Matt Scott is a Managing Partner at Basecamp, a pre-seed and seed fund by the Alumni Ventures Group. A leader in network-powered VC, AVG boasts 900+ portfolio companies. Prior to Basecamp, Matt was a three-time founder and operator of venture-backed, acquired startups, and was a member of the corporate venture practice at Nike. Today, he focuses on ecommerce enablement, SaaS, Web3, and digital health spaces.
We sat down with Matt to learn from his deep expertise, having run both sides of the board room table. We covered topics including:
- The tension between consumer expectations and legacy infrastructure
- Why legacy platforms are being outstripped by new eCom players
- What he looks for in early-stage tech founders
Brandon: What about the commerce ecosystem is broken, if you had to distill it to three to four different buckets that you're tracking?
At a high level, there’s a big disparity between consumers’ expectations and the legacy infrastructure that powers the commerce ecosystem.
If you think about the last era of what we might call Commerce 2.0, the rise of direct-to-consumer commerce was an evolution and a behavior shift for our consumers to seek out merchants and brands that they want to engage with, spend time on their native URLs, and buy from them directly. And that was a really interesting inflection point, where consumers were able to have one-on-one relationships with brands. But consumers don't necessarily want to have a one-on-one relationship with every brand. And there are more direct-to-consumer companies now than ever before.
Moreover, as we evolve into this “metaverse” or more digitally immersive world, consumers want more robust and engaging commerce experiences than a boring, old dot com can provide. And when I say a “more engaging experience,” that runs the gamut from live shopping experiences–really dimensionalizing and merchandising products in real life–to social shopping–engaging and enabling consumers to buy in the social media platforms, where they are spending all day, every day–to being able to transact via digital advertising, etc.
In short, consumers are engaging with brands in a variety of different ways. And it's great that consumers have this desire, this appetite to interact in a much more immersive and fragmented way. But the challenge is that the old existing architecture is not set up for merchants to be able to meet consumers where they are and where they want to be.
Brandon: Do you think that gap exists because there aren’t incentives to fill it, or because structurally merchants and channels can't respond quickly enough to offer the experiences that consumers and merchants want right now?
I think it's the latter. It’s an age-old tension between investing in future opportunities and meeting current demands. A merchant or channel has a core business, and they're looking at the IRR of pulling three dozen really talented engineers off their core business to invest in infrastructure for a forward-looking project. And the reality is it's probably too low to justify that CapEx and that SG&A investment. They're better served, and those engineers and that product team are probably better served, just sticking to their knitting and doing more of the same.
But the challenge is when that inflection point hits (and trust me, it will), sticking to their knitting won't be serving the needs of the consumers, and the legacy platforms won't have made the forward looking investments to be able to serve consumers where they want to be engaging with brands.
“A merchant or channel has a core business, and they're looking at the IRR of pulling three dozen really talented engineers off their core business to invest in infrastructure for a forward-looking project. And the reality is it's probably too low to justify that CapEx and that SG&A investment. They're better served, and those engineers and that product team are probably better served, just sticking to their knitting and doing more of the same.”
Brandon: To follow up on that gap and that dilemma: what about Violet initially intrigued you and your team?
I think there were two main aspects of Violet that stood out:
- Technical competence and product viability: We'd spent a lot of time looking and talking to a lot of different folks that had fancy splash pages or webpages, and decks claiming to be a universal commerce API. Or they're raising a bunch of money to begin to solve this problem, in terms of providing the infrastructure to enable legacy systems to meet consumers where they are. But when we spent time with the Violet team, it was clear that this was not a pipe dream, that they were actually in-market and had built something.
- Deep knowledge and experience: It was clear talking to you and Rhen that this wasn't a jumping-on-the-bandwagon type of endeavor for you and your team. You’ve been building in this space for years, you know the ecosystem inside and out. So, it wasn't like, "Hey, we need a universal commerce API, let's go build that." You and your team had been heads down executing and building a technically viable solution well before everyone else even realized that this was a pain point. There’s really no one else right now who understands this problem the way Violet does.
Brandon: We’ve talked a bit about merchant pain points: on the channel side of things, what pain points do you think are still left unresolved or unaddressed?
It's one thing to spin up a consumer brand, and be a cool, sexy, new way for consumers to transact. But given that these channels don't hold any inventory, they have challenges populating these experiences or these channels with stuff for people to buy.
And that takes not just the relationship development with merchants, and the aggregation of vendor relationships, but it also requires a certain level of dynamism and responsiveness. These channels exist in real-time, with fluctuating consumer demand. So you need the technical support to be able to facilitate the supply in these fluctuations.
Brandon: I'm curious about what you see happening investing today, given what we just spoke about. What would you say from an investment perspective are the shiny new themes or trends that folks are investing across the market, and more importantly, which do you think actually have legs?
Not to talk too much from my own book here, but I see two big trends right now, both of which I think have legs:
- Commerce infrastructure: I think there are a number of folks trying to solve this universal commerce API or commerce infrastructure problem. It's clear already who is selling pipe dreams and who is shipping real product, but the space is clearly gaining interest. And for good reason: as I said before there’s a big gap to be filled if merchants and channels are going to be ready for that inflection point in customer expectations.
- Closed-loop commerce: People are starting to ask earnestly how to infuse sustainability into ecommerce best practices. I think there's a lot of different layers to that. When you stop to think about the carbon footprint of shipping five things to me when I only really wanted one, it’s obvious there’s a gap to close there for consumers like me who want choice, flexibility and sustainability. Then there are newer initiatives like sustainable packaging, or something like Patch that helps embed carbon offsets and carbon credits into a transaction. I’m definitely spending a lot of time thinking about it: it’s a pressing issue.
Brandon: I want to jump into Web3 for a second. Can you walk me through the overlap between the world of Web3 and ecommerce from what you've seen: what is happening now, and where do you think it’s headed?
I almost find it cringy to say, but I think a lot of it comes down to this idea of the metaverse. Today people are asking about it in the future tense: when will the metaverse be here? When will this “weird” thing that Mark Zuckerberg keeps talking about actually be real?
But in reality the metaverse is already here. I’m on my Peloton first thing in the morning, I look at my phone all day flipping through social, and then I sit on Zoom calls all day for work. While this is a less immersive version of the metaverse, it’s definitely here. And within that we’ve seen the proliferation of consumer buying experiences, or ecommerce channels.
So I think this idea of the metaverse in which we're actually living or existing in more robust virtual worlds will only act like an accelerant for those ecommerce trends. When that happens, the need for a platform or solution like Violet will only be more acute. What we're seeing now in the birth of live shopping and social commerce is only the precursor to what will be this fully fragmented commerce landscape that will be cemented by the arrival of the metaverse.
Brandon: When it comes to larger, more enterprise scale merchants, how do you think about the challenges they'll need to face and how they should be approaching innovation in light of everything you've just said in the conversation? I’m thinking specifically about your Nike experience and how well you know and understand merchants at that scale.
I think one of the biggest tensions that large, incumbent, enterprise brands struggle with is this idea of ownership of the consumer experience and ownership of data. On the most reductive level, a company like Nike faces a central tension between going omnichannel or selling on Amazon. Either way they feel like that's going to be destructive to their brand equity, and they lose out on both consumer experience and data. And I think the reality that most enterprise brands need to just come to terms with is: you can't fight consumer demand and you can't fight consumer expectations. That is just a tsunami of inertia, and consumers don't want to exist in walled gardens. They just don't. And no matter how cool or flexible or interesting your website is, there's going to be a time in which consumers are just not interested in going to nike.com to buy a shoe.
Ultimately, you need to meet consumers where they are, and we see where consumers are: they’re flipping everywhere! So you want your product to be everywhere.
Brandon: The last main thing I wanted to ask about was founder-related: valuations are increasing all the time. There's more capital available than there probably ever has been. And more people like yourself are looking earlier and earlier. So what do you look for as early signal? What do you look for, especially in some of these early bets?
I think ultimately it comes down to commitment: commitment on the founder's part to solve a particular challenge, build a particular thing, et cetera. I’m looking for someone who understands the ecosystem that they're building in and has earned secrets in that space.
In contrast, we're seeing so many entrepreneurs that are very excited about Web 3.0, not just because of the promise that it provides and the interesting creative problems, but the funding. It's easy to raise money if you're a Web 3.0 such and such versus if you're a Web 2.0 such and such. So we've had a lot of reservation backing entrepreneurs that seem quite talented, but also seem like they're jumping on a bandwagon.
I think building something is the hardest thing that one could do. As a founder, it's the loneliest job in the world. It's rife with emotional highs and gutting emotional lows. And so, in order to be able to have whatever intestinal fortitude to actually realize your vision, you have to have commitment to do that. And we like to see proxies of that commitment as evidenced by the time spent for their engagement around a particular problem or challenge, or opportunity area.
Brandon: Great place to end. Thanks, Matt!
Matt Scott is a Managing Partner at Basecamp where he looks for companies led by passionate, mission-driven entrepreneurs with an acute understanding of the markets they are looking to disrupt. Prior to joining Basecamp, Matt was an 3x founder and operator of multiple venture backed businesses: Integral (acq. by Vista Equity Partners), enterprise SaaS platform Suzy (backed by The Foundry Group, Tribeca Venture Partners) and a direct to consumer brand (backed by Lerer Hippeau). Earlier in his career Matt was a member of the corporate venture practice at Nike and an investor at Coriolis Ventures. He began his career as an innovation strategy consultant for Procter & Gamble.