business plan: the engagement of your employees. But if you ignore the emotional well-being of your staff, you’re making a big mistake, says Tom Davin, former CEO of Panda Restaurant Group, which employs over 18,000 people in over 1,250 Panda Express, Panda Inn, and Hibachi-San Asian restaurants in the U.S. and Puerto Rico. “It’s the soft stuff that drives the hard stuff,” says Davin.

In the below video, Davin talks about the crucial role of a startup’s founding entrepreneur or CEO to build a cohesive company culture. Davin believes CEOs should serve as “chief storytellers” in their companies, pointing out employees who have gone the extra mile in their jobs. With some 56% of US employees unhappy in their jobs today, according to Gallup, Davin says there is no time to waste; if your employees are not  fired up about working at your company, you won’t achieve the growth rates, customer satisfaction, and revenue goals you want.

WIRED Editor-in-Chief Chris Anderson at Maveron CEO Forum

At our recent CEO Forum, we had the pleasure of welcoming WIRED Editor-in-Chief Chris Anderson as a keynote speaker. As always, Chris presented some thought-provoking, future-forward ideas. Anderson talked about how the Internet forever shifted a centuries-old content model, with the Web enabling everyone to become a creator, author, and collaborator and turning the communications, publishing, and media worlds on their head. This wealth of content, of course, is the “long tail” – Anderson’s now-celebrated term that describes the enormous amount of information generated and distributed online. But Anderson also spoke about how the Internet’s “democratization of production” model in the digital world is now giving way to a “new industrial revolution” in the physical world, a topic on which he’s now writing a book.

In the below video, hear Anderson talk about how the past decade was about finding new social and innovation models on the Web, and how the next decade will be about how consumers and individuals apply these models to the real world to make physical products. In the consumer world of the future, people won’t just buy mass-produced products, but will instead design the specific products they want themselves, and get them made through low-cost, on-demand production methods. Anderson certainly got the crowd of CEOs thinking about what’s next in industrial design and manufacturing. Listen for yourself to hear about the not-too-distant future of consumer-driven production.

Maveron Hosts 2010 CEO Forum

What could be more fun than spending a few days in a place called Carefree, Arizona? Maveron hosted its 2010 CEO Forum in Carefree, where we were joined by the CEOs of our portfolio companies and several visionary business leaders for stimulating discussions about growth and innovation.

The CEOs enjoyed the opportunity to engage with Tom Davin, former CEO of Panda Restaurant Group; Bill Campbell, Chairman of Intuit; Chris Anderson, Editor in Chief of WIRED Magazine; and Peter Bassi, Former Chairman Yum! Restaurants International.  In addition, Mark Vadon, Executive Chairman of Blue Nile, sat down with Darrell Cavens, CEO of Maveron-backed Zulily, to discuss a topic critical to all startup

Howard Schultz chats with Maveron CEOs

Howard Schultz chats with Maveron CEOs

executives today: “Winning Today: Going Fast While Being Cheap” and serial entrepreneur Chris Michel shared “Lessons From the Edge” insights from his time leading Military.com

Attendees also got a chance to converse with Maveron co-founder Howard Schultz, Chairman, President and CEO of Starbucks Coffee Company about the lessons he learned working on the successful Starbucks turnaround.  Other topics at the event included the importance of social media today, how to manage rapid growth and tough lessons learned during the recession.

The CEO Forum is part of Maveron’s commitment to add value to its network of companies that goes beyond investment capital.  With high quality speakers and plenty of time to network with entrepreneurial peers, the Forum gave CEOs a chance to learn “in the trenches” strategies to grow their businesses.

Jason Stoffer on Education

With education spending on the rise, education has become one of the hot investment sectors of the recession.  Jason Stoffer, Principal at Maveron, shares his views on this sector.

Zulily Emerges from Stealth Mode

Maveron today announced our investment in Zulily, a new online private-sale shopping site for busy moms. Co-founded by Blue Nile founder Mark Vadon and former Blue Nile technology and marketing head Darrell Cavens (who is CEO), Zulily aims to build a strong children’s retail ecommerce business offering high quality products for babies, kids and moms at discounted prices. We wrote recently about the rise in social shopping and Zulily serves as our first investment in this exciting emerging category.

With a new private-sale site popping up every week and market leaders like Rue La La and Gilt Group already exceeding $100M in annual sales, the right question to ask is why were are so excited about backing the latest market entrant in this space. Our investment thesis can be succinctly summed up in four parts, outlined in more detail below: (i) it is still early days in the domestic online private-sale market; (ii) private-sale sites are more than a liquidation channel; (iii) private-sale sites can succeed by going or mass or focusing on a targeted demographic and (iv) Zulily has a great team we are excited to back.

 Consumers love a bargain – Private-sale sites are the online extension of the outlet mall

We view private-sale sites as the online extension of an outlet mall. Some stats from the broader liquidation market provide some insight:

  • Private-sale market pioneer Ventee-privee is based in France and forecasts ~$900 million in 2009 revenue. Given the US is roughly five times bigger than France population-wise, you could easily see a scenario where a U.S. market leader could have sales of $5 billion+
  • Back in 1997, an estimated 55 million Americans traveled at least 200 miles round trip to shop at outlet malls in 1997, according to Consumer Reports. I couldn’t find more recent numbers but I assume they are much higher today!
  • Off-price retailer TJ Maxx has $19.7 billion in annual sales

 Private-sales sites are not just a way to liquidation merchandise – but a new sales channel

There is a view by some that private-sale sites have benefited from the recession and the opportunity to access excess inventory at low prices. These folks believe that as the economy turns, private-sale sites will have trouble accessing product. We couldn’t disagree more. As outlet malls grew, manufacturers began to see them less as a way to liquidate excess inventory and more as another channel to sell product. Essentially, outlet malls and now sample sale sites allow manufacturers to price discriminate and increase sales volume by reaching those target customers more focused on value.

A specialty brand can successfully compete and thrive against larger mass merchants

One could ask how Zulily can compete against the marketing muscle of larger competitors like Gilt Groupe, who could easily add children and baby gear to their offerings. We firmly believe that great brands can be built by targeting a specific demographic, understanding their unique preferences and delivering a delightful retail experience. Blue Nile did precisely that in building into a successful publicly traded company while competing head on against Amazon.

The $50 billion market for children’s and mom-related product presents a compelling opportunity. Many neighborhood baby boutiques are closing and there are thousands of product suppliers who have trouble achieving retail distribution for quality product. By focusing on merchandising and curating these products and becoming a trusted voice and advisor to moms, we believe that Zulily can become a premier online retail destination.

Zulily’s Team has the Right DNA Coding to Succeed

CEO Darrell Cavens has quickly assembled a team of e-commerce veterans with experience from Nordstrom, Red Envelope, Eddie Bauer and Newsvine/MSNBC. They are scrappy, focused, have deep understanding of the sample sale channel and know how to build great online brands. It is early days but we are incredibly excited to back the Zulily team and look forward to the site launch early next year.

Allconnect Dramatically Boosts Revenues by Empowering Consumers

Allconnect, the leading comparison shopping and connections marketplace for essential home services recently reported another record quarter of earnings, customer, and revenue growth. In the third quarter of 2009, Allconnect reported a 42% increase revenue year-over-year and a 34% increase in customer traffic.

Allconnect is the type of consumer-driven company that Maveron is excited to back: one that offers an easy-to-use, free, and useful service that saves people time and money. Consumers are flocking to Allconnect’s free phone and Web-based service that helps them get their household services like gas and electric utilities, high-speed Internet, phone, cable TV, satellite TV, and home security systems up and running before moving into their new homes. People simply call Allconnect’s 1-800 number or log onto their site to compare pricing and service options across dozens of providers with complete transparency, choosing the providers that are right for their budget and personal needs. Allconnect does the rest – setting up all the services for free and guaranteeing the lowest prices available.

Founded in 1998, Allconnect has connected over 10 million people through its partnerships with more than 30 utility companies and hundreds of service providers across the U.S. With its recent increase in customers and partners, Allconnect’s marketplace has grown annual sales to more than $3 billion in home service products from over 200 service providers.

Allconnect’s tremendous growth proves what Maveron has believed since day one: a business built around delivering trusted information to consumers to empower them to make better purchasing decisions is not only useful to consumers, but delivers substantial returns to investors.

Social Shopping: Not Just a Fad

At Maveron, we always closely monitor how consumer behavior is shifting, and what impact these changes will have on consumer businesses today and in the future. Recently, we’ve noticed something critical; people are not just making more purchases online, they are changing the way they make those purchase.

Preliminary sales figures for Holiday 2009 show what most retailers already suspect; the Internet is capturing a larger and larger percentage of overall sales. A report from ShopperTrak RCT shows that shoppers spent $10.66 billion when they hit the malls on the day after Thanksgiving this year – only 0.5% more than last year. Yet web marketing analytics firm Coremetrics said its data showed the average amount online shoppers spent on Black Friday rose 35% to $170.19 per order – up from $126.04 last year.

The Internet has in just a few short years fundamentally changed the way consumers shop. Googling for promotion codes, reading and writing product reviews, using price comparison engines, expecting free shipping: all of these behaviors have become commonplace and have fundamentally changed the way consumers view their place in the buy-sell relationship. The Internet has caused the power to shift toward consumers, who demand better prices, more personal relevance, and more transparency in their purchases than ever before.

But as much as online shopping has already altered consumer behavior, we’ve noticed even bigger changes afoot recently. This holiday season, consumers are, for the first time, banding together to exert their purchase power; social shopping is here. Many consumers are turning toward social networks like Facebook and Twitter, invite-only sample sale communities like Gilt and Hautelook, coupon aggregators like RetailMeNot and CouponCabin, and deal blogs like FatWallet or Dealfinder to find the best discounts and bargains – and they’re sharing these deals with friends, family, and the wider web.

Data from Hitwise shows that downstream traffic to the Retail 500 coming from both Facebook and Twitter increased 36% and 15%, respectively, on Thanksgiving from the previous day. Downstream traffic to retailers grew again on Black Friday and Cyber Monday, as many retailers promoted sales via fan pages and tweets. These kind of traffic and sales figures show why 47% of online retailers plan to increase their use of social media this holiday season, according to the National Retail Foundation.

A prime example of a new company that’s successfully harnessing the social shopping trend is GroupOn, which just raised $30M in Series B financing for its site which combines a deal of the day with a local twist. Essentially, GroupOn offers one great deal each day in a local area; this could be restaurant discount, a spa special, or theme park tickets. The social component is that the only way to get access to the deal is if enough people sign up to buy, giving consumers incentive to pass the deal along to friends.

But retailers should map out a strategic social shopping strategy if they want to succeed in this new world – not just blast out coupon codes to temporarily boost sales. To become a valued brand in the social shopping decade ahead, retailers need to:

  • Develop a true multi-channel strategy, engaging consumers in a personalized way and on their terms wherever they are (online, mobile, in-store, call center, TV shopping etc.)
  • Build a real community around their brand using all aspects of the social web (Facebook, Twitter, a brand blog, customer forums, mobile social networks, ratings & reviews sites etc.) to engage in an open, ongoing dialogue with customers.
  • Explore crowdsourced product development to give consumers a real say in how their products evolve and change to meet consumer needs.
  • Put authenticity at the center of everything they do: if a brand moves away from its roots and loses touch with its core consumers, they will suffer immensely, because consumers want credibility, transparency, and their voice to be heard.

We are still in the early days of social shopping, but the changes in consumer behavior brought about by the trend are here to stay. Smart consumer companies should focus on bringing their brand into the social shopping age in 2010.

Function Over, Well, Everything

By Dan Ginsberg, Maveron Sector Advisor, former CEO Red Bull

The seismic shift that has occurred throughout the business world has been felt as strongly in the leading edge of the fast moving consumer product categories as anywhere else – maybe stronger. After all, it is not difficult to understand that, when put under buying pressure, the consumer will stay as closely attached to their tried and true brands, those that they know deliver what they want, rather than taking a “risk” on a new product, even if the price point is “only” $2-4. This has presented problems for innovative brands right on through the value chain from creation through funding, distribution, retail merchandising and, ultimately, the consumer.

What is an Entrepreneur to Do? While there is no doubt that price plays an integral role at a time like this, it seems that price, like a better, greener package, is the ante alone, and not enough right now to move the consumer to a, so-called, riskier purchase. So, as happens in any cycle, we are now seeing brand after brand finding a new path and, in food and beverage, it is definitely functionality. Innovative entrepreneurs are adding a distinct health advantage to naturally nutritious products by supplementing with ingredients that add value in a therapeutic manner, and/or for consumer convenience.

Some beverages, for example, are providing the calcium and Vitamin D that women are being told they need as supplements in their diet. Because of this efficacious movement, the consumer can refresh themselves and satisfy this pharma-type need all in one purchase. Meal Replacement beverages, as well, are seeing good growth, even in these tough times. Those would be the belly-filling, nutritious, great tasting products that also feature the simple, but all important, mouth appeal of a classic beverage. They deliver the protein, or the multi-vitamin, or the carbs that consumers are looking for in an incredibly convenient package that doesn’t require a fork and a knife, or even a hard stop in a time-starved day. It’s so portable; they can even drink their meal while driving.

This healthy-on-the-go movement sees no end right now and so, as I speak with the entrepreneurs who are looking for their next round, or even first round, of financing, I am careful not to discourage them about their own better mousetrap idea, while making certain that I firmly cement in their minds the growing opportunity to move beyond refreshment, alone, and articulate the power of this movement toward functionality. Certainly this is not the only way to success, but look around at all the new products and the numbers speak for themselves. Those emerging brands that feature functionality far outstrip those that don’t. In the case of those that don’t, they had better be healthier, reduced calorie or greener choices.

Just so that we are clear on this not being a beverage-only conversation, the same applies to snack foods. While it is a tough road to hoe for traditional empty-calorie snacks, the nutraceutical approach to snack foods that promise the same healthy value-add as their beverage brethren is working. What began as health bars has leaped into chips, sticks, dips etc. etc. Why not get my daily dose of X while still getting the satisfying crunch I’ve always gotten from my previously-favorite bag of chips. But for a few pennies more out-of-pocket, it’s a no-brainer for many consumers and, especially, for the Mom gatekeeper, who is more studiously than ever, moving quickly down the aisle looking for better alternatives for her family, and herself.