Innovation by ideology - what's new is the story

Back when I (too briefly) worked for Bruce Golden at Accel, he'd look at one of the companies I brought in and ask: what's the significant invention or innovation here? The question bugged me at the time and I wasn't sure why. Bruce encouraged arguing from first principles and frequently the stuff I liked wasn't fundamentally new, so we wouldn't proceed. There was no "better mousetrap."

It's the worldview of engineers and (many) business people. Make something ten times better and the world will flock to your door. You corner the mousetrap market by building a more effective trap. 

But many of the companies that I had seen succeed didn't do that at all. They did something slightly different, sometimes somewhat better in one dimension, and significantly worse in another. And it wasn't like the better dimension was 100x better - this wasn't an innovator's dilemma thing. 

What these companies did instead was change the conversation. They hit upon the zeitgeist or mainstreamed some subculture in an important way. To keep with the analogy of the mousetrap, today that consumer market (in Europe) is dominated by humane designs. There has been a silent but significant revolution in how we think about the sentience of animals and the primacy of humans in nature over the last 50 years. And the guys who started building non-fatal mousetraps tapped right into that - perhaps not even consciously but because it was the *right* thing to do.

I've gotten more conscious about this kind of ideological or cultural innovation over time. You can see it everywhere around us. It's human progress enabling commerce enabling progress. I'm a big fan of that cycle. And I nowadays recommend it frequently to founders.

Want to build a car subscription company? Why not make it just for electric cars. Want to build a digital FMCG? Start by removing all paraffins, perfumes, and animal testing. 

And so the world gets better, one small company at a time.

Image source: Bodha, Come Back to Yourself, a DTC aromatherapy company from LA (not in our portfolio)

Travelperk raises $21 million Series B for its business travel SaaS platform

I met the Travelperk founders Avi Meir and Javier Suarez in 2016 through an introduction from Johannes Reck, co-founder and CEO of our portfolio company GetYourGuide. It was ten days after our first daughter, Charlotte, was born and I had to fly to Barcelona to meet these guys and here's a shout-out to my wife for being amazingly supportive in these situations 🤟🏻😍🚀

Avi and Javier were the real deal - serial entrepreneurship in travel, massive domain expertise from their time at, the passion and ambition level to match ours, a sense of purpose. In business travel, companies have two bad options: either antiquated enterprise agencies that are both crappy and expensive, or a mess of consumer tools that result in a flurry of invoices, payment methods and general confusion. Travelperk fills that gap - it hides the complexity from the traveller by offering a complete end to end solution and not just a sexy interface (it also has a sexy interface). Its simple purpose is to "fix" business travel. We joined the $7M Series led by Alex Finkelstein at Spark Capital (Medium post from June 2016).* 

In the two years since our investment, Avi and Javier have put together a phenomenally capable team in Barcelona with some great hires from Skyscanner, Booking, and others. Demand has grown more quickly than forecast. Customers now include Transferwise, Typeform, Outfittery, GetYourGuide, CityJet and many more. Charlotte's grown a lot since 2016, but not quite at the 1,200% YOY rate that Travelperk has. 

The new $21M Series B is led by our friends at Target Global and Felix Capital. Sunstone participated above pro rata. The round brings total raised for Travelperk to $30 million and sets the company up for scale: scaling team (engineers, support, product management, sales), accelerating internationalization, and opening a slew of new markets.

We're thrilled to continue supporting Avi and Javier - thanks very much for having us along on your journey! 

Techcrunch post here

* The seed round was led by Robin and Saul at Localglobe. We would have preferred investing at seed, but didn't see the company back then. 

Refragmentation and why corporates don't really get it

Refragmentation is a secular trend - meaning it's here to stay. The decrease in transaction cost that has empowered consumers is shrinking the boundaries of the firm (Coase) and making it more porous. Hence the Cambrian explosion in startups. Hence managing contractors becoming a core skill. 

In a refragmented world without lifelong corporate tenure, maintaining and providing value to your own network has become a key determinant of career success. Tech industry karma is alive and well - we're open and we give. When our people are successful, it's good for all of us. Pay it forward. 

Large companies are often stuck in a previous paradigm. Power and responsibility aren't devolved. The hierarchy can't process the edge cases and so starts inventing process and bureaucracy. And then people at the edges stop acting like people and start acting like corporate automatons driven by greed and by fear.

That's the thought I had when I saw this craziness that Holger of German Autolabs posted on Facebook:

I really hope that we find out who this is. Not unlike METRO's disappointing ad campaign, there are a set of rules about how to engage with small companies hoping to make a dent in the universe. This breaks most of them. 

#taketheexit? Not quite yet, METRO

For a few weeks posters on the streets of Berlin have been pleading with developers to #taketheexit (see below). Ostensibly because of poor working conditions in startups. 

Having been involved in a fairly large number of startup companies at this point, I've seen crunch times, shitty offices, and managers who succumbed to their anxieties and shouted at employees. The latter is never acceptable. I'd always encourage anyone to #taketheexit from an abusive or otherwise toxic environment. 

But overall, people love working at startups for a whole number of reasons: more freedom, more responsibility, less need to conform, fewer overheads, fewer stupid meetings, a strong sense of purpose/meaning, higher impact, cooler people, fewer rules and regulations, etc. 

So the axis of working conditions is a bit of a weird one as a dimension of competition because it was always very unlikely that the advertiser would be able to compete. Maybe with "fewer hours." 

Today it was revealed that METRO, the retail group, is behind the campaign. Too bad only that they don't list any jobs on their Work With Us page. Feels like a pretty big investment to screw up conversion that way...

If you want to make people shop a bit more frequently at METRO companies, or increase average order value there, or make sure there are fewer hiccups in the METRO supply chain, by all means do go work at METRO.

But for those of us who want to change the world, feel free to stay in startupland a bit longer. We love having you and are working hard to #giveyoutheexit you deserve. 

Insta shoppable posts go global

I'm a bit late with this due to Audrey's birth, but we finally have shoppable posts in Germany, France, Italy and Spain (after the feature launched a year ago in the US). 

Tagging products in posts has shown to yield a significant increase in engagement (Glossy). And of course you can now track more accurately what that engagement means for conversion. 

We're always looking for great European brands that are kicking butt on Instagram. I'd love to know your favourites. 

...and we're back!

Meet Audrey:

Everyone's happy and healthy and this papa can get back to his continuing obsession with European direct-to-consumer, digitally-native, vertically-integrated brands from next week. 

Much love,


Brief hiatus

We are in the hospital for the birth of our second daughter. Regularly scheduled blogging to resume after major life stage change event is complete. 

Much love,

The top 20 books on consumer branding and consumer marketing for tech entrepreneurs and VCs

As you may know, we're doing a big push on direct-to-consumer, digitally-native, vertically-integrated brands at the moment. This is on the back of one very promising consumer packaged goods/FMCG investment that I can't talk about yet (but hopefully will soon). For a variety of reasons we love DTC brands as a venture investment hypothesis, especially at seed stage. I should write a post about that. 

I have a PhD (well, really, a German Dr. rer. pol.) in marketing for writing about the "Antecedents of Marketing Performance in Recession" (and other periods of uncertainty). But it has been a long time since I've brushed up on my branding literature. And so I asked the folks on Twitter and Facebook what books they'd recommend.

Here are, in the order they were recommended, 20 books on branding and marketing. I hope they are useful to you.

Interesting: 2x Al Ries & Jack Trout in the first five minutes. Notable absence of old branding folks like David Ogilvy, Alina Wheeler, Wally Olins (though David Aaker made it). Lots of Marty Neumeier! Hugh Macleod from left field with Mark Earls (will read that for sure). Glad Seth Godin made it (remember the purple cow thing?) Some interesting peripheral ones (I loved Let My People Go Surfing and liked Shoe Dog), but I did not list Naomi Klein's No Logo because like me y'all read it in 99, right? Different times.

I read approximately one non-fiction and one fiction book a week, so I hope to get through a number of these over the next quarter. I'll write brief reviews for the ones I find most intriguing/useful.

And, if you're seeing this post just now and your favorite branding/marketing book isn't on here - please contribute. I'll update the list as new recommendations emerge.

Much love,

P.S. Yes, these all contain my Amazon affiliate link. I spend thousands of dollars a year on books. Consider this my way of funding research. It will result in better Christmas and birthday presents for everyone I know. 

P.P.S. Pretty links below! 

Zero-sum markets and CPG

I stumbled across this term in a post by David Pakman about Dollar Shave Club from 2014: for DTC, he says, "invest only in zero-sum markets."

Zero sum is a situation in which a participant's gain or loss is exactly balanced by the losses or gains of the other participants. In this context, "a customer buying your product means they stop buying your competitor’s products."

It's an interesting thing to think about, because "zero-sum" isn't quite repeat rate/purchase frequency, strength of brand affinity, or whether the vertical lends itself to subscription. It's a measure of whether you fill that need for the consumer for a certain amount of time. The closest I've gotten is the old "vitamin versus aspirin" analogy, but even that doesn't nail it.

It's a potentially very useful criterion (if true) because it lets you eliminate a lot of possible investment opportunities: everything that is fashion, for instance. Then again, as my colleague Deepka notes, non-zero-sum doesn't stop Glossier from being successful with lipsticks, eyeshadow, etc. Or Allbirds, for that matter.

But we will certainly pay more attention to businesses that "remove" the consumer from competition because, c.f. Thiel, that's one way of building a (temporary) monopoly.

P.S. Glossier is cool to the point of where I want them to have a men's sweatshirt.

The Facebook vampire squid and why non-normies don't have a right to be surprised

From 2010 to 2011 I co-founded and ran a data marketing company called Qwerly, which appended metadata to email addresses and social media usernames. You'd ping our REST API with an email or a username, we'd do a bit of magic and serve back some JSON that listed social media profiles, location, photos, associated URIs. It wasn't so dissimilar to what a Rapportive or a Rapleaf did and it piggybacked off the available APIs, e.g. for finding friends by email addresses, as well as the rel="me" microformat to discover new websites and social media profiles.

The core bet that didn't really pan out was that the social web was getting more diverse and interesting and meta-profiles would have value. We figured this could be a cool consumer play, like a decentralized Friendfeed. But as we rolled this out, we saw the opposite was happening: 80% of our results were from Facebook. 

And so we opened an API to see what people wanted to do with our results. And found that people really valued social data: to populate CRM systems, email lists, to make call center agents' conversations better, to target marketing. And so we pivoted to B2B. 

Qwerly the B2B business was almost instantly profitable. Our biggest customer was Mailchimp, who used us to populate email lists with social profiles. But we also had political customers (an NDA prevents me from saying which campaigns). The volumes were impressive. For example, when we sold the company, the database had hundreds of millions of profiles. We never had to raise money. But we did get some inbound investor interest - from In-Q-Tel. Not surprising.

To their credit Facebook, while allowing us to do what we did, was keen to preserve privacy controls throughout the chain. So if a marketing manager somewhere had been blocked by his ex-wife, he shouldn't be able to see her information. 

We prided ourselves on only serving "public" data, i.e. what you'd see searching Google or if you weren't logged into any one service. So that wasn't really a problem for us (though the constant re-OAuthing sucked). But of course the way we appended data relied on using private or frequently hidden APIs. We quickly realized this privacy stuff was harder than expected.

We ended up selling/merging Qwerly into Fliptop, which was acquired by LinkedIn in 2015. A primary reason was that we were scared that Facebook would end up killing the whole social data industry.

Well, they didn't. And I think most people in tech knew that. At least anyone that was in the "app" business knew that data was being traded quite openly. One way was via "acquisitions" of Facebook apps. 

Today there are big vested interests in keeping Facebook the way it is. Businesses love the Facebook marketing machine and there seems to be very little demand elasticity to price increases in its advertising. Government, now posturing about the awfulness of it all, has always had a big interest in a more transparent populace and the means to control it. Heck, most people I know only know they kind of dislike Facebook, but they can't imagine their lives without it. 

The fact that a WhatsApp co-founder is tweeting #deletefacebook is too little too late. WhatsApp was a company that said: we're never going to serve ads, we're going to show you that we can build a large social messaging app on subscriptions, we're going to do right by users. Well, that promise was worth less than $20 billion in case of these guys, so I have little sympathy here. 

I am not sure where we should go from here. I loved the internet without Facebook. I hate the monopoly on advertising and attention and M&A for social that is the Facebook vampire squid. But we seem to have done a poor job creating alternatives to Facebook. The application layer of the decentralized web seems years away. Mobile vertical communities can work but by definition they're more niche. The implicit messaging infrastructure of iMessage is cool, but Apple isn't good at building social. From Snapchat, Musically and Path to Meerkat and Periscope, Houseparty, and many others, long-term retention and engagement isn't very good on most social properties. And the ones where it's good or has potential to be good are acquired by Facebook. 

Perhaps it's time to turn East to learn how to build new consumer platforms in the US and Europe. Anyway, here's some old slides from a presentation we did at a Techcrunch event. Knowing what you know now, it does sound more ominous than it did at the time...: