8VC's Drew Oetting on backing Quince at seed: the $10B DTC retailer the Valley overlooked

course, in the Lambda Lightning round. And Lambda is the super intelligence cloud building AI supercomputers for training and inference that scale from one GPU to hundreds of thousands. And without further ado, we have Drew from 8BC. He's a founding partner there. He's in the re waiting room now.

What's going on?

TV pin Ultra. How you doing, Drew?

Hey, doing well. How are you guys doing?

Doing great.

Great. Good to finally have you on the show.

Yeah, thanks for having me.

Uh, talk about Quint. Let's get right into it. Uh, I feel like uh somehow this company came out of nowhere for me. I I haven't I haven't purchased anything there yet, but it didn't come out of nowhere for you guys uh given that you backed it at seed. So I would love to uh yeah understand uh how how you initially found the company some somewhat of a contrarian move to back a company like this given it's kind of not necessarily right in the sweet spot for eight if you look at the rest of the portfolio and then there's a kind of a graveyard of companies in Silicon Valley that have like made different attempts at this opportunity generally.

Yeah. I mean we've been involved in uh one of them was actually instrumental to this. But we uh I met Sid a long time ago, the founder. Um and kind of a basically like it was just incredible. He was running a business called Lollian and Pops, which I'd never thought about before. It was basically a uh a luxury candy company. And the way he talked about the about the business and

the stuff he wanted to do there, I was just super impressed because I I kind of maybe didn't think there was all that much when it comes to uh you know, luxury candy. Uh, and so he he kind of told me he was going to think about his doing his next thing. And so we spent months kind of just ripping on ideas and um it was this was 2018 and Wish.com which uh we had invested in from a uh one of our actually our first fund uh was was kind of a high-f flyier at the time and he was very intrigued by it interested in in the business model and and their use of technology I think frankly um and an everexpanding sort of category of things to to sell. And so he was studying it and and you know I was I be totally honest with you. I was trying to convince him to you know work on a some sort of defense tech or bio manufacturer or some some other business. I just

Yeah. something more uh in the typical line of sight for you guys.

Exactly. Which shows you know how stupid it is to try to be thematic about things. Uh and so

well you guys were smart. You didn't let you didn't let the you just bet you you you backed the the jockey. Exactly. So, we I had already agreed on whatever we wanted to do and he came and uh he pitched us what was called last brand at the time. Um and uh the rest is history.

Uh and then and then how how quickly did you realize he wasn't too too crazy?

I mean, I think pretty early on the business was working. I think what's you know it's kind of like what it's always tough to see like with an exponential curve kind of early on and it was um and it really started to become obvious maybe uh just after co that how fast he was growing and really how unbelievable uh the operations were. I mean, the the amount of products they were bringing in with really high quality uh and the amount of like retention and repeat purchasing, it's just it's just totally nuts.

I mean, I think that at this point,

um Quinc is now a top 10 uh retailer in the United States in terms of repeat ordering and the other top 10 all have grocery or pharma uh that drives people in, you know, every month or whatever. um which has been massive and the company grew 100% year-over-year uh last year. Cash generative at like a multi-billion dollar scale. So, it's just uh it's just really a testament to the way that Sid and the team he's built have been running the business.

Zooming out, how do you think about DTOC retail changing in the AI era? Like we've been tracking the agent commerce stuff pretty closely. It feels like it could go exponential this year and go from like 0.1% to 1% and it wouldn't necessarily move the needle, but like how are you thinking about it as like the next decade?

Yeah. I mean, it's it's something that's that say has been investing in

a huge amount. Um, and really I think the way he describes it is just like he wants to build the world's most efficient supply chain. Mhm.

Um and so AI is used in like every like literally every single aspect of the business.

Sure.

Um obviously there's some places it can have I think a much sort of maybe more there's a lot more like of a call option of something being totally transformative maybe more on the front end side but but the reality is like one of the ways that he's been able to just be so unbelievably capital efficient and cash generative is because their operating expenses are just incredibly low and that their sales and marketing is super super dialed in and and and just basically every dollar they spend in it is cash generative. So I think that AI will probably have the biggest impact just in terms of taking a business which maybe you thought okay the max ceiling here and what this thing could generate would be 20 or 30% you know operating margins and just drive that even higher. Um, and there's obviously interesting stuff on the on the consumer front end, too. But, uh, to me, that's what's most impressive, at least right now.

Mhm. Uh, just just thinking about the broad startup landscape, are you more bullish than in previous years around consumer broadly? Um, there's a lot of like, oh, B2B SAS vertical stuff, you know, oh, it's going to get steamrolled, blah, blah. It feels like DTOC commerce, it sort of went through a wave and then there's winners and losers. You're clearly in the winner, but uh uh how are you thinking about just uh startup opportunities these days? I

mean, I think it's it's actually interesting being based here in Austin because

uh Austin maybe is like the maybe probably the most sort of has the highest density of successful CPG founders. And I think the the interesting thing about them is that the vast majority have run super super capital efficient. Maybe they've raised a little bit of money.

The one I think the sort of traditional

Yeah. They're sort of forced to they're really forced to be capital efficient. I'm sure a lot of them would would love to just be like, you know, growing uh paying whatever it it it took to grow. But you look at the rounds that even great brands with great economics put together, it's like they're pulling in

500k from over here, a few million over there, and that's with like being an eight figure revenue business. when you look at their any other counterparty even in in defense or AI if they had that level of revenue they'd be raising it 50 to 100 times revenue potentially you know

yes so I think it's I think that I think it's I think AI offers the potential that and we're talking more on like the actual physical you know consumer product companies side I think it offers the potential for higher margin structure so if you find the right entrepreneur I think there can be more businesses built even if it doesn't if there's not some super obvious uh like big why now just because people who deploy this the best are going to be they're going to have a sphere of cost structure which means they can spend more marketing grow faster invest more in their product quality uh and then I think obviously on the software side I think anytime you see one of these big tectonic shifts there's going to be tons of businesses built um you know on the consumer side I think some of them are going to be tiny but insanely profitable I already you know as we all know there's people who have one or two people that have thrown the other something making like a million or two million or three million bucks, you know, a year and they're running it basically for cash.

Um, but we I, you know, I think at the we're always looking for super high quality founders that match well to the uh, you know, to the business they want to build. And at the earliest stage, I think can't be overly thematic. So if another, you know, Sid walks in and wants to build something uh other than other than Quint, I would back him into it at the early stage. Um

but uh

but I think there will be we will see more founders that are able to run these businesses at pretty pretty insane margins because of AI. What uh what categories in physical AI or or uh industrials or even defense do you feel like is still underinvested today? Uh it feels like uh obviously there's great company. Sometimes you wake up and it feels like there's great companies in every category, but from from your vantage point, where do you want to see more uh new company formation? I mean, I I think that we're kind of just still at the first innings of just the I mean, basically every huge technology wave right now is bottlenecked by the physical world.

Mhm.

And I think there's just going to be an insane amount of companies that are built, some of them will be incumbents that figure out how to use AI to lower their cost structure, change their incentive structures they I mean uh and maybe those will be you know those won't be done by startups but I just think that pretty much anyone looking to build a big company that is enabling the amount of energy cement steel copper wiring you know etc. Uh right now is is super super well positioned

um if they can figure out how to run those businesses. They're very different than running a software business.

And so, you know, I think, you know, kind of to the point of what we saw with Quint,

I think a lot of people who were great, you know, software engineers and maybe would have built great SAS companies wouldn't have necessarily been the right founder. Um, I think that uh like when it comes to the re-industrialization that's happening in the United States, like capital allocation is is just this unbelievable like it's probably the most important sort of lever. And so if you're building billions of dollars worth of facilities a year and you don't uh you know have a relatively sophisticated finance function or a CEO who who has you know studied this and comes from that world I think you could be in trouble. Um which is kind of an interesting thing to see for the first time. You know I've started seeing like co-founding CFOs of companies.

That's crazy. uh or maybe they have a different title, but that's basically their background is like, you know, partner in investment bank or you know, whatever. And

it's so funny cuz like a decade ago if you if you if somebody comes in to pitch you and they've got this CFO as like a co-founder, you're like, "Hey, I think you have like much more important problems to deal with than like the finance function. You should probably get some some uh revenue and happy customers first." But now I can see that flipping.

I mean, totally. It used to be like the I would my advice would be like I don't want to see like a CFO person like around like until you at least like 30 million of revenue. I want just like hire the smartest investment banking analyst you can find who will work like 120 hours a week and like make sure you don't run out of cash, right? But now it's like okay well we're going to go raise a $500 million like you know project financing deal for this facility. It's a little different.

Yeah, that makes a ton of sense.

Awesome. Well, thank you so much for taking on Austin. How's the weather?

Weather's great.

It's uh probably great at least for another few weeks and then it'll get really hot. But uh it's good. Yeah. Come visit now.

Then it's time to go water skiing.

Hill and Valley next week.

Hill and Valley. We'll have a bunch of folks out there.

Fantastic.

Looking forward to it.

Looking forward to it.

We'll have a great rest of your day. We'll talk to you soon, too. Great.