I am joined by Faraz Fatemi, partner on the Lightspeed consumer team where he focuses on consumer platforms. Before joining Lightspeed earlier this year, Faraz was at Clubhouse and Wave and he started his investing career at Bain Capital. Among other things, Faraz will be building out the Lightspeed presence here in LA.
Give me the overview of the new gig.
Absolutely. So I recently joined Lightspeed as a partner on the early stage consumer investing team. First LA based partner on the team. And I spend a lot of my time focused on four big buckets: the first is consumer social, the second is creator economy, the third is community based commerce, and the fourth is interactive media.
Yeah. for our early stage team, our bread and butter really is seed to series B investing. but we have a dedicated growth vehicle as well.
So, you know, we'll really invest anywhere from seed all the way up to, Later stage pre I P O rounds and even a couple publics as well.
And I think you are a lean four or five person team on early stage consumer.
That's right? Yeah. So five partners on the team right now. my partner, Alex Taussig leads a lot of our efforts, in early stage commerce and marketplaces. my partner, Mercedes bank leads a lot of our efforts around consumer web three,
And my partner, Nicole who I believe has been on this podcast in the past as well. She leads a lot of our efforts across creator platforms gaming, and more recently consumer health and FinTech as well. and we have, my, other partner SI Sykes joining us, uh, here this summer, which we're incredibly excited.
That's pretty small actually. Cause I think of lights. We is such a huge
We're a, lean and mighty team, despite the fact that. The firm's been around for a couple of decades. it very much feels like. Affirm that it moves quickly is entrepreneurial. We continue to redefine, you know, what resources we can deliver to founders. We work with what our right to win is
Excellent. Well, I mean, I always love chatting with you about consumer trends and, and what's going on in the consumer world. so maybe we jump into a couple of the buckets that you're focused on and, and how about I pick on community based commerce and just maybe just start by telling me what that is.
Perfect. Yeah. So super high level, you know, community based commerce, I think commerce in general, it's, it's no secret that the pandemic really, you know, facilitated a dramatic acceleration around. E-commerce penetration, And, uh, you know, I think the offsite, McKinzie stat, is, you know, we had 10 years of e-commerce penetration growth, condensed into just the first three months of the pandemic in 2020.
That's that's really what stole the headlines,
And so specifically within commerce, I spend a lot of my time in and around community based commerce. And really what that means is I, I actually chunk it up into, four or five buckets. The first is live stream shopping. The second is influencer commerce. The third is group buying. The fourth is peer-to-peer marketplaces and the fifth is discovery platforms.
And so, you know, to, to go through each, uh, influencer based commerce. you know, I think platforms like the lobby, Brandy, uh, lime road, I think, you know, definitely a theme that goes, goes in line with the, the creator economy bucket that I spend quite a bit of time on.
can you just stay on, on the influencer? Like it seems like in other countries, the influencer. Is just a very different model. And, and someone was telling me that like in Asia, a lot of the influencers, they're not like celebrities. They're more like the consumer report influencers.
right. That's absolutely right. And, and actually I think that there's an even deeper level of validation that comes with these micro influencers who are building their own. Really, really rich, really deeply connected communities and, and sort of becoming seen as the centers of influence rather than here in the us, where it's very much, led by, the quote unquote head influencer who has tens of millions of followers, um, who may not necessarily feel has connected with that celebrity.
Um, I think internationally we've seen sort of the reverse, and I think we're starting to actually see it here in the us too, with, with the emergence of some of these livestream platforms.
And can you explain what you mean by it being the reverse in the us?
Yes, absolutely. Yeah. So I, I, I think, you know, what we've seen historically with influencer based commerce is you've had, you know, businesses like, like to know it, uh, and reward style, which have been very much, you know, the Kim Kardashians of the world coming and, uh, saying, Hey, you know, Buy this brand or buy this product.
and oftentimes a lot of it is the celebrities are launching their own brands, which makes a ton of sense, you know, just another, another way for them to engage their audience But I think internationally, what you've seen is, platforms have emerge that have, uh, empowered this class of micro influencers, medium and long tail influencers, who drive a lot of the commerce.
And again, these livestream platforms are very much built. More for them than, those head influencers who have tens of millions of followers. And so, you know, I think we've seen the emergence of this class of influencer, in the commerce world recently. And, and it's one that, uh, is only gonna continue to grow.
Yeah. And. and you mentioned group buying as well, which you're probably gonna touch on, but that's another one that seems like it's very different internationally than it is in the us. But you tell me,
Very much so. Yeah. So I, I think, you know, we, we've been privileged to see the journey with, with, uh, with platforms like Pindo duo which we at light speed, uh, you know, have been investors
can you explain, can you explain Pindo for those who aren't super familiar like myself?
Totally. Yeah. So, you know, broadly the, the group buying theme is in a nutshell, you know, you bring together groups of consumers, and, and sort of once you're able to take critical mass you're, you're able to, get the best deal on a particular product or particular set of products. And I think what's, what's interesting more broadly when it comes to group buying is a lot of folks, really what they want is a little bit of social validation when it comes to their online purchase.
You know, validation around not only quality, but also assurance that they're not just gonna be an outlier in their groups of friends. And I think the, the unique twist for, from Pindo duo is really its integration of the social components rather than the traditional, online shopping process.
And so they coin this, um, term around. Team purchases. and really what it's done is it's allowed, you know, folks to get great deals on everything from toys to shoes, to accessories, uh, and clothing, which, you know, very much has been built out from, from the early days, uh, which is largely focused on perishable agricultural, fresh products
let's move to one of your other about grades, consumer social, right?
You know, what are the themes you're looking at?
It's an area that I am super, super passionate about.
you know, broadly, I think consumer social, uh, is an incredibly, incredibly exciting space. Um, I think we're at such an exciting time in, in the long history of social media, we've had increased global smartphone, penetration, increased global internet penetration. Uh, and I think that's been paired with, uh, a desire for new forms of communication.
from this new digitally first, generation, uh, which has created really, I think, an incredible white space opportunity for the next generation of, of consumer social platforms. And so really within that, there there's two big. Themes, you could say that I, I look at one is vertical specific social platforms, uh, and the second is, you know, more authentic, less filtered forms of social.
and so getting into each, I think on the, the vertical specific side, basically look at every single top Reddit group, you know, sports, music, news, gaming, science, et cetera. Really the question comes down to, can you build a case that there's a big enough Tam for a standalone community based platform for each of these categories?
Uh, and then if so, you know, I, I fundamentally feel that yes, you know, we will see the emergence of a vertical, specific social platform then tackling this category, What does it mean to be more authentic or like, how do you think that plays out? If, if you just sort of paint a picture of different ways that could look to be more authentic.
Yeah. I mean, look, I think, platforms like B real, right? You have. Two minutes to, to post a picture of whatever you're doing, right? So you don't have time to prep. You don't have time to, find a pretty backdrop or, or anything like that. You just send a picture and that's your way of, you know, being connected with your friends.
And I think Snapchat is somewhat similar, What they care most about is keeping their streaks alive. And they don't actually care about it being a really nice picture, uh, or a nice message or anything like that, that they're sending.
They just wanna have that communication, consistently over time. And so, you know, they'll take a picture, like a blurry picture of a wall, or they'll take a, a picture of, a, a street sign. That's like, not, not actually that exciting, but they do it just. They don't care about impressing their friend.
They're actually, I think a little bit more adverse to that, you know, the social pressure that comes with being so perfect in your communication and, uh, for me, really, the eye opening moment was hearing my, my college age brother say that him and his classmates don't actually exchange phone numbers.
Mainly, communicate over Snapchat and really, you know, what that showed me is that the way that this generation consumes content and communicates with one another is so fundamentally different from the way our previous generations have done it.
Right. Such a fun opportunity to think about what the new tools might be. And I think really what's interesting is two platforms that I think are very, very ripe for disruption in the social space uh, legacy platforms are, Yelp and LinkedIn. And I think a couple of those categories that they hit on, you know, travel And social food and social even, you know, the way you work you know, layering in social sciences.
Uh, I think that there's a lot of opportunity, particularly given the shifts that we've seen in the way that , this current generation interacts with one another and communicates and consumes content.
That's really interesting. And I'm so old, but let's talk about LinkedIn for one second, cause that's
because that's one, I, I understand. You know, obviously my identity on LinkedIn is quite different than my identity on Reddit, on Facebook, fill in the blank. are we all gonna have sort of different identities?
Like, how does this start to play out? How do you think about weaving an identity?
Well, think again, I think this is part of the shift in the way that the folks can interact with a lot of these social platforms. But I think historically,
It's been based on, you know, where have I been, what logos do I have on my resume? What's interesting is we're seeing a shift away from that to actually getting deeper on a personal level. And I think the next iteration of LinkedIn is actually going to be a lot more.
Who are you as an employee? Like, how do you like to work? What are your day-to-day habits? Where do you spike? What, what are the areas that you want to improve on? I think it's going to be a lot more social in nature. Like I think LinkedIn is great for sharing professional updates, but.
it's not as social in nature , as it could be. And I think the future of a platform like LinkedIn is going to be a lot more community centric and a lot more community generated candidly around sort of, you know what does this individual's personality like? Where do they thrive?
What environments do they thrive in? , and so on. And. that's going to be a major shift from sort of what we've seen really over the past decade and a half or so of, consumer social.
How, if you're building, whether it's a brand or an a network, how do you build in that sort of community generated piece?
Greg question. I think ultimately it really comes down to product , and the way that, you know, the product is built, I think LinkedIn and Instagram to an extent are very me projecting to the world the way that I want the world to perceive me. That has a certain level of Polish embedded in the product that we're not actually going to see as much of in future generations of special.
both B to B and B to C. And I think that the reason for that again, is because of the way that this current generation is this future generation likes to interact with one another and their priorities, like, I think fundamentally it's a different set of consumer priorities than what we've had really over the past couple of.
I don't know total weirdest side, but like, I actually feel like when I have an avatar, it's actually kind of different. Like it's a different, uh, it's actually more manicured feeling in some ways.
it's interesting. Like, I think that, I don't know if it's going to be avatar based for what it's for it, future of, of social. But I think again, part of it is. much work do I have to put in to have this perception of me that may actually be a little bit divergent from who I am as a person and who I am as an employee and who I am as a friend, et cetera.
But I think to your point, like avatars is due to an extent, give you a little bit of freedom to like, define that.
that's fascinating. I hadn't heard it so clearly articulated, but it's like how much work do I have to put in to establish that identity?
Interesting. does this lead to social networks that are more positive? Like I just keep hearing about all the negativity for teenagers excited.
Absolutely. I mean, I think again, the whole push towards authenticity is a push towards what I hope is a nicer, internet and nicer community. because they're so heavily it's actually hard , to stay away from some of those issues around bullying and around harassment and because so much of it is objectifying yourself in a way that you want other folks to be perceiving you. Um, And I think this, you know, what we started to see.
And the more recent class of social platforms uh, that have taken off things like be real locket side chats, name a few uh, much less manicured and much less you know, you could say materialistic then legacy platforms. And I think uh, what that does is it makes it a lot more authentic to this current generation.
And I think with that brings a much healthier internet.
what was the community I'm bleeding off your focus areas a little into your job history.
Cause you were at clubhouse most recently. Like
we all know what clubhouse is, but like how would you describe.
my club has experienced for what's worth was an exceptional one. You know, I think building a platform like that in a time when it was so needed by the world that truly had a global impact really wasn't an unparalleled experience. you know, I firmly believe that.
At clubhouse is probably the strongest collection of technical and creative talent combined that I've ever seen at any early stage startup. I think the biggest learning that we had as a team in clubhouse is the importance. Prioritizing retention for consumer platforms early on. You know, I think the public saw all the spikes and ups and downs at clubhouse and 2021, but really what our team was laser focused on was building the products and building the content strategy to ensure that retention is there for our golden cohort of power.
The user metrics that's top line numbers, you know, daily, weekly, monthly actives. That's what seals the headlines. But in reality, if you don't have retention in place, it's really a leaky bucket and any growth investments that you're making will never actually become our live positive. The other big thing that we really wrestled with a lot internally is prioritization. Really prioritization of geography is going to be going after prioritization of product features, privatization of partners. really, you know, ultimately the learning for all of us throughout 2021 was that spreading the company too thin and not having a clear understanding of your platforms, how our users and B you know, what your value prop is to those power users is what leads to yield loss. Luckily, you know, over the course of 2021, we developed the answers to a lot of these questions so maybe we can extract some sort of lessons learned what other lessons around prioritizing, where you guys got something right?
Or got something wrong in terms of prioritization.
. So on the point around retention in particular, I think. Has completely changed the way I invest in companies to a particular consumer platforms you know, back in the day before I had the way of past experiences, I actually cared a lot about, you know, the, the top line moments and to, you know, the, the user growth.
Uh, And I think that's fantastic. And I think having an incredibly viral product that's growing really quickly and has strong momentum is, is fantastic. But I actually think. Developing an understanding of what drives engagement and what drives retention, and fully embedding that into the product is actually critical to the success of any social platform or any consumer platform, really over a longer term time horizon.But I think, you know, going back to your original question around really sort of, other learnings and other sort of, you know, things that we got, right.
Or, things that we, you know, we're working on What it was, was clubhouse during the pandemic. We very much identified, again, a need the world. I needed for connectivity, a need for less filtering because there is no video component and a need to be serving you know, a global audience and bringing that global audience together.
But you know, I think over time that comes to the trade offs, you know, and I think same thing with product, you know, I think shipping features it's important to understand really what the core user base is and focusing those feature on a really sort of, well, it's going to drive engagement for those core users.
What is it in the case of clubhouse that really drives engagement and retention.
So this was a, it was an interesting discussion. I think that we had a lot of back and forth on internally. Um, I mean, I think what initially drove a lot of the spikes where you know, the big Musk rooms and sort of the big, more broadcast experiences where, you know, you could come in as a user and feel a deeper level of connection with, you know, these individuals, you idolized over time.
I think we saw, okay. How do you build in stickiness for the platform? And I think a lot of that, again comes back to community. How can you help people identify their own communities within clubhouse onboard their existing communities onto clubhouse, and then give them , an experience with.
Hangouts or with, you know, small group experiences or with targeted communities and categories that really give them a reason to keep coming back to the platform.
Interesting. Yeah. Identifying your community. On-boarding your community? Someone said to me that community is the new AI in the sense that it's. Now see, and every pitch deck
you know, when you see community in a pitch deck, how do you sort of start to dig in to understand whether someone's coming about this the right way?
great question. you know, I think really what I look for is one does the platform have a clear understanding of who their core communities are?
The core users are and to. Is it, everything this business is doing fully aligned towards building a sticky retentive experience for that community. And three, are you seeing signs of organic growth? Are you seeing healthy K factors? Are you seeing sort of that that initial buy reality starts to develop? That's being largely driven by the community as opposed to being driven as much by you know, investments across sort of paid all that? Cause I think at the core community is what would drive, you know, The success a long-term time horizon for a lot of these platforms.
one more last question.
I think you said something else that was insightful to me, which is I think you said that it lowers the barrier because there's no video, but
also it allows you to bring that more authentic self because you're not like what, like dressing up What it's worth, I think the whole theme around more authentic social platforms, I actually think clubhouse was like the first mover that bucket because , videos, fantastic photos are fantastic. But I think audio is to your point because it lowers barriers and lowers the, the level of effort that you have to put in to be present, to be engaged.
I actually think it allows folks to. Be their more authentic selves and feel more comfortable participating in the, experience as opposed to just being consumer of the experience or an observer of the experience.
So like I'm more comfortable jumping in and sort of adding a viewpoint And I think just like seeing by little icon up in the corner, it's hard. It's distracting, you know, and I think not having to worry about visual perception and actually, you know, being able to focus on. the content that you're sharing and you know, the spoken word.
I actually think there's a lot of.
Yeah. So then it's hard to get the cues though. Like, is it my turn to jump in?
Well, I, again, I think in terms of the uh, the product product, I think you're going to see some interesting things from clubhouse on that specific front-seat. So stay tuned.
very cool. Let's keep going backwards, which is before clubhouse, you were at wave
I was, yes.
we've broadly it's like sports content.
Yeah. So the core thesis that the wave has is, and I think it's something that's come across a few times in this conversation is the way that millennials, but even more so gen Z and gen alpha consume content is very different. Particular sports content is very different than what it was.
previous generations. So, you know, while myself, or, my dad's generation might watch an ESPN, my watch sports center watching the entire 60 minutes segment to, you know, get to minute 52 and see I'll highlight from their favorite team. You're not going to see, the same attention span, I think from a lot of sort of younger consumers.
And I think really what it is is taking a lot of this fantastic sports content already exists and then bringing. , To meet consumers, particularly younger consumers, where they already are. And then around that, starting to build community where a lot of the content actually is community generated over time.
And I think by, creating a more inclusive experience whereby the community actually feels like they own part of the platform and part of the brand, think that's actually what drives the overall success of really any sort of media content type platform.
where the community feels ownership.
Exactly. And actually, I think what's interesting is that. This is actually become even more accelerated with, web three. I think web three onboarding has come greater focus, truly believe that the next generation of social platforms will have some elements of community ownership. that reward things like engagement and development , and contribution frankly, to the platform.
The platforms will likely serve as a centralized store of content. and it'll Really what it'll do is it'll start to build up a social currency and credibility with an emphasis on digital identity as you're contributing to this community as you're building out the content.
You said it quickly, but sort of the social currency and digital identity, because my digital identity also is tied in with what I've created, what I've contributed.
Absolutely. Thanks. And I think get a candidly , it's also a reflection , of the way modern consumers like to consume. You know, I think folks want participatory experiences, they want experiences that aren't just as much pure broadcast as they are inclusive. And you feel like you can actually interact the brands and the platforms and the content in a much deeper way , than, you know, we've been able to.
Change threads with me. what has surprised you coming to Lightspeed? , you know, you had a career, you were at BCV at Bain. You've been around venture, you know, one of the things you're like, oh, that was different nights. Like.
I think the big thing that I'm so excited about Lightspeed. The way that we think about deals is rather than looking for you know, reasons for not investing in a company, which is great for driving you know, downside protection.
Well, we actually do is, look for reasons for asymmetric upside and look for what are. Unique differentiators that should lead us to want to invest in this business. And I think that fundamental perspective is so important in early stage and in particular in early stage consumer, where again, you have to be a contrarian and you have to be thinking about, okay, you know, not everything's going to be perfect.
Not every single metric is going to be best in class. But are there specific things about this business that make it uniquely positioned? Are there specific things about this founding team that make them uniquely positioned to win in this space?
Would you put cameo in that book?
I think so for sure. and, context I have came here to thank for, you know, bringing me closer to the Lightspeed team, my partner, Nicole, she, uh, she led , the series. They invest in a cameo and I had the privilege of investing as part of the series B with, my team at the Bain capital ventures.
And you know, really. Cameo at the time, especially in the early days, , it was very easy to come up with reasons to say, Hey, you know, this business doesn't make sense for X, Y, Z reasons, or it feels really cool, but like, are you going to be able to build a business around it?
And I think what it did was it proved that one, there's an appetite on both sides of the marketplace to there's really an amazing way to build momentum quickly, given the compelling unit economics on both sides of the marketplace. and through. By building an exceptional differentiated product that was unlike anything else in the market.
Again, that's really how you drive outsize returns venture and in the startup world. More broadly.
Awesome. Let's shift off the investing into the personal I'd like to ask. How would your friends describe you? That's a great question. I mean, I, I'm very bubbly in case you going to tell and it's not a front that I put up these conversations is I actually am very very energized by getting that , talk to people and spend time with people. I mean, my life today really revolves around few things.
It's, you know, my fiance and wedding planning. Uh, Our puppy that we, we got last year, not so much of a puppy anymore, and I think beyond that, it's really spending time with. People in the broader LA ecosystem could continue to build out not only my own network, but also sort of broader Lightspeed's network down here.
And I think it's something that initially, you know, having grown up in the bay area probably didn't see myself making the move down here to LA uh, really the move was, spurred by, , my fiance wanting to be down here and us wanting to plant roots. Given she grew up in Southern Cal.
But you know, I think all of it really comes back to, really priding myself on being people first and putting others first and This job, this industry, it's what we all do.
And I think that's what really energizes me.
And so let's keep going on this, which is you're from the bay area. Are both of your parents immigrants.
Both of my parents are immigrants. Both my parents moved here from Iran. I'm full person. And even when I'm back home with my family, I, uh, we only speak Farsi.
And so it's awesome. Just being able to. Bring some of that Persian heritage, Virgin culture into a lot of my day-to-daywhat are some of the lessons you took from your parents? So both my parents were immigrants. Both of them actually came to the states and started their own businesses. dad is a financial advisor and my mom is a therapist and for them really leading. You're on leaving a lot of the life that had, the wealth of they'd been able to build and the relationships that they have there, all those sacrifices and coming to the states, really with the intent of one pursuing the American dream.
But two more importantly, I think uh, really just setting up the best possible life for myself and my younger brother, Ryan and future generation. That sacrifice is probably the biggest motivator for me my personal life, in my professional life and really in the way that I interact with And then I think the, the other, again, he keeps talking about, you know, people being at the heart of everything, but really, you know, growing up in a big, big Persian family. My, dad has nine brothers and sisters, and I have a ton of first cousins. All of them live in small town up in the bay area foster city.
And so Having that community and putting all those other people first and even just seeing how older generations within our family interact with one another. it really, I think is part of what instilled this whole people first mentality in me from a very young age and it's going to be something that, you know, I carry with me and hopefully pass on to future generations.
I mean, that's like a beautiful personal advice. Is there anything moving into the career advice? Like, is there anything that's,
Advice you've been given or yeah, you'd like to share.
Yeah, totally. I mean, look, I think , my mom is a therapist. She's a psychologist by trade and lot of consumer investing candidly is, is understanding the psychology why consumers do what they do why people interact with one another, the way that they do. And, ultimately I think the way that.
I think about a lot of, businesses that I looked at is by, getting her take on, you know, what do you perceive as being unique with the way that this platform is serving the audience that it's going after? And you know, what are folks looking at?
You get out of it from a psychological perspective? Because I think if you can nail a psychological piece, I think that's, what's gonna allow you to you know, build a really, again, sticky community. But then I think, look professionally, my parents are incredibly hard workers and. At the same time, they were always there to support me as I was going through uh, you know, any life career decision, but they never put me on comfortably , to go in any different path.
And I think biggest parallel that I see is, as I'm thinking about different businesses or I'm working with, you know, different founders, I think at the end of the day, It is a founder's business, right. And is baby. And there should be , the ones that are determining sort of, you know, the direction that the business was going in and being a thought partner, being somebody who is a hard worker similar to, you know, well, my parents were, but never being Overly authoritative. I think that is really important to being a valuable board member.
Yeah, anything else you'd really like to cover, because this has been amazing.
Yeah. I love this. I love this. I mean, I think look more broadly as, as we, you know, talk about, you know, me being here in LA building out of their LA presence I think. Lightspeed as a whole, you know, we've been incredibly, you know, hashtag long LA for over a decade now dating back to early investments in snap and honest company.
and I'm incredibly excited to be here as our first LA-based partner and,being a partner to a lot of these amazing. amazing.
Yeah, it's amazing. And I'll just know you're not brand new to LA. I mean, it's a new role for you, but you've actually been in LA.
Well, I'm just so happy for you in this new role and selfishly excited.
We get to hang out more and look at deals and be part of the same community.
Likewise, unbelievably excited. I believe you excited to be here. So much going on and I think it's such early days. And so I cannot wait, can always spend more time with you with the team. And to just be here.