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Friends,

Ever since I began working in venture capital, I’ve been fascinated by the craft of consumer investing. Though every great investor relies on intuition and feel to some extent, there is a certain cold-eyed rationality that can be used to analyze B2B opportunities: How large is the market? What current solutions exist? How much do companies pay for them? What new benefit does a startup offer?

Though you can ask modified versions of these questions when analyzing consumer companies, they’re likely to be insufficient. More than dispassionate market analysis or competitive benchmarking, great consumer investors have to understand people and what motivates them. They are interpreters of desire and status, kinship and self-expression.

Since founding Forerunner, Kirsten Green has established herself as one of the very best practitioners of this elusive craft. Over the years, her firm has backed a slew of hits, including Glossier, Oura, Dollar Shave Club, and Chime – long before they became obvious to the rest of the market.

In today’s edition of “Letters to a Young Investor,” Kirsten explains how she analyzes consumer businesses. Alongside expert intuition, Kirsten also relies on rigorous frameworks that help her decode the value consumer companies deliver and how that intersects with their business models.

We also discuss how consumer preferences are changing in the age of AI. Kirsten outlines why products that deliver “relief” will outperform those that offer “delight” and why we’ll be more excited by products that allow us to “edit” compared to those that just supply “access.”

I don’t say this lightly, but I think this might be my favorite edition of “Letters to Young Investor” we’ve ever published. I learned so much!

What to expect

1. Three frameworks. Kirsten walks through three frameworks she relies on to make better consumer investing decisions. She explains how she analyzes the intersection between product and business model, assesses whether certain consumer behaviors are “inevitable,” and parses the “second-order effects” that make some companies nearly impossible to compete with.

2. Matters of taste. What do we mean when we say an entrepreneur or company has taste? Does it matter? Kirsten gives her definition, explaining why taste and aesthetics should not be confused.

3. Lessons from the DTC boom. During the 2010s, “direct to consumer” (DTC) brands looked set to take over the world. Most have disappointed. Kirsten shares what most investors missed at the time and how her firm picked so well.

4. Living in the present. It’s often said that to predict the future, you need to live in it – trying out new products and exploring technological fringes. Kirsten takes a different approach, focusing on understanding the present with extreme clarity.

5. The age of “proactive measures.” Kirsten sees opportunity in companies that allow consumers to take “proactive measures.” She explains how social and financial stresses have created a demand for products that give us agency and allow us to act as “CEOs of our own lives.”

…and much more. To unlock the full correspondence, and everything else The Generalist’s premium newsletter has to offer, join today:

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Mario’s letter

Subject: Consumer Genius
From: Mario Gabriele
To: Kirsten Green
Date: Thursday, February 20 2025 at 4:16 PM GMT

Kirsten,

Thank you so much for your last correspondence. I so enjoyed hearing about your journey into venture first hand and am grateful for the transparency and vulnerability with which you shared it. There is such power in realizing that our greatest successes often lay just beyond our most gutting disappointments. That’s a lesson I suspect many younger investors and founders cannot hear too many times.

I’m tempted to follow about a dozen threads from our last message, but if I force myself to discuss what I absolutely must discuss with you, it’s your genius for consumer investing. I don’t think genius is too strong a word – there is something alchemical in interpreting the zeitgeist so acutely that it can be translated into successful products. It takes a shrewd reading of psychology (status, mimicry, and desire), anthropology, marketing, and, of course, commerce. The dream exponent of this art might be a cocktail of Jony Ive, Ray Kroc, and Rene Girard – hardly a pedestrian concoction. Products that should work often don’t, while those that shouldn’t (razors in the mail) sometimes, inexplicably do.

You have established a remarkable track record for spotting these surprising winners before they become obvious to the rest of the market. A more skeptical, linear investor might have struggled to find the sense in many of Forerunner’s winners:

• A ring that tells you you’re sleepy (Oura)

• A blogger’s cosmetics line (Glossier)

• Decent human food but for dogs (Farmer’s Dog)

• Vitamins for women (Ritual)

• A bank for people living paycheck to paycheck (Chime)

You could craft these kinds of unappealing taglines for just about any consumer company – which is the point, of course. Much more so than with B2B companies, it’s extremely difficult to distinguish creative from delusional, promising from moribund.

At the same time that Forerunner discovered some of the companies mentioned above, other firms were backing a slew of less successful consumer plays, from high-end juice presses to boxed mattresses to attractive electric toothbrushes.

Without a differentiated perspective on what makes consumer brands work, it was all too easy for investors during this period to learn the wrong lessons. For example, many seemed to believe that every household item could be reinvented by a startup, provided they sought branding advice from Red Antler or Gin Lane. Couches, candles, cleaning supplies, sneakers, skincare, and cereal have all been reimagined (usually multiple times) by venture-backed companies. (Some have worked reasonably well!)

In our last correspondence, you shared how you use “personal equations” to guide your investing. For example, assessing whether a company’s business model adds or detracts from the consumer’s experience. Are there other equations or heuristics you find yourself returning to when trying to separate signal from noise in the consumer space? When you look back on the direct-to-consumer boom of the 2010s, what helped you find so many of the breakout companies amidst a sea of appealing color palettes and clean typefaces? What did other investors chasing the next Dollar Shave Club or Glossier in that era miss or misunderstand?

The example equation you provided focused on the business model. When it comes to analyzing a consumer opportunity, is this where you end up focusing most? How hands-on do you want to be with the product? Does it need to speak to you personally, at some level?

How heavily do you weigh the person behind the business? Are there particular signals you find particularly promising in a consumer founder? Do you want this person to have demonstrated “taste” in their given domain – whether that’s suitcases or shoes? If so, what does taste really look like? How does it manifest? (Can you tell I am skeptical of this word?)

In a previous edition of this series, Reid Hoffman described venture capital as a form of “predictive anthropology.” This description strikes me as especially apt when applied to consumer investing. To identify outlier investments in this category, it seems like it is not enough to simply pick a great product or a big market – you have to, at some level, see a little bit into the future and imagine what society looks like in two years or ten. How do you do this? I ask this from a very practical perspective. Are you someone who strives to live in the future? Are you constantly testing out new products and experiences? Do you turn to art or history or science fiction for inspiration? If recalibrated in cold, technological terminology, I suppose what I’m asking is what training data is most useful in powering the Kirsten investing algorithm?

Of course, I can’t use an AI analogy without exploring how the current revolution will change consumer behaviors. Across your investing career, I wonder how you’d rank the present moment compared to previous eras. Has there ever been a better time to invest in consumer startups? Perhaps the social media companies of the late 2000s and 2010s offered a richer opportunity set, but it certainly seems like the next few years have a chance of rivaling that period.

Last summer, you and the Forerunner team put out a report entitled “Winning with Consumers in AI.” I particularly enjoyed how you describe the amplification that occurs when changing consumer preferences meet a new technological paradigm. As you say in the presentation, “When a consumer values shift intersects with a tech shift, generational companies are built.”

It’s an incredible deck and one of the most arresting, thoughtful analyses of what AI might unlock and why. Two points really stood out to me:

• A shift from “access” to “edit.” You argue that over the last decade, startups won by expanding access. Think Airbnb to properties, Uber to cabs, or Spotify to music. As choices have proliferated, AI should help us “edit,” sorting through abundance.

• Winning with “relief” rather than “delight.” You explain that previous tech products won by “delighting” consumers. Examples include riding a Peloton, buying Bitcoin on Coinbase, or sending money to a friend via Venmo. Interestingly, AI’s magic may come from providing “relief” to consumers, taking care of a challenging task.

I outline this in the hopes of understanding the thinking behind it. What was the research process like? Did you start with a hypothesis in mind? How did you land on “relief” as a dominant consumer motivation? These may seem like writerly questions, but I think they might reveal some of the magic in your craft.

Given the speed of development in AI, how might you update the report today? What shifts have bolstered your conviction, and which are prompting a rethink? I’d also be interested in hearing which AI experiences have delivered the most powerful magical moments for you so far. Where has AI created “relief” in your life?

With much gratitude for your correspondence,

Mario

Kirsten’s response

Subject: Consumer Genius
From: Kirsten Green
To: Mario Gabriele
Date: Monday, March 3 2025 at 1:59 PM PST

Mario,

I couldn’t help but be energized when reading your note – both for the sharpness of your observations and how you reflect back points from our last exchange with such clarity and curiosity.

Your framing of consumer investing as a blend of psychology, anthropology, marketing, and commerce resonates deeply. That alchemy is exactly what makes this space so fascinating and, at times, maddening. Why does one product take off while another, seemingly just as promising, flounders? The answer often lies in the intersection of consumer behavior shifts and structural business model advantages rather than in branding or product quality alone. Products that should work often don’t, while those that seem improbable sometimes become category-defining.

You asked about my “personal equations” for navigating this – the heuristics I return to when trying to see the signal through the noise in the consumer space. The overarching principle here is a belief that the strongest businesses don’t just have a great product or compelling branding – they are structurally designed to scale in a way that enhances the customer experience, aligns with inevitable behavior shifts, and creates self-reinforcing advantages over time.

On a more specific level, there are three frameworks I return to in order to pressure test this:

The first is The Consumer Experience <> Business Model Test: does the business model itself enhance the product experience, or is it just financial engineering? A great example is Spotify – its subscription model isn’t just about creating revenue predictability; it fundamentally improves the experience by removing ads and enabling offline listening. Compare that to many other subscription-based consumer companies, where the model is in place primarily to benefit the company, not the customer. Similarly, virality is only a durable advantage when it meaningfully strengthens the product. Venmo’s viral loop strengthened its product experience – the more friends that joined, the more useful it became – while some fintechs relied on acquisition incentives that didn’t actually make their product better. If the business model doesn’t make the experience better for the consumer, it’s a red flag.

The second is The Inevitable Behavior Test: is this business riding an unstoppable consumer shift, or is it trying to force unnatural behavior? The strongest consumer businesses accelerate an existing shift rather than manufacture demand. Peloton initially succeeded because it tapped into a real and growing desire for at-home fitness, premium experiences, and connected communities – whereas many “smart” kitchen devices failed because they assumed consumers wanted more complexity in cooking, not less. The key is identifying whether customers are already moving in a direction or whether the company is trying to push against ingrained habits. You don’t need to convince people to change; accelerate a shift that’s already underway...