A Freestyling Angel

Burning thoughts from Josh Felser, cofounder of Spinner, Grouper/Crackle and Freestyle, an institutional angel fund.

in a Box

I have been struggling with the latest ecommerce trend to spread like wildfire: “” in a box. The list of startups is long: meundies, whittlebee, blissmo, beachmint, babbaco, kiwicrate, foodzie, birchbox (met the founders of birchbox recently at Summit Series and they are impressive)

All the box plays seem to fit in to two boxes: replenishment of staples or curated goods. 
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Replenishment box success stories will need to focus on items 1) that arent easily purchased in stores (online or offline) we already frequent on a regular basis 2) that are consumed in a predictable time frame and 3) that arent bulky. In this segment buyers are the curators choosing exactly what they need. Vitamins and kids clothing are decent examples. 
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Curated box success stories will need to focus on items 1) that are aspirational or give prestige to the buyer 2) that are easily exchanged (non-perishable) and 3) dont need to be heavily personalized. Trusted experts like the box company’s brand/buyers or celebrities/tastemakers are the curators and the consumers are mostly passive. Women’s shoes and beauty products are already clear winners. 
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To date, I havent seen a replenishment box startup that feels like a mass market business. Some mix of low quantity, low frequency and low price point has kept me out of this segment. Maybe an aggregator of staples like Alice can become successful through delivery of a big enough basket of goods to overcome low margins, with volume. I also wouldn’t be surprised if Amazon backs in to this segment through a more comprehensive re-order feature. 
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The curated box segment is a different beast as consumers seem to be willing to pay up on a regular basis for goods packaged by "a trusted source". Its also inherently more viral as users boast to their friends and followers when their eagerly anticipated boxes arrive.  
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Since i get a new box startup pitch every week, I am continuing to evolve my thinking on this space. Love to hear what you think. 
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Then again maybe we should just learn from the most widely viewed box of all: “bleep” in a box. 
http://www.youtube.com/watch?v=WhwbxEfy7fg

$500k

Yesterday was a great day. Freestyle is backing a kickass, made entrepreneur that we missed in his last startup. But we had to go through a little hell to get there and it was mostly my fault. For reasons that I will explain, freestyle now has a minimum investment size: 500k.

We raised $27mm in May and will invest that capital in 20 - 24 companies over 2 years. We also reserve 50% of our fund for follow-on investments. Back to the 500k minimum. We make fewer investments/partner/year then most seed funds. I target just 5 startups per year because that’s all I can handle. We strive to be the most active seed investor in every startup we back until they raise their series A. That’s our goal and we achieve it 90% of the time.

We also never make more then one bet in any segment and we define each segment broadly so that we aren’t ever in conflict. We want our relationships to be as simple and clean as possible. So because we invest in so few startups every year and we only target one startup per broadly-defined segment, our investments need to be meaty, substantial, meaningful. We believe that 500k captures that need. It’s less about ownership percentage and more about haveing enough capital at risk to feel like we are totally in it with the founders.

So back to yesterday”s conflict. I didn’t communicate our minimum clearly when the entrepreneur and I were “dating”. When I “proposed”, I surprised the entrepreneur with my 500k requirement. Over the weekend we both stewed on it, the entrepreneur came back, I reiterated our belief in him and the entrepreneur kindly agreed to let us in with 500k.

We both felt great about it and I promised him that he would feel it was dilution well spent. He will get everything he wants from us and hopefully a little more.

Lucky and fearless enough to spend time with Larry Harvey and Marian Goodall at Summit Series in tahoe. 

Lucky and fearless enough to spend time with Larry Harvey and Marian Goodall at Summit Series in tahoe.