Investor Spotlight: Red Sea Ventures
Paul Strachman is a Partner at Red Sea Ventures, the New York-based firm investing in early-stage tech companies in next-generation commerce. Its portfolio includes Allbirds, SweetGreen, Prose, Nest, Convoy, Clyde, and AccrueSavings among others. We were fortunate enough to have Red Sea lead our Seed Round back in 2021, and participate in our Series A in the following quarter. Paul also currently sits on our board.
We sat down with Paul to dive into his years of expertise in the industry, and get into his predictions for the three levels of infrastructure evolution occurring in ecommerce, including:
- Recreating in-person shopping experiences for ecommerce
- New, innovative, online-native shopping experiences
- The important tech strides being made in infrastructure, and Violet’s role in that advancement
“Violet has the opportunity to power new experiences across all kinds of commerce platforms. These could include experiences like one click checkout, try now, buy-now-pay-later, affiliate, cross-selling, and many more we haven’t even dreamed of."
Brandon: Let’s start with NextGen Commerce investing at Red Sea: three, four, five years ago: what did the infrastructure investing landscape look like and how were you approaching it? How did that evolve?
A few years ago, with the rise of Facebook’s targeting engine, we were really interested in the new model of direct-to-consumer companies and how it was changing the landscape of commerce.
With the rise of the commerce platforms such as Shopify, BigCommerce, WooCommerce, and the like, we have been focusing over the past three years more on the ecommerce infrastructure sector with three distinct layers:
- Making online commerce similar to what happens offline: In this layer you have companies that are finding ways to bring the experiences usually only happening in the physical stores online. Clyde, who we’ve invested in, is a good example of this: they offer extended warranties that integrate directly into merchants’ online platforms. But there are tons of examples of IRL shopping experiences being translated online.
- New ways of shopping: A lot of models in this layer are coming from China, but it includes any number of new online shopping environments like group buying, livestream shopping, AR/VR, etc.
- Hardcore infrastructure: This is the layer of backend innovations that make all the new, exciting experiences online possible. Violet fits into this layer.
Brandon: What trends have you been noticing in each of those layers that you think will be big in the next five to ten years?
In the first layer, being able to try online is something that's still missing on a fundamental level. There are many companies that have tried to offer “try before you buy,” but I think soon we’ll see more options emerge where you'll be able to have 3D visualization of your body, and really anticipate how something looks and feels. We’re also going to see opportunities in this layer around online concierges or sales-assisted commerce for products that are more complex, where you need a higher-touch experience.
In the second layer, the metaverse and VR are going to be transformational because they finally allow online shopping to offer not just equivalents for in-person shopping experiences, but more exciting and even richer ways to shop.
As I see it, there are two key aspects of commerce: search and impulse. Search is pretty self-explanatory: whether you go to a brand’s individual website or a marketplace like Amazon, you go there because you are looking for something–a movie to watch, a favorite food, a piece of clothing, etc. Impulse on the other hand is the urge to buy that comes out of organic discovery. In brick and mortar environments this happens when someone walks into a store, and for example they see the model where the merchant has curated an outfit. It’s this display which actually makes someone want to buy the shirt, more than the shirt itself. A shopper may not even have been searching for a shirt, but the display gives them the impulse to buy one.
In a 3D environment like VR, you have an even greater opportunity to create impulse. A shopper can enter a VR store and look at ten or more different clothing combinations at a glance: merchants and channels can generate impulse at the same time as the search. And that’s just the tip of the iceberg. Ultimately it’s those new opportunities for impulse-creation that make me believe a big part of ecommerce will happen in VR.
Brandon: We’re obviously a little biased towards the third layer, but can you say a little more about what you’re seeing in infrastructure, and why that layer is important to Red Sea?
To get rich impulse-creation experiences in the frontend, you need cutting-edge backend infrastructure.
Today online merchants are trying to drive impulse across many different channels–social media, blogs, live streams, etc.–but the path from impulse to purchase is still so complex with too many clicks, so that merchants and channels frequently end up with abandoned carts.
This is why Violet is so powerful in my view: it enables merchants to bring the shopping experience directly where the shoppers are, without a million clicks. Within search and impulse, Violet is powering the impulse.
Brandon: When did you start becoming familiar with the pain points that Violet solves, on both the channel and the merchant side of things? And what stood out to you about Violet as a solution?
In 2011 or 2012 I actually tried to build a universal checkout, and researched what was involved in scraping. The pain points were just incredibly obvious: every retailer’s data schema was different, and even within a retailer, they may have different schema for different kinds of products. So you could just tell it wasn’t a sustainable solution.
Nonetheless, I firmly believed that the universal checkout was something that if possible, would become huge. So when we met with you, Brandon, I understood very clearly which pain points you were solving for: no more scraping, no more several-click checkouts, no more painstaking custom integrations. With a single API, Violet resolves all of these. The ubiquity of these pain points, and thus the potential of Violet to improve online shopping, is tremendous. With the tech so strong, the only open question is really about getting merchants and channels on board.
I also just think that the level at which Violet sits is very clear. Because of your past experiences and investment in this particular problem, you and Rhen have such a clear perspective, vision and knowledge of the market. It's rare to have that.
Brandon: One thing we’ve seen is that a large portion of our investors have all had some sort of firsthand experience with the problem. You had explored universal checkout and scraping, Brian Sugar–investor at Sugar Capital and co-founder of PopSugar–knew the problem well through the acquisition of Cosmic Cart. And Lachy Groom–previously head of Stripe Issuing, currently an investor at Violet and elsewhere–had a similar experience setting up Stripe Relay. So when each of you sat down to meet with Violet, you each understood the challenges we resolve, and the potential of our API.
Yes, totally. For all of us I think it’s clear that if you popularize Violet’s infrastructure, really any online commerce experience can be built on top of it: it’s future-ready. Once it’s embedded, as long as Violet becomes the go-to ecommerce API, they will be able to build the largest catalog of products directly tied to inventory, so that anyone with an audience can create a marketplace. At that point, the sky's the limit. It will be able to power new experiences across all kinds of commerce platforms–one click checkout, try now, buy-now-pay-later, affiliate, cross-selling–and many more we haven’t even dreamed of.
Brandon: Well, we couldn’t agree more. Thanks so much for your time, Paul!
Paul Strachman is currently a Partner at Red Sea Ventures. Before Red Sea, Paul was at Equinox in NYC where he led strategy for over five years. For the past few years, Paul has been an active angel investor in NYC and SF; he sits on several boards and serves as a mentor at future labs at NYU Tandon and StartX. For more information, visit redseaventures.com.