Kirsty Macdonald is the Investment Manager at JamJar Investments, based in London. Prior to JamJar, she worked in sales and marketing at Unilever. You can follow JamJar on Twitter: @jamjarinvest.
What drew you to venture capital and working with startups?
I wish I could say I was aware enough to seek out venture, but I fell into it serendipitously. It was very lucky! Now that I’m here I can’t imagine being anywhere else.
There are three main reasons why I am proud to be an investor:
The people. At JamJar, we work with some of the smartest, most innovative people I’ve met. They’re entrepreneurs who’ve taken huge risks for ideas they believe in wholeheartedly. They’ve put much of their personal life on hold to deliver something better to consumers. I have a background working at a large corporate; too many people put off taking the leap into entrepreneurship. I never underestimate the importance of making that decision. The hard work and conviction that founders have is really inspiring.
In-depth qualitative and quantitative analysis. We look at historical data to forecast models. We conduct consumer research on products and their features. We evaluate the best distribution channels and partners for portfolio companies. I find these challenges interesting and thought-proving.
Investing exclusively in consumer brands. It’s what I know and love. Everyone is a consumer - and I believe these products and services are much more relatable than something like a B2B SaaS product in a banking stack.
Why JamJar? Can you walk me through the hiring and recruitment process?
JamJar reached out over Linkedin. They had interviewed some bankers and consultants but wanted to hire someone with an operating background. I honestly knew nothing about investing but I sent in my CV (and then spent the weekend desperately researching venture). It was a very long recruitment process; I spent over 12 hours in interviews ranging from behavioral chats to case studies.
JamJar only had 4 people on the investment side. It made sense that they were dedicating a lot of time to the process as they were increasing the investing team by 25%. By the end I knew so much about VC and JamJar. I remember thinking that I’d be devastated if I didn’t get the role because I had no desire to go back to Unilever. I was ecstatic when I got the offer.
How did your prior work at Unilever and background in economics help prepare you to be an investment manager?
I feel like my background is atypical for VCs. At the beginning got a few funny looks (a lot less of them now). I won’t lie - there was a steep learning curve but a few things from Unilever have helped me adjust to the investing world. One thing was my background in consumer products and research. What makes consumers pick up a product? How does a consumer evaluate look and feel, the emotional connection? These tactile and psychological responses are incredibly important for consumer brands to understand.
On the more analytical side, I was in charge of a brand called Bertolli. It was a horrible margarine but one of Unilever's multi-million-pound brands with a massive P&L. I learnt complex financial analysis, pricing, and promotional strategy. This operational experience has been really useful in assessing opportunities and helping the portfolio post investment. That kind of broad expertise is particularly needed in venture when so many investors come from financial services and M&A. Additionally, I have an innate understanding of the big consumer corporates and FMCG (fast-moving consumer goods) companies like Nestlé and P&G. They are the potential acquirers for many consumer investments and I’m pretty confident on what they do well and where they are weak.
It’s funny that you mention my economics degree. At Oxford, I studied game theory and advanced microeconomics, all of which are grounded in hyper-rational assumptions, which just don’t hold true in the real world. It hasn’t helped much (I leverage my experience at Unilever more often) but it’s interesting that I think some people in the industry tend to give more weight to that than my previous work experience.
Even in the past 3 years, I’ve seen a huge difference in the diversity of VC backgrounds. People are waking up and recognizing that everyone from journalists, to organizational psychologists to academics and industry experts can be shrewd investors. I’ve seen this particularly in the UK’s early stage and seed funds, which is becoming an increasingly exciting and eclectic place to be. I can’t wait to watch it grow even more.
I’ve asked this question to Natasha Lytton of Seedcamp before: Europe hasn't seen as many startup consumer brand successes as the United States - Warby Parker, Glossier, and Casper are just a few examples. Are there fundamental differences between American and European consumers? What vertical, if any, do you see as a ripe space for emerging consumer brands in Europe?
JamJar considers consumer brands anything that’s marketed directly to individuals. By that definition we have had several successes like Farfetch, BlaBlaCar, Spotify, and Deliveroo. I think many people limit their conception of consumer startups to DNVB (direct native virtual brands). And to answer why we haven’t seen more of those, I see some challenges with different languages and regulations across Europe. As for funding, there’s different risk tolerance in Europe. That’s improving as more success stories emerge and companies figure out operational challenges.
Historically, Europe has followed the US in many consumer trends and areas but I think it’s important to be thoughtful in the way you analyze differences between the markets, looking at in on a sector-by-sector basis. For example, European consumer fintech in many respects is ahead of the US. In New York, I sign a cheque in a restaurant and the money can go out a few days later, which I find absolutely crazy. Most places in European cities are close to cashless, using pins or contactless cards. Healthcare also is unique. The UK takes a central view with the state-run National Health Service (NHS) while the US relies more on private insurance at an individual level. That’s a huge difference in the system and consumer mentality for that sector.
Having said that there are of course striking similarities between markets. Whether you live in the US or Europe, consumers are demanding more in price, community, personalization, and speed of distribution. I anticipate a lot of consumer brands you see in the US will appear and make the jump to Europe and vice versa.
One interesting vertical for me is the household utilities and services. It’s a massive market dominated by large, slow, expensive, incumbents with customer service that makes you want to scream. Our investment in Bulb energy is tackling the problem on the home energy side but I would love to see a brave entrepreneur go after the telecoms market somehow.
JamJar's investment criteria has been summed up as “Product, People, and Potential." Can you elaborate why these are particularly important for the consumer space?
It’s not particularly innovative to say we start with the team and the team needs to be fantastic. JamJar’s secret sauce is what we look at across the team. We look for15 qualities that span everything from intrinsic motivation to deep commerciality. It’s difficult to find all of those skills in a single founder, so we look across the founding team. The founders of Innocent Drinks, who launched JamJar, like to say there was one amazing businessman across all three of them. It was the combination of Richard Reed (brand savvy), Jon Wright (operational expertise), and Adam Balon (sales and expansion) that built a successful business. We want a team that covers each other’s blind spots. They should be more than the sum of their parts.
On the product side, it’s one fundamental question: do consumers or will consumers love the product? That's the very thing we’re investing in. I love founders who bring their products to pitches and they’re constant tinkering and rethinking their product even in those meetings. It shows to me that they care deeply about the customer experience. Additionally, we look at the data like repeat rate, retention rate, online reviews, etc. We try the product ourselves. It’s both a qualitative and quantitative exercise.
And finally, the part about potential... we want to invest in companies that will be seriously profitable and worth hundreds of millions, if not more. There are lots of products that consumers love but that don’t make money and this isn’t what we are after. We want to see a strong yet simple business model operating in a huge market with favourable competitor dynamics. The entrepreneur needs to have clear idea of where money will be made, and where it will be lost and be razor focused on proving this out.
All of these things - people, product, and potential - sing together. We look for teams we trust that fill each other’s gaps. Products that people love and tell their friends about in a huge market.
How many investments does JamJar make per year?
We do roughly 10 investments a year. But we’re an evergreen fund, which gives us flexibility to do more investments or none at all. We receive 200 plans a month and fund about 0.5% of them.
Identifying the VC-backable companies comes with improving pattern recognition. I've been amazed in 3 years that I’ve become much faster at it. You build that recognition and these investor instincts over time. Of course, it's important to challenge them. I try to take the meeting I'm unsure about, knowing that biases can emerge if I rely purely on pattern recognition. VC is forward-looking so it’s a mix of pattern recognition and challenging yourself.
Like AllRaise in the US, Europe is reckoning with a lack of diversity in the startup and entrepreneurship space. You're involved in Diversity.VC. What role does Diversity.VC play in changing the narrative and what successes has the organization seen so far?
Diversity.VC is so important and needed in the UK and European startup ecosystem. Having venture dominated by a white and male contingency is not representative. I fundamentally believe, from a commercial perspective, that more diversity leads to better investment decisions. People often refer to McKinsey's company performance study from 2015, but it would be ideal to have one for VC that links diversity to improved fund returns. We’re working towards that at Diversity.VC and convincing funds to open up their data.
Diversity.VC focuses on four areas:
Network. We’re connecting investors other like-minded, diverse VCs. That will help diverse investors to go strength to strength.
Ecosystem. We also connecting to communities outside of VC and ensuring a recruiting pipeline from diverse pools.
Pathway. Diversity.VC leads investor workshops and provides toolkits to remove bias from the investment process.
Data (which I work on). Diversity.VC runs the largest project in the UK examining diversity in venture. Only 18% of investors are women (far fewer on the partner side). Our next study will look at ethnicity as well and hopefully we’ll see improvement on the overall state of diversity.
JamJar has invested in a number of startups beyond its bread and butter in the foodtech space like Songkick, Babylon, and Sleepio. What other spaces is your team looking at?
Food tech is definitely an area we look at although I wouldn’t call it our bread and butter. It’s just one facet. We look at anything B2C.
It goes without saying that we’re looking a lot at DNVBs right now. Without a retail middle man, D2C products can (but not always!) have a greater velocity of feedback, higher margins, and a better consumer experience. I think the FMCG incumbents have been greedy with margins without keeping up with the pace of innovation. I see plenty of opportunity for better, more convenient personal and household products.
I’m also super interested in digital health. My whole family are medics - even my grandparents. Especially in the UK, our healthcare system is massive and increasingly inefficient. We’re investors in Babylon, a doctor-on-demand platform. Babylon provides one of the best consumer experiences in years for digital health: it takes just 10 mins to see a doctor. Innovation can be tricky with the NHS. It’s a slow system. The US has potentially been more disruptive in this area due to the private market but we’re seeing more and more digital health companies emerge in Europe
Another interesting area is home ownership. Buying a house is one of the biggest financial decisions a consumer will ever make and it is an awful, confusing and frustrating experience full of trust issues. Layer on top of that the housing crisis and affordability problems we have in the UK and it makes me think there must be a better way to serve this massive market. There are some great entrepreneurs tackling the problem already and I’m excited to see more.
Partner Katie Marrache is one of the UK's youngest female partners. It must be awesome to have that kind of mentor around you. What is some sage advice that you've learned from Katie that you'd share with young women who want to enter VC - on the investing, operations, or platform side?
Katie is amazing. I owe a lot to her since she took a chance on hiring me. One thing she often espouses is to really know yourself and be honest. She means a few things with that but one example is to ask yourself what are you really passionate about and where do your experiences best help you? For individuals looking at venture: where do you have a crazy appetite to learn more? Then read and research this like your life depends on it and demonstrate that passion and knowledge in your interviews. VC recruits talented, curious people who are desperate to learn and analyze new models and businesses. If you can show you can do that in one area, then you’re likely to do it with another space. That makes you a compelling candidate.
Another thing that inspires me about Katie is the confidence she has in her opinions coupled with the humility to admit when she’s wrong. I think we’re often worried we have an opinion people don’t agree with. Or we’re scared to be wrong. I might be wrong about something - in fact I’m probably wrong about it as most people are wrong most of the time in this industry - but those mistakes are incredibly important to improve my decision-making. Learn from it and move on.
What challenges have you faced as a junior investor? How are you tackling / overcoming those obstacles?
Sending rejecting emails is what I enjoy least about my role. It’s a huge part of what I do. We receive 200 pitches a month and invest in maybe one of them. Many of those companies are good businesses but aren't right for us. Maybe JamJar has concerns about the potential market size or business model or gap in the team. Maybe there are other opportunities in the pipeline that we’re more excited about. We could also be flat out wrong. I find it difficult to say no to entrepreneurs especially when we do have little complete information at the early stage. I endeavor to be honest without demoralizing the teamand try to communicate as quickly as possible. We always also encourage founders to come back at a later stage if they think the fit is right
Has JamJar invested in a company that the fund didn’t back initially?
We have. Propercorn is a classic FMCG investment. They’re the fastest growing popcorn brand in the UK. We invested in their Series B and we’d seen them a few times before (one of our partners had been a mentor). We said no earlier because we weren’t sure about scale and the competitive market. The team had done amazingly well. We saw what they’d executed and we saw the market validation. Following Propercorn from strength to strength made us invest in the end – the risk-reward payoff simply made sense. We have a few investments where that has happened and I see it as a massive positive Founders return to us after an initial rejection.
What are some ways that JamJam offers post-investment support?
Part of our model is to be very flexible and mold ourselves to the companies we invest in. There’s no standard way to work with companies. We have some founders that call us twice a year to keep us informed. There are a number of companies that fall in the middle of the spectrum who need help with internationalization, rebrands, etc. We can do workshops and support on a project-by-project basis. Then at the other end, there are companies where we take a board seat and are extremely involved.
We have some amazing experience from Innocent. This might sound strange but every Christmas since 2003, Innocent has held a campaign where people knit little woolly hats and send them to the company to put on smoothie bottles. Every one of those smoothies sold has a portion of the sale go to charity. It’s unbelievable that more than 7 million hats have been sewed for the campaign. This kind of vitality and customer engagement kicked off before Facebook or Instagram. It speaks to the strong brand loyalty and love that the Innocent co-founders have created. Like I said earlier, we have Richard and his brand and marketing know-how. Adam led Innocent's commercial and international expansion. He worked on the retail negotiations that made Innocent a household name, and later a CocaCola Company brand. Jon built Innocent’s impressive supply chain from scratch and set up internal operations to scale with growth. With this history of brand, marketing, product, and commercial, JamJar can provide our portfolio with a lot of consumer guidance and expertise.
Rapid fire 🔥
Your top life hack?
You know when you’re cooking and you burn the bottom of your pan? If you fill it up with washing up liquid and boil it, the gunk comes right off! I discovered this last year its just transformed my cooking experience.
A mobile app you'd recommend?
Citymapper. People visit London and are often confused about transit. I tell everyone to use CityMapper. It’s the best way to get around London - and they’re a scrappy startup beating Google at their maps game.
Blockchain or nah?
Yes but I don’t think consumers care yet. The best blockchain projects and companies won’t identify as a blockchain to business to consumers.
Dreaming or doing? Doing, definitely. I’m not creative at all but I can get stuff done. I’m a worker bee!