To lead, first be loyal

Leadership is often used to mean "getting people to do what you want." A more worthwhile definition could be "getting people to want what you want." Or even better "making things that should happen, happen."

Leadership, above all, requires loyalty to both people and truth.

Top-down organizational change rarely works if the people aren't ready for it. At other times, I have been a hapless bystander as management has ruined a good company in a bad market by trying to drive it to greatness. Great theorists can make the worst generals.

As I don't tire of saying: people are more important than things. At times, those things include the truth.


Sometimes, all it takes is a bit more time for people to come around to your view. So be patient. Respect someone's ideas and dig deeper to see why they don't like what you believe to be the truth. Such a clarifying journey can be helpful for both the leader and the led.

To "command" loyalty is impossible. To deserve loyalty, first you must be loyal. This includes loyalty to your people, but also to yourself.

In speaking truth, it is thus necessary to gauge the readiness of others to hear it. They may need to hear it. They may say they want to hear it. But sometimes they can't hear it. Timing is crucial, since you may not get a second chance.

Above all, be loyal to yourself in evaluating the truth. Question whether you see what you want to see or you see what is. When discovering that the truth is not what you want it to be, do not take it out on others. Authority exercised thus is not just disloyal - it is incompetent and cowardly.

Authority is granted; it does not happen by appointment. Good leaders realize that whatever they may wish to do, it is only in the strength of their team that they can hope to accomplish it.

Beware the metaphor as a mental model

A few years ago I spoke to a founder working on generative machine learning. After the chat she sent me a follow-up, thanking me for the meeting, and said she particularly liked the "metaphors" I had used to talk about her segment.

I'm sure she meant it as a compliment, but the comment threw me. Had we not managed to have a real conversation about her work? Was my technical limitation starting to show (I don't have a CS degree and the little programming I do could be generously described as "script-kiddy")? What did she mean?

This was prior to my coaching days, so I didn't give her a call to ask, which would have been the obvious and straightforward thing to do. Instead I retreated - good introvert that I am - into dwelling on it. Which leads us to this blog post.

"Mental models" have become more popular recently because of a speech given by Charlie Munger in the 1990s. And perhaps also because the world is more connected and complex and we still have to live very human lives with very average intelligence dealing with a lot more ambiguity. That's before "The Merge" anyway, but I'm getting ahead of myself.

The concept of mental models has been around for a very, very long time. It's right there in the cave with Plato and rather the whole point of Kant: there is no real direct access to things-in-themselves. Our perception and its concepts mediate between us and the world. You could argue that cave paintings are an abstraction and that parietal artists knew they weren't making "real" buffalo on the wall, so this likely goes back as far as human history or at least as far as the development of language.


Which leads me to my second point. Metaphors are a type of mental model. They're very good for communicating. They're powerful, memorable, evocative. All good things if you want a point to stick. Take the "Big Bang" theory (a Fred Hoyle creation). I wonder if "Primordial Singularity" would have had the same resonance.

But as mental models, metaphors for critical thinking can be sloppy. Their abstraction of the things-in-themselves relies on the ability of language to supply us with relevant images. Which is a much worse way to go about building a model than, for example, the Pareto principle.

This, of course, leads to the imprecision of language and the realization that most of language is metaphor. But let's not go down that - wait for it - rabbit hole. Rather, I've found it helpful to note when I'm going down metaphor lane (sorry). It helps me question whether I'm taking a lazy shortcut (again, sorry) to abstraction, rather than doing it thoughtfully.

Music Saturday - Folksy Ventures Playlist

Algorithms have become so good at making playlists, I doubt my kids will ever understand the big deal that making a mixtape was. That got me a bit nostalgic, so I thought I'd make you a virtual mixtape (Spotify link). 

Anyone who knows me knows I love a good bit of Americana. Hence the Texan bride (she has other redeeming qualities), the unsuitable-for-Europe Lucchese boots and a penchant for Townes van Zandt et al. Enjoy.

How to feed 10 billion people (request for food startups)

Last night my wife and I watched the first episode of Netflix' documentary, Rotten. Yes, our life is run increasingly by algorithms. Isn't yours?

The episode was about the adulteration of honey, the circumvention of existing trade laws and regulations, colony collapse disorder, and many more interesting and pretty sad things.


Modern supply chains can be nasty - the deeper and further upstream you dig, the more you'll find an attitude of "it's not my problem." I'm not sure I know four more damaging words in the English language. 

A lot of the food startups we have looked at over the past years have been focused on convenience. Some were looking at nutrition. None, as far as I can recall, have addressed the incredible damage we are doing to our planet as a result of the way we make and ship food. There are 7.6 billion of us and we're going to need to change how we do things.

This article in the Atlantic has an interesting take on the different worldviews in current agricultural research. I'm neither a techno-optimist, nor am I a Malthusian dystopian. I think there's a third way that transcends and includes both points of view, making different products for different tastes and willingness to spend while working within the constraints set by the environment.

For me, the problem of how to feed 10 billion people sustainably is an interesting starting point. If you're doing a direct-to-consumer food startup with deep vertical integration and an integral view on how the food industry should change, we're always open to chat. If you're the founder, you can get in touch via this form. Or if you want to suggest a few European companies we should look at, simply send me an email: max@sunstone.eu. 

Worthwhile ideas and how to have them

There are no larger fields than these, no worthier games than may here be played. - Thoreau (Walden)

Ideas matter.

I like talking to people outside of the tech industry. These days, a lot of them tell me that they'd love to be a founder. It's become very cool to be a founder, because we see them in the media so often. Gates, Jobs, Zuckerberg, Spiegel, Kalanick. The biggest barrier to becoming a founder, people tell me, is that "they don't have an idea." The public's idea of invention/innovation seems to be that everything follows from that instance of inspiration.

My first job in venture was as an analyst with Atlas (now Accomplice) in 2007. The counter-intuitive orthodoxy then was: ideas are a dime a dozen. It's all about team and execution and timing. The best argument I ever heard for that was: if ideas were valuable, there'd be a big market for them. And there isn't.


Of course, the truth is integral. Ideas do matter, but not the way people think. Most startups start out doing one thing, but end up doing something else within a short space of time. But there's a lot of value in where you start.

Compulsion is best. If you can build something in a segment you're obsessed with, go with that. It won't get boring and no matter what happens, it will have been worthwhile.

The common advice is to focus on a problem. Preferably one that you are having. But most people in the developed world have fairly trivial problems. That's one of the reasons we are seeing so many trivial companies. Which is odd given that massively important problems abound. Start at the environmental crisis, or the crisis in faith and meaning, or the fact that over 70% of people hate their jobs.

Framing a problem as a question is good. Explore the segment and iterate. Come up with a partial solution. In my mind, that's how Facebook and Uber and Airbnb got to where they are. They started with small, well-defined but partial solutions. And then realized that the full answer would sustain a much bigger business.

The best such large market you can come up with is something that any internet user could use. Zero marginal costs of distribution meets global scale. Those continue to be the most exciting businesses for me. We are seeing too few of them at the moment.

Many VCs (including us) value domain expertise. But a fresh and naïve look at old industries often yields interesting ideas. Zen mind, beginner's mind (thanks, Shōgaku Shunryū). There's much less to unlearn if you're too stupid to know better.

Ideas don't spring up in a vacuum. Terry Pratchett had this concept of Inspiration Particles that sleet through the universe and hit people in the head as an explanation why several people often have the same idea at the same time. I think it's an evolutionary process. Previous selection begets new variation. It's often more revelation than inspiration.

The best places for new ideas in the US seem to be universities. I'm not sure why, but that's just not as common in Europe. Maybe it's the lack of dorms. Young hackers just screwing around are great crucibles of ideas. I joined the foundation board for the Humboldt University, one of the largest universities in Germany, to have this conversation in more depth.

In general it's good to surround yourself with smart people. Explore the edge cases of the problems that excite you. Frame your idea as a question so you get less pushback. Listen, learn, iterate. The main advantage you have as a startup is your speed of learning and iteration.

I thought that having a purpose is helpful, but have come to view it as essential. Purpose is the narrative of why you're doing what you're doing. It's helpful in the outside world, with investors, customers or regulators. But it's crucial when it comes to convincing brilliant people to join you on your journey and to get people to come to work every day with a spring in their step.

The best narrative I've ever heard in that respect is from Patagonia founder Yvon Chouinard in "Let my people go surfing." It's a book I enjoyed tremendously. My colleague Yacine said he'll write a post on it (here's his Medium - no pressure, Yacine). 

Ideas really do matter. And the way you approach them, too. What you devote your life to is one of the most important choices you can make. Honor yourself by making it something worthy of You.

The weird secret of our most successful founders

"Let not to get a living be thy trade, but thy sport." - Thoreau, Walden

We meet a lot of founders every year. And we do have a shared view in the partnership of the characteristics of founder teams that we like. Top of that list is determination - persistence or grit. Further down are things like domain expertise, social cohesiveness, raw intelligence, and charisma. All very important.

But there's a secret weapon that our best founders share. And that they share - in our view - with the most successful entrepreneurs globally.


You see, our best founders aren't motivated by money. They're motivated by the thing they're doing. Which is making stuff. Building teams that make stuff. Striking deals to source, transform and ship stuff. Helping their people that make stuff have the right resources to be great at making stuff.

Building the product and building the company is what drives them. Making customers happy. Being straight with suppliers. Doing right by their people.

Our best founders are passionate. That passion extends beyond their love of creation to the organization that creates. Money is a consequence of these things done right. It is the fuel to be able to keep doing these things. But it is not the end goal.

Now, this "causality" might be tautological. Lots of our fast-growing companies get early acquisition offers. By definition, the founders that sell early don't go on to be our most successful.

But we've now chosen to look at "authenticity" of the founders as something to gauge before an investment. Is the business a creative extension of a long-standing interest? Or did they make a spreadsheet of the pros and cons of 30 different ideas? The latter teams often don't have the staying power to create greatness.

Very average analytics

"...and all the children are above average." - Prairie Home Companion

Venture capital pitch meetings are full of average numbers. This can lead to sloppy thinking.

What's the average order value? What's your customer acquisition cost? Who's your typical customer? What lifetime value are you calculating with? What are your unit economics?

The first thing to note is that these are all close-ended questions. You might as well be asking a spreadsheet. Conversations with founders are more interesting if you ask open questions. (Conversations with VCs who ask open questions are also more interesting. Raise from those.)

But the obsession with averages is more pernicious. Especially if you use them to actually run your company. Averages obscure the distribution. And it is in distributions that you can find a lot of truth about what's working in the business and what isn't.

I have a company in the portfolio that sells to businesses. The potential customer first has a chat with the sales team and then does a paid pilot. In the early days of that company, most pilots didn't convert. For a while, churn was above 70%.

Sales: it's clear the product isn't working. People hate it. Also, the leads are weak.
Marketing: it's clear sales is not explaining the product right. Also, coffee is for closers. 
Product: Look at my roadmap! I can fix this!
Finance: We are in trouble.
CEO: ...give me that spreadsheet again.

As the CEO found out, a good number of people loved the product. Except those customers had a specific profile. They were large employers and had a big and recurring problem that our product solved. These customers did not churn after the pilot. They had much higher order values and bought more often.

We stopped selling to the smaller clients and focused all our efforts on the right customers.

Whenever I see an average, I reflexively think about what the distribution looks like. Are there several businesses hiding in one? Is there stuff that's just not working? What's working phenomenally well? What predicts a happy customer? I like when founders pull a histogram out of their back pocket and start explaining that because they've been thinking about it all along.

One other caveat: at the stage we invest in - Seed and Series A - sample size is usually so low that the mean can wander a lot over time. Interestingly, as your business evolves, the distribution can wander, too.

It took me a few years to always go at least that one question deeper on everything that's presented as "average." Maybe I save you some of those years.

P.S. Another hard-earned lesson: always look at the actual cash-flow. Always. But that's for another post.

What leprosy can teach you about the modern world

My biggest issue with the Catholic faith growing up was its required belief in magic. Magic was dogma - the resurrection, immaculate conception, the lives of saints, Jesus the healer, winemaker, waterwalker.

Many of these, approached with logos and armed with the tools of exegesis, turn out to be the standard narratives of myth-making throughout human history: the virgin birth, the chosen people, the heavenly ascent, and so forth.

The entire Curia, most of the clergy, and a significant number of the lay people in the Roman Catholic Church know and fairly openly acknowledge this.

From what I can glean, this perpetuation of myth-magic is seen permissible from several perspectives: the belief that there are different levels of consciousness in the faithful, especially among the children and the poor; that there is a metaphorical interpretation that is seen as valid; and that the extension of such interpretation leads to a "right thinking" (hello, Buddhism!), which in itself is the miracle and mystery of faith.

Thus, the story e.g. of Jesus and the leper (Matthew 8:1-4) is not at all about the actual healing of leprosy, but about the radical inclusion within the community of an afflicated person. It is a radical break with the traditions, mores, ethics, religious precepts and so on of the time. It says: there is nothing within you that we cannot love. Unless of course you're in third grade or in sub-Saharan Africa, in which case the Church maintains the whole story is totally about leprosy (this is not acceptable). 

In one of my favorite heretical texts, A Course in Miracles ("scribed" by some psychology professors at Columbia University and a base text for the self help boom, having inspired Eckhart Tolle, Marianne Williamson, Tony Robbins, and many others) Lesson 341, which is rather towards the end, begins:

"A miracle is a correction. It does not create, nor really change at all. It merely looks on devastation, and reminds the mind that what it sees is false."

In other words, it is a change in perception - a change in consciousness. It moves from judgement of exterior to the acceptance of the inner perfection of the individual, no matter how wrong a turn they may have taken, how far in "sin" they've slipped, how disgusted you are by their actions. 

This lesson of universal acceptance, inclusion and non-judgement is one we'd do well to heed in societies that are slipping further towards tribalism, othering, authoritarianism. 

"Miracles fall like drops of healing rain from Heaven on a dry and dusty world, where starved and thirsty creatures come to die. Now they have water. Now the world is green. And everywhere the signs of life spring up, to show that what is born can never die, for what has life has immortality." (ACIM, Lesson 341)

Happy Sunday.

Music Saturday - Woodstock (Joni Mitchell)

Joni has always made sense to me. This song was first performed in 1969 at the Big Sur Folk Festival, about a month after Woodstock (which she didn't attend because her agent thought she should be on TV instead).  

"We are stardust / Billion year old carbon / We are golden / Caught in the devil's bargain / And we've got to get ourselves / back to the garden"

I wish I could have seen her live. 

Acknowledge & validate

Yesterday I wrote about empowering questions. It's a tool I took from my training as a professional coach. I've been applying it in my work as a venture capitalist ever since.

There's another tool I'd like to give a nod to. It generally comes before asking empowering questions. It's called "acknowledge and validate."

One of the most powerful gifts you can offer someone is to listen. By acknowledging what someone has said, we let them know we're truly listening. The most straightforward way is to paraphrase what they said.

"So what you're saying is..."


The second, and even more powerful part, is to validate their experiences. Everyone has feelings. Many people feel bad about how they feel. Guilt is a bitch. As a German Catholic, believe me I know.

Validating isn't judging what they're feeling as right or wrong - it's letting them know that you can see things from their perspective. Letting people feel "normal" by releasing their negative energy helps reset even the most difficult times.

"It's perfectly natural/normal/makes perfect sense to feel that way..."

It's straightforward to combine acknowledging and validating into one powerful statement:

"It's perfectly natural to feel [the feeling] (validate) given [the situation] happened (acknowledge)."

In the beginning, most people feel awkward using "acknowledge and validate" as a tool. It feels fake. But that feeling goes away if you mean it and practice it.

It also doesn't feel fake to the person you're saying it to. They feel like you're listening and understanding them. Which is what we all want.

Note: I'm not recommending you go all Dale Carnegie on them. Be Real.

I may make this coaching tools thing a series. There's a lot I learned from iPEC in my nine months of coach training last year. It feels like I should share some of it with you.

Thanks for reading and have a wonderful day.