By KATIE BENNER and MICHAEL J. de la MERCED MARCH 26, 2017
SAN FRANCISCO — Kirsten Green had only dabbled in investing in startups before she began a venture capital fund in 2012. What she had instead was years of experience covering the retail business as an analyst on Wall Street.
So Ms. Green, 45, parlayed that retail knowledge into her venture capital endeavors and used it to bring specialized advice to her companies. In one of her first moves as a venture capitalist, she was part of a $1 million investment into Dollar Shave Club, then a tiny company, which sells razors to consumers online. Later, she invested in Jet.com, an ecommerce startup that was vocal about wanting to take on Amazon.
Last year, both those startups hit the jackpot: Unilever bought Dollar Shave Club for $1 billion, while Walmart purchased Jet.com for $3.3 billion. For Ms. Green, that translated into a bonanza of returns.
Thinking about “the acquirers, the state of the public markets, how a business is being valued — that’s an essential way to understand the overall ecosystem” of startups, said Ms. Green, whose little known venture firm, Forerunner Ventures, is based in San Francisco.
The Dollar Shave Club and Jet.com deals have helped vault Ms. Green this year to No. 12 among the top 50 venture capitalists in the world, according to data compiled by CB Insights, a research firm that tracks venture capital. Other venture capitalists on the list also landed their spots partly because of big sales or initial public offerings of their startups, including the recent I.P.O. of Snap, the maker of the ephemeral messaging app Snapchat.
The place of Ms. Green, who did not rank in the top 20 last year, on the list demonstrates that the real measure of success in venture capital is how much a startup is worth when it sells or goes public. That is especially so now as the rate of startup sales and I.P.O.s — known as investment exits — is expected to pick up in 2017 after a long lull, according to Renaissance Capital, which tracks public offerings. This year has already seen strong stock market debuts from Snap and corporate software maker Mulesoft.
That means the venture capitalists who nurtured those businesses can finally reap some cash. “The fact that we’re seeing more exits, and a stronger opportunity for exits, is a good thing,” said Theresa S. Hajer, a managing director at Cambridge Associates, an investment advisory firm.
Knowing when to sell a startup or take it public remains as important as deciding to sell. Founders Fund, a venture firm started by the investor Peter Thiel, had put money into Stemcentrx, which makes a cancer fighting drug. Last year, Stemcentrx agreed to sell itself to the drug maker AbbVie for $5.8 billion, an amount that generated returns exceeding the $625 million fund that Founders Fund had used to invest in the company.
“It’s clearly important to generate realized returns, but the question is still when,” said Brian Singerman, the Founders partner who oversaw the Stemcentrx investment and who is No. 5 on the list of top 20 venture capitalists.
CB Insights put together the list using criteria such as the size of a return an investor was able to generate when his or her investments went public or were acquired. The firm focused on the performance of investors since 2009 for the list.
Ms. Green is an unorthodox venture capitalist for several reasons. Apart from having never worked at a venture capital firm before starting her own in 2012, she is also a woman in a maledominated field. (Of the top 20 venture investors this year, only two were women.) And unlike many generalist venture investors, who work in a range of areas, Ms. Green focuses specifically on commerce and other retail related startups.
Investors have tried for years to find the next Amazon or eBay, often with little success. Recent high profile ecommerce failures include Fab.com, One Kings Lane, Shoedazzle and Gilt, all of which were financed by brand name investment firms including Andreessen Horowitz, Greylock Partners and General Atlantic.
Ms. Green’s roots in retail run deep. She began her career as an accountant auditing retailers. In the late 1990s, she covered those companies as a stock analyst for Montgomery Securities, studying wonky measurements like customer traffic in retail locations and a store’s profitability per square foot. She also observed the rise of brands like Abercrombie & Fitch, Coach and Ugg.
She soon concluded that online commerce would underpin the next generation of important retail brands, but that consumers would not rely on just one way to shop. With the rise of Amazon and other online retailers, Ms. Green saw more bankruptcy filings from traditional retailers, as well as news of store closings and reports of market share shifts. But she also saw stores do well when companies could make an emotional connection with shoppers and better analyze their behavior.
“Retail is now totally propelled by consumers and their needs,” she said. “People can buy what they want in any way that they want it. That trend started a long time ago, and it has really changed everything.”
In 2003, Ms. Green decided to jump from analyzing this shift to investing in it. For a time, she worked as a consultant to a private equity firm before turning to venture capital because of her interest in young companies. In 2010, she raised an angel investment fund to make oneoff investments in companies like Birchbox, a cosmetics subscription service, and Warby Parker, an eyeglasses retailer, while she stu0died how to raise a venture fund.
In 2012, Ms. Green raised a $40 million venture fund. The investment firm Cendana Capital contributed $10 million, despite the fact that she had never worked as a traditional investor or tech entrepreneur.
“When we talked to founders she had worked with, they all said that she had the best expertise and gave the best advice,” Michael Kim, a managing partner at Cendana, said of Ms. Green.
With that fund, Ms. Green helped lead a $1 million investment into Dollar Shave Club when the startup was valued at just $5 million. She also joined the company’s board.
After Ms. Green invested in Jet.com in 2014, she chatted with Jet’s executives almost weekly about matters including strategy and potential acquisitions, said Katie Finnegan, who was the online retailer’s head of corporate development. Ms. Finnegan said Jet still consults with Ms. Green even after the company’s sale to Walmart.
Ms. Green has “a real instinct for brands,” said Rachel Blumenthal, the founder of the children’s apparel startup Rockets of Awesome, which sends subscribers a customized box of clothing for every new season. Ms. Blumenthal got to know Ms. Green from Warby Parker, which was founded by Ms. Blumenthal’s husband, Neil.
Ms. Green invested in Rockets of Awesome last year and has brought her opinions about consumer behavior to the startup. At a recent company board meeting, Ms. Green argued that the online retailer’s subscription box needed to remain distinct from its other packaging. Ms. Blumenthal agreed, saying that making the box “the crown jewel of the customer experience” was the right decision because it was one of the most powerful ways to reach consumers and to learn about them.
Ms. Green currently serves on more than 10 company boards, including for the men’s clothing company Bonobos, the makeup brand Glossier and the women’s vitamin company Ritual.
She has also had her share of flops. Threadflip, an online consignment store in which she had invested, shut down last year and became part of Le Tote, a service that lets users rent clothing.
As for exits, Ms. Green said she tells entrepreneurs that she expects them to take the companies public or sell to a buyer as soon as appropriate. Of the 30 companies in her first fund, eight have been acquired. In her second $75 million fund, which she raised in 2014, two companies have been acquired, including Jet.com.
“Now that people are bombarded with information, we are in a golden age where brands matter,” Ms. Green said. “I want to be part of this new era.”
This article originally appeared in the NY Times.