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Hello everyone, I am one of your co hosts for today's interview, Chris Walton.

And and I'm Ann Mazinga and we.

Are pleased to introduce Claire Cherry.

Claire is a partner at ERA vc.

Claire, thank you for joining us and welcome to omnitalk.

Great to be here.

Very much looking forward to it.

We're excited to have you.

Claire, I'd love to just hear a little bit about your background, how you got into venture capital, a little bit about yourself if you don't mind just starting starting this conversation off with a little bit of that for the audience.

Yeah, of course, yeah.

So if we take it from the beginning, I guess I've always had a keen interest in innovation.

So way back when I was actually a scientist, loved the excitement of discovery, kind of got to graduation, knew I didn't want to be in a laboratory, didn't have great careers advice at the time and really thought that that was my only option.

So I did what most self respecting people do in London, went into finance and I guess that happened to early stage investing.

So typically into high growth companies at the start doing everything from pensions administration software all the way through to cancer drugs to Mexican restaurants.

But I really could see that, you know, I guess I was loving everything I did in consumer, consumer brands, consumer technologies and I've ultimately been doing that ever since.

So yeah, as I always say, once I fell in love with consumer, there was kind of no turning back from that perspective and I think that probably resonates with quite a few people here.

And yeah, I joined ERA earlier this year and really we back category transforming consumer brands.

So investing into businesses with less than 5 million of revenue, helping them grow and turn into category leaders.

So typically both online and offline and sort of fast moving consumer goods and yeah Pretty global remit.

So as you can tell probably from the accent, I'm based in the uk, but we're investing across North America, Europe and Australia.

Wow.

What is your.

What was.

I have to ask what science you were doing?

What made you a scientist, Claire?

Well, I actually was seemingly quite indecisive.

I did biology, chemistry, and economics at the time, so it's not necessarily recommended.

Yeah.

Everything from, I guess, cell aging all the way through to, yeah, organic chemistry.

So quite a wide breadth, which I guess did inadvertently set me up for this, but not that I realized that at the time.

Oh, that's wild.

Yeah, it is.

And I think this is the first laboratory drop we've ever had.

Yeah.

The history of the avitalk retail podcast network, so.

So kudos to Claire for that.

Yeah, it's crazy.

Like going from a scientist to a vc.

That's a.

That's an interesting path, for sure.

All right, well, Claire, one of the things that I'm excited to talk to you about that I'm going to kind of bait the hook for the audience here is you have a lot of experience in store of the future investments, which is, you know, kind of Ann and I's bread and.

But ananized bread and butter.

And so I can't wait to talk about that.

So those listening are going to want to stick around.

But before we do that, I'm curious, what types of investments are you currently keen on in the marketplace?

Like, what type?

Like, what are you guys, you know, at Arrow, what are you guys really looking at?

What do you think is going to be hot?

Yeah, I mean, I think for us, I guess we have always focused on three core buckets, which is beauty and personal care, health and wellness, and future of food.

But really where we get super excited at the moment is kind of the intersection of the three of them.

So if we take kind of a couple of examples, you know, something like longevity, really where we're seeing a shift.

You know, we've seen longevity clinics come to the market.

They're kind of servicing the 1%, but ultimately we now see that people are bringing that into the mainstream.

Right.

So consumables, supplements, powders, coffees, teas that ultimately allow you to live a longer, healthier life.

And I think, yeah, we get excited where technologies are really hitting that intersection of.

Yeah.

Becoming, you know, widely adopted for consumers generally through, you know, a retail proposition.

Right.

And yeah, as at that intersection, something like future of food is exactly the same.

Right.

So, you know, brands that are taking traditional food and drink habits Making them better for you, better for your mind, your body.

Something like functional mushrooms.

You can produce a coffee, a chocolate that ultimately gives you energy, gives you focus, no caffeine, crash, added health benefits.

You know, really we're seeing, I guess, a big consumer draw towards that.

So generally, you know, younger demographics leading it, but I think everyone wanting to reduce their dependence on drugs or pain medication to manage, you know, long term health benefits.

So that might be hormone imbalances, fertility, sleep, mental wellness.

I guess that takes up a big chunk of what we're doing at the moment.

And you know, that's everything from children all the way through to adults to aging populations.

And yeah, I'd say that's, that's probably the bit that, yeah, gets us all most excited at the moment.

Wow.

So.

So that's what, so basically what you're saying is, so you're saying like, because there's always been a trend towards healthy food, but now you're saying that there's real movement towards food as medicine, is that right?

Yeah, exactly.

And I think just functional benefits.

Right.

So instead of, you know, snacking for the sake of snacking, ultimately you might be able to pick something that, whether it's high protein, better gut health.

I think it's that, you know, knowledge base that really everyone's an armchair scientist.

Right.

How do I better understand my own hormones, my own balance, my own body to really drive into, to drive brands into categories that they might not otherwise have.

Have looked to.

So instead of saying, okay, if I want to live a longer life, then I have to take 50 supplements or 50 pills every morning, you know, maybe you can incorporate a whole chunk of those into everyday habits.

So, yeah, no, it's exciting.

Claire, are there any areas especially, I would have to imagine when you're focused on the categories that you talked about, beauty, functional health and wellness products, there's got to be some areas that you are not looking at or that your, your team is avoiding right now too, within those same categories or, or even spend that you're, you're seeing, that might be something that you tell people to shy away from.

How do you think about that question and where does Arrow land on that?

Yeah, I mean, I think in terms of look ultimately across the consumer space, yes, there are categories that are more saturated.

Probably another skincare brand right now is difficult.

But it's not to say that we wouldn't do it.

But you know, I guess that category has evolved quicker than perhaps personal care, hair care, you know, body care, all of those things.

Right.

So it's not to say that we wouldn't look there, but really, for us, I think the biggest challenge is ultimately what businesses look like under the hood.

Right.

We're coming out of, you know, probably a decade or more of businesses where acquiring customers through Facebook was relatively easy.

And I think that got investors and founders into a mindset of kind of hacking their way to growth.

But ultimately, I think we're all starting to realize that you can't shortcut your way to building a brand.

Building customer love, but building loyalty.

And so we look very holistically about how you're acquiring customers, what that looks like, what your channels are, are you showing up in the right place, or is the product really resonating?

Because really, the key factor for us is building brands that withstand the test of time.

You know, we want them to be here in 10, 15, 20 years, and we accept that we might be of that journey, but, you know, that's the, the goal here.

Rather than build a business on Amazon, you know, buy it up quickly, sell it and kind of get out.

That's just not, not what we do as investors at all.

And I think, look, as.

As a lot of your listeners will know, we always have and always will believe in the power of retail.

Even at peak E commerce in Covid and the height of, you know, everyone talking about digital and direct consumer models, we know that everyone still wants to shop offline, particularly in these categories.

Right.

They're very, you know, sensorial, emotional purchases a lot of the time.

And so, yes, we place a lot of weight on speaking to retail buyers.

How are they perceiving the category, what do they want it to become?

And ultimately, where might the businesses that we invest in play a part in that?

So, yeah, I think founders may be a surprise by the breadth of what we look at under the hood to try and understand.

Yeah.

Truly, whether it's a sustainable model and, you know, whether it has a reason to exist, to your point, in a number of very crowded categories.

Right.

That's what we're trying to understand.

Yeah.

And are there, like, different metrics now that you're looking at when you look at some of these businesses to say, you know, it's not just, you know, how many people you, how many new customers you've acquired on with your Facebook ads, but like, really what, what, what a sustainable business looks like that can keep, you know, bringing in revenue year after year after year that are maybe important for listeners to know about?

Yeah, I think there's probably one or two key digital ones, which is ultimately for us personally and obviously everything here is, you know, personal how we think about things.

But we don't typically like businesses where if you're paying more for your customers than they're spending on their first purchase, right, so you're expecting them to come back, they have to repeat, you're not paying back.

It's just not very good for cash flow.

It's not very good for, you know, just a mentality.

So from that perspective, that's generally a line we draw from a digital perspective.

And then in retail I think there was a big trend, particularly coming out of COVID of retailers placing, you know, exceptional purchase orders for initial buy in and then a product sits on shelf, it doesn't sell, revenues look good for three months or six months and then possibly suspect after that.

So yes, we care a lot about, you know, how products are actually selling, where they're sitting on shelf.

Again, what the plan is for the category, how you can get, you know, maybe to brand blocking to a position where I guess you could over index.

You know, if you think about a lot of these businesses only have maybe three or four SKUs on shelf, perhaps less so the expectation that when you see a beautiful digital portal where they can tell the story exactly as they want to tell it, that's very different to being smack bang in the middle of a Walmart shelf with nobody having brand awareness and kind of no ability to tell that story.

So and you know, it's, it's fundamentally a very different skill set for people to have to build those two sides of the business.

So yes, we look at team and team composition and who's really going to drive it, what experience do they have?

Do they know?

Retail packaging, you know, it's all of that level of detail I guess that feeds into it.

So yeah, but those are the two things that you know, are immediate watch outs for me.

So Claire, why don't you explain the second one a little bit more too?

Because the first one, I think the first one's pretty self explanatory for the DTC market.

Right?

Like are you spending more on advertising than you're getting in, you know, revenue from your customer?

That's essentially, essentially what you're saying, but, but the other one's a little more nuanced and the other one's a little, I think less known for the entrepreneurs that are trying to go wholesale in the route there.

So, so explain that more in terms of what you're saying.

Like what are you really looking at from the due diligence perspective that helps you identify, you know, if that situation is arising.

Yeah.

So from our perspective really it's twofold.

Right.

I guess, you know, there is a, generally a challenge potentially where retailers are stocking a new brand.

They don't know how much is going to sell, they don't know how much is going to resonate with customers.

Right.

So yes, they do their best estimates of forecasting as we all do.

And ultimately there are only so many levers you can pull to get a product off of a shelf and into someone's hand.

So for us we really think about ultimately how many units are selling, how many dollars they're selling on a per store per week basis.

Right.

And we would hope that over time that's trending up as you increase brand awareness, as you get to a point where you do have more loyalty, you're not discount incentivizing all of those pieces.

But yes, ultimately it's a measure of how much product is actually going out the door and into consumers hands.

And around that of course we look at what's worked in terms of, you know, whether it's sampling programs, marketing support.

Have you managed to drive loyalty from a digital perspective even through retailers?

All of that piece.

But yeah, the fundamentals are whether it's sitting on shelf or whether, yeah, you're actually managing to sell through.

That's a really interesting point.

I've never thought about that, that from the investor perspective there's a lag time in the sales you're seeing for the, on behalf of the, of the brand.

Right.

Because they're selling into the retailer, they're getting that big order.

But then you have to actually wait to see how it sells on shelf.

And, and yeah, you feel that with all the DTC advertising and all the buzz that's going on about these brands, you really don't know anything about them until probably a year or two down the line where you can really see how they're, how the market is, is taking to the, to the products and the ideas.

Wow, that's really cool.

All right, so, so I teased it before.

Let's get back to the store of the future here now.

So our question for you is this.

In what areas do you foresee continued disproportionate investment as retail stores, both online and those both online and those in actual physical stores?

How do you see the store, the future investments continuing to evolve?

Yeah, I mean I think if I come at this from where we're seeing the innovation ultimately.

So I think that from my perspective comes in two key areas.

The first is helping retailers drive additional revenue.

Right.

And then the second is helping them reduce their cost base.

So if we take the first from a revenue perspective, probably some of the areas that we're getting most excited about are proper loyalty and incentive schemes.

So we've seen I guess the next wave of AI and personalization drive to a place where customers can think about a retailer as something other than price based.

Right.

Which is what we all want, is what retailers want, is what brands want.

And yeah, I guess it's the evolution of digital voucher schemes, seamless transactions, all of that to enable both an online offline experience but also true customer loyalty.

And you know, we are starting to see particularly some of the smaller retailers have an ability to adopt full personalization for consumers.

Right.

So instead of just recommending on a basket based on what you've bought historically, you know, it's far beyond that and has far more data points.

And I think that's where we get most excited.

You know, we looked at a fragrance multibrand retailer in Europe and they now had a database themselves of close to 25,000 data points on how people shopped, what fragrances resonated, you know, how they move between brands.

And ultimately you have such a powerful data set.

And I think yeah, historically retailers have sat on it and not necessarily had an ability to do much with it.

But yeah, the beauty of where we are now is that that's, that's just beginning.

And I think again it comes back to a great customer experience, better loyalty, better engagement, all the things we like to see.

And then yeah, that seamless transaction I think is very important if we think about how customers were shopping, you know, particularly in Covid and post.

Covid, yes, E commerce has continued, continue to trend up from pre Covid levels.

But until we get to a store experience that's as equivalent, as joyful on both sides of it, I think that's where you really manage to unlock kind of, yeah, true value.

Right.

So whether it's the evolution of something like Warby Parker, where they started, you know, to allow consumers to try on in physical sites, we're seeing technologies that allow that from a multi brand perspective.

So you could shop online, have everything in store, try it on, send it back, you don't have to worry about returns, all of that piece.

Right.

We, which I think yeah, it just gives for a great experience and you know, it gives the best of both worlds.

Right.

The ease of digital plus all of the benefits and touch sense of, of physical and then on the other side from a cost Perspective, we've probably seen two key areas.

So you know, I think as we're all aware, cost of living increases, big rise in theft across the board at physical retailers.

People tackling it very differently.

I mean we've looked at from startups using computer vision and cameras in store to help track and reduce theft.

But I think the excitement is that now AI has got to a point where you don't need the cameras, you don't need to go through the expense, the logistics, you know, the headache of installing a physical kind of overarching view.

And you can do that fully from a software perspective.

So yeah, that will massively reduce it.

It'll mean we don't have to go and get everything out of a, you know, plastic cabinet or anything like that, which I guess was the alternate to that issue.

And then the second that's ultimately blending similar technological advancements is inventory efficiency.

So you know, the big challenge of having inventory in the right place at the right time, moving it between sites, you know, cross handling it with physical, with digital.

Yeah.

We're seeing a lot of very smart solutions that, that again, it all comes back to enabling that fully seamless experience for everybody.

Right.

And you know, better management of working capital for, for everyone.

And even the, what we spoke about before.

Right.

Which is brands may sell out their product in a handful of stores and at the moment, you know, retailers really struggle to move that between stores or think about, you know, cross merchandising in.

In from an inventory perspective.

So yeah, the technology advancements there make me.

Yeah.

Excited about what's to come.

Yeah.

And I always love talking to VCs because they put everything in such black and white terms.

Yeah.

For the story of the future, retailers need to either drive sales or reduce costs.

That's basically what.

Right.

What Claire, just pretty basic there.

Yeah.

Yeah.

Right.

Like let's just get down to basics and brass tax, which is always a good thing to keep in mind.

But I'm curious too because you mentioned it.

So you said with I want to go into theft a little bit.

So you said, you said you're seeing software solutions that don't rely on computer vision to help decrease theft.

Can you explain that more like what types of things are you seeing?

Yeah, so I guess there's a couple.

And I think it's the interesting part for me is that everything's starting to converge.

Right.

In terms of, you know, if we look at the barriers historically, potentially something like RFID or near field communication tags were a barrier because the price was too high.

The Price of that's come down.

So you can transact, you know, on that without scanning to check out Y.

We've seen that, you know, becoming relatively widely adopted.

And that feeds into how you think about theft, how you can track items.

And for us, yes, you don't then have to have a camera which is, you know, ultimately identifying the item there because you already have your technology in place to identify it.

So then the theft can be done.

Yeah.

From a tag perspective.

And I think in future, although the technology is not quite there yet, ultimately the artificial intelligence is so good at image recognition that you will get to a point where you can just see it in store without ever having or understanding customer behavior, which I think is quite exciting.

Yeah, yeah, that's really interesting.

I mean, that's our background too.

I mean, we kind of were big proponents of that idea in general of using solutions like RFID or near field communication to just understand what's moving throughout your store at any given point in time and not relying on the capital infrastructure of cameras and whatnot to, to help you get the better answers to those types of questions.

So that's really interesting that you're starting to see that trend.

And that was, I mean, gosh, I mean, we've been thinking about this conversation for that topic for a long time, man.

So it's just crazy to think that that's just now starting to come into play.

Yeah, yeah.

And I think I started looking at it in 2016.

Right.

And I guess really now everything is converging.

And yes, of course, you hope you get to fully transparent supply chains all enabled.

Like we've seen fibers that are trying to replicate RFID tags so that ultimately you wouldn't have to put a tag on it.

You would just know from spinning it into the yarn, which, you know, again, gives an ability to, to do anything with that, that data.

Right.

And we've looked at, yeah.

Many solutions.

Also thinking about efficiency, how you're driving that in store again, coming from whether it's RFID or equivalent.

Right.

And that, you know, it just wasn't possible a few years ago.

Yeah.

So fun fact, I didn't know we're going to talk about yarn identification, but Ann and I had this debate on a recent show, like towards the end of last year where we, we talked about the value of RFID vs IT vs radio identification interwoven into the government.

Where's your head come down on that whole idea or that argument?

I'm curious which side of which side you fall on or is there even a Side to fallout, I guess at this point would be the question.

Yeah, I mean, I think that for me they serve different purposes.

Right.

I think generally an RFID is probably more widely adopted mainly because of that price point and also ultimately ownership of supply chain, all of that piece.

Right.

I think it's hard unless you kind of truly have that end to end sort of vertical piece.

But I mean, yeah, from a transparency and sustainability and ethical standpoint, obviously absolutely fascinated by the kind of interwoven RFIDs, but mainly for, from my perspective, for end of life.

Right.

So what happens to the garment afterward?

Where does it go?

How do you track it?

You know, I think some of the people I spoke to who were most advanced in terms of what I'd seen were primarily using it for that recycling issue.

Right.

Because if you're mixing fibers, then you can't, you know, put it into a relatively standard process.

So that for me, it 100% has a purpose there.

Whereas whether the cost benefit ever plays out for most people, I don't know.

Well, Claire, I.

I am curious.

You cover so many different industries that you're investing, where you're making investments.

Where do you, where do you stay on top of trends like fiber radio frequency threads?

Like, what are the places that you look to, especially given, like on one hand you have new beauty products that are going direct to consumer, under $5 million a year in revenue, all the way to, you know, somebody who's putting RFID in place in order to minimize theft in a retail store.

Like, what are those sources for you, if you don't mind sharing?

Yeah, I mean, I guess the beauty of this in part is that, you know, we get so many pitch decks every single day.

And so even things you never would have thought about or had never even considered, which, yeah.

Puts a very different perspective on things which, you know, we have to be forever thankful for.

But yes, there's a lot of time in very niche substacks, I bet.

I was gonna say.

Yeah, I think actually, you know, podcasts, everything.

Right.

It's just about assimilating as much news as possible.

And I think, yeah, for us the balance is definitely, you know, how much we lean into climate technology, all of that piece versus how you actually sell a brand in store on shelf and, you know, all the basics there.

And yes, ultimately the two are very different, but we try to at least keep.

Yeah.

On top of, you know, some of those key trends for sure.

How many pitch decks do you get a day on average?

Oh, would you estimate.

I mean, me personally is probably around 5 to 10 a day.

Wow.

And okay, so then I gotta ask, like, how do you, how do you sift through them?

Like, how do you decide?

Like, okay, this one is worth like following up on, this one goes to the bin, like all that kind of thing.

Like how, how do you decide that?

Yeah, I mean, in part why we have some non negotiable criteria is to do some of that filtering up front.

Right.

So anything for me, that generally is very early in their journey.

Perhaps no retail presence.

All of that probably goes on the too difficult pile.

And yes, obviously there's buckets within that.

So, you know, people I need to care about in the next three months, six months, year, two years.

Wow.

And then, yeah, I mean the rest of it, look, it's as much as we speak about AI for everything else, yes, there are tools that help pull out the information we might need to see.

So, you know, key facts and figures, a bit about the team.

That's been very helpful.

But it's still a human review.

Right.

So yes, we all sift individually and then we have, you know, probably at least one meeting a week where everybody sits and says, here's the middle bucket that we need to decide.

Is it worth a meeting?

Is it not worth a meeting?

And yeah, having different perspectives on that is very helpful.

But yes, it's the biggest part of the job.

Right?

Yeah.

Right.

Yeah.

It's really interesting because it sounds like you have to be very segmented in your approach too.

Like there's the, what do we want to look at now?

What do we want to keep warm for later?

What do we want to say just too early, not for us.

And like being very thoughtful and methodical in how you approach that and connect across the entire organization too, to, to keep that pipeline moving.

Yeah.

And that's forever evolving.

Right.

I think that's certainly a massive part of it.

And from our perspective, and every fund will, will do it differently.

But ultimately, you know, there are A sectors and B subsectors that we're very excited about.

We would generally always take a meeting.

You know, things like longevity at the moment, we really want to understand that.

We want to know what everyone's doing.

You know, you try to assimilate as much as you possibly can and then I guess for other more traditional categories, we have such a bank of things.

We've seen businesses, we've spoken to that then, you know, in some areas we truly have to see something exceptional for us to take it forward.

Because we've just seen, you know, in skin care, we've probably seen, I don't know, close to 5,000.

I've probably seen close to 10,000 businesses.

Right.

And so I don't find it hard because, you know, founders come to us, it's their baby, it's their life and soul, and I crush their dreams and, you know, whatever it is.

One lovely worded email.

So I think, yeah, it's a real balance, but ultimately we have to be true to ourselves and know.

Yeah.

What we want to see in any of these categories.

So we do a lot of thought work internally.

You know, for next year.

We'll set here are the areas that we really care about, what we want to do and where we want to invest.

And that helps set the guardrails for sure.

Well, Claire, you keep, you keep raising these new questions here at the end, like, so then the next question I want to ask you too is like, because you mentioned it, like, how do you, how do you, how do you let the.

The founders know you're not interested?

Because we had somebody on our program a few weeks ago that was like, no, I'm just going to tell you, you know, if it's not hitting it, like, their approach was to be more direct, whereas other people have told me, like, you know, as a vc, like, you never want to hurt somebody's feelings.

You always want to be thoughtful about your approach because you never know if you're going to come back and see them again or look to invest in them at a later stage.

So.

So how do you approach that when you need to tell, you know, prospective investment, you know, hey, this just isn't for us.

Yeah.

I mean, we're always fundamentally honest internally and externally with what that reason is.

Right.

And yeah, generally, even if it's potentially an issue with the team, if it's an issue with perhaps the retail channels they've gone into or the retail partners or, you know, the product quality isn't good enough, I would always be very honest with that.

Ultimately, we are in the business of helping founders sell products to consumers.

Right.

So if we have questions on any of those, it's not necessarily helpful for us to hide it.

And yes, if we have benchmarks that they're not hitting or we've seen data that perhaps would indicate, you know, some categories are just very challenging.

We've seen, take men's cosmetics, for instance.

You know, we've backed a couple there.

We've seen a lot more.

And ultimately our belief is that the market just is still in that building phase.

So for us to do it again, obviously it has to be exceptional.

And I think, yeah, we're trying to be as helpful as possible to founders, but of course, nine times out of 10, whether they take that with a pinch of salt, what they do with that, that's kind of their choice.

But we would always be honest in terms of why we haven't taken it forward.

That's awesome, Claire.

That's great.

It's been so fun to be able to just pepper you with questions today.

I'm sure our audience appreciates it.

If people want to reach out to you, they.

They want to get more of your perspective.

And we want to get more here, too, for our ongoing conversations here at Omnitech.

If people want to get in touch with you, Claire, what is the best way for them to get in contact with you?

Yeah, happy for anybody to email me.

I'm on Claire, which is C L a I r era VC or on LinkedIn.

Claire Cherry.

Relatively memorable, I'm told.

So, yeah, hit me up on either of those.

Excellent.

Awesome.

Wonderful.

Well, that wraps us up.

Thanks.

Thank you, Claire.

That was great.

It was wonderful to have you.

Again, thanks to Claire Cherry for of era VC for sitting down with us.

And thanks to everyone out there for listening in to this episode of our ongoing series on VC perspectives across retail and the consumer goods industries.

Please let us know what you thought of our interview with Claire on social media.

Let us know how we can do better.

And as always, on behalf of all of us at Omnitok Retail, be careful out there.