Capital and the Creator Economy: Two Conversations with Sari Azout

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Oct 2, 2020

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INSIGHT

Building Lasting Brands

While it's easier than ever to launch a brand, longevity requires a unique story and authenticity.
Simply replicating existing D2C models won't guarantee success.

INSIGHT

Brands cater to different levels of Maslow's hierarchy of needs, from basic needs to self-actualization.
This framework explains the rise of platforms focused on belonging, meaning, and purpose.

INSIGHT

Traditional VC funding models, focused on billion-dollar outcomes, might not suit retail companies.
Retail has marginal costs unlike software, impacting valuations and requiring different investment approaches.

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Sari is an early stage investor, a lead strategist at a startup studio, and a newsletter writer.
“To me, being human-centered means you’re far more obsessed with the problem you’re solving than you are with a product that you’ve built. And what that gives you is the flexibility to evolve with your customer.” - Sari Azout
“Being human-centered ultimately means that you don’t really sell your product. You sell your purpose.” - Sari Azout
The brand ‘story’ is important for longevity. Brand stories and purposes are what resonates with consumers.
“The story can’t be the marketing. The story has to be the strategy.” - Sari Azout

“They’re not tech companies, they’re tech-enabled companies.” - Sari Azout
Retail vs. software company investments should be valued differently because of marginal costs of physical goods.
The internet and DTC brands have allowed brands to be much more niche, so Sari suspects we are going to see “more like 5,100 million-dollar-brands and less like a billion plus outcomes.”
The business model for VC relies on those billion dollar outcomes; however, we see in retail that the VC’s need billion dollar outcomes, but the founders do not. The founders are better off with smaller outcomes varied throughout smaller niche businesses which results in lower risk.
Sara speculates that we’ll see an innovation in the way VC’s invest in these smaller, niche brands and that traditional VC will kill more companies than it creates.

Gen Z is a different kind of consumer because of their digital nativity. In the past, ‘luxury’ items were brands based on status; now, symbols of status are changing to identity conscience - like podcasts or activities that individuals engage in and identify with.
On Gen Z consumers: “They are self-interested as humans are, but they’re also spending with a conscience, as long as [the brand is] doing something that feeds their ego and identity and self-interest and also has a common good.” - Sari Azout
Companies like Amazon have set the expectations for a lot of consumers which lean towards consumers ‘winning’ the margin - with things like free shipping, free returns, etc. But this is based on consumers with convenience as their highest priority instead of conscience or community.
On conscious consumerism: “Where we need human ingenuity and innovation is ‘How can we build for a consumer that is increasingly conscious but also doesn’t want sacrifice?’” - Sari Azout
The consumerization of enterprise and the enterpisation of the consumer: Transitioning from the gig economy to the passion economy, creators who previously didn’t have ways to monetize their talents are now seeing tools emerging to facilitate that monetization and make that possible.

The world now is ‘post-place’ - everything is happening online.
“I think the opportunity to build the tools for a world that is post-place has really opened up.” - Sari Azout
“In the world of eCommerce, we’re realizing that the eCommerce infrastructure that we set up in the US was one hundred percent search-based. It wasn’t recreational. It wasn’t emotional. We optimize for price and speed and the Amazon kind of effect.” - Sari Azout
The idea of ‘luxury’ has changed and is much more centered on accessibility than status. Brands are shifting from being exclusive to being membership-driven with shared ideology.

On the difference between influence and influencer: “Influence these days comes from authenticity, which ultimately comes from trust, whereas influencers are the result of commoditizing social media reach.” - Sari Azout
Sari notes that Gen Z is reacting to this in seeing brands that are relatable, participatory, and welcoming as more appealing than the manufactured lives of influencers.
There’s a distinction between the “participatory” economy and the influencer economy - consumers/fans are sharing in the connection and value with creators instead of being unidirectionally influenced.

“I think what people are more interested in these days is far less individualistic and much more collective.” - Sari Azout
As the economy moves online and continues to change, the lines between media and commerce and services get blurred.
“What’s most exciting is being able to truly involve your customer in the creation of the product.” - Sari Azout
Sari suspects we’ll see less venture-backed brands and more organically grown brands due to the niche demographics that brands can authentically serve in our ‘post-place’ world.
“People will always gravitate towards what is easy. If you believe that, then that means if we create different toolkits that are equally easy… then brands are going to do it. And by doing so, they’re going to shape culture and create a different future… Tools matter.” - Sari Azout
Sari states that raising venture is easier than other forms of debt, but as our tools change, new funding tools emerge which change our outcomes.