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.

Empowering questions

One of my favorite tools in coaching founders is empowering questions. When presented with a challenging situation, don't try to come up with a response. Don't tell - ask. Help increase others' search space for new answers, options, possibilities.

It sounds so simple. But it's powerful.

Empowering questions are open-ended. They clarify. They challenge. They're generally future-directed, solution-oriented. They take away the feeling of victimhood that comes with hard times.

Great examples are:

- What can you do about that?
- What other choices can you make?
- What's another way to look at that?
- What did you learn from that?
- What is really bothering you about this?
- What do you need to get that done?
- How can you find out more about that?
- Where do you believe that thought comes from?
- What will you get out of that?
- How can you make that more fun?
- Why is that important to you?
- What are the benefits in that?
- How is this an opportunity?
- How do you feel about that?
- If that doesn't work, what else could you do?
- What seems to confuse you?
- What beliefs are holding you back?
- How does that fulfill your purpose?
- Where are you limiting yourself?
- How can you stretch to get there?
- If you had all the time, energy and money to achieve your goal, what would you do?

You get the picture.

To use these, you need to recognize the situation as it arises. You need to increase the time between stimulus (stressor) and your response. Awareness is the only way I've found to do that.

Awareness, awareness, awareness! Tony de Mello was right.

P.S. Many of these questions are from the Institute for Professional Excellence in Coaching (iPEC)'s manuals.  

Valuation: what price should you go out with

I got a question this morning about getting an external, "objective" valuation with which to go out and raise financing. Here's my typical answer to that:

Early-stage valuations are straightforward to understand. But they have little to do with traditional valuations.

In normal valuation work, enterprise value is the expected value of future cash flows. For early-stage companies, the variance in those cash flows is very high. It's not a meaningful analysis if there's a good chance of your cash flows being zero or you being the next Facebook.

Early-stage valuations are a confluence of many different factors. You can only control some of them. Most important to understand is that a valuation is a market price. It's a price for a very specific asset - shares in your company - at a very specific moment. It's not what your company is "worth" or even what you could sell it for. Those are different market prices.

The way to maximize the market price of a venture financing is to be smart about the negotiations. That's why I tell all founders to never, ever talk about the valuation upfront. For one, it anchors you. If you set too high a valuation, people will walk away. If you set too low a valuation, it will create a ceiling. Bad news, either way.

The right thing to do is figure out the money you need to get to the next value inflection point. Build a model that shows the use of funds and how the investment makes you a much more valuable company. That should be the smallest amount you're looking to raise (plus a buffer). Divide that amount by the highest dilution you'd find acceptable. Now you have the minimum valuation you are looking for.

Figure out a timeline that means you'll get a few offers more or less at the same time. Then you start talking VCs. Stall or rush as necessary to get people onto the same timeline. You want termsheets submitted within days of each other. A sense of competition and urgency can help, but too obvious an auction process will turn people off.

When investors ask you for valuation expectations or "guidance" in meetings, don't answer that. Stress that you're looking for a long-term partner (you should mean it). Tell them your last valuation (if any) and all the progress you've made since. Paint the picture of the upside again. Don't give them a price - offering you a deal is _their_ job.

Once you have several offers, you've created your market. There are lots of unique things about the bidders. You may like one of them more than the others. But now you have liquidity. You can go back to the lower ones, if you like them better, and ask them to increase their bid to match others. Rinse, repeat a few times.

Using this process, many of our founders raise more money and at higher valuations than expected. The dilution (what VCs will own in your company) is often less flexible than the amount raised. A higher amount raised will generally mean a higher valuation.

There are lots of posts out there about valuation not being the most important factor in a financing. That's true, but it's also true that you owe it to yourself to optimize price as one factor of a financing. The process above is the way to do that.

Signals.vc

We've had a few new funds emerge in Berlin over the last few years. But I'm particularly excited about Signals.vc, run by Videesha Böckle. Videesha was previously at Redstone and before that at PROFounders, our co-investors in Berlin-based GetYourGuide

Signals is investing in European SME- and enterprise-focused companies at seed and Series A, in particular in frontier tech (AI, Blockchain, IoT). It's a segment that doesn't have a lot of dedicated investors and yet it's one that requires a lot of expertise to make conviction-led investment decisions. It's a €100M first time fund, which is also a great result.

Go talk to Videesha if you're doing something enterprisey. 


Fight the forces of endless distraction: turn off, tune out

It took just a decade and a half. 15 years to go from the hopeful, curious, rebellious days of the post-crash internet for the misuse of this tool to start ripping apart the social fabric, the basis of our way of life, to start gnawing at the core of what it means to be human. There are days it makes me a bit Ted Kaczinsky (sans bombs).

Our world is tumbling from obsession to obsession, from anxiety to anxiety. Look around you and no matter where they are, people are glued to their devices. Looking for that next feeble dopamine hit of pretend social connectedness. That brief elation in status from a Like or a new follower. Only to come home to lose themselves in the beautifully made, well-told but ultimately moral-free Netflix-original Marvel-adapted hogwash of sentimentality. Hook, peril, hero’s journey, MacGuffin, 5 seconds until another episode starts, skip trailer.

Everyone is distracted. It’s so constant, we don’t even notice anymore. I loved Roger McNamee’s essay earlier this year. And the news that former FB employees are coming together over the issue is encouraging. But on an individual level, don’t wait for people to educate and regulate. 

Resistance now looks like this: turn off, tune out (sorry Tim Leary). The world as it presents itself today is an incredible opportunity for those of us with the discipline for focus. Who realize that the algorithms are running us. And who think that we might want to walk upright, straight-backed, knowing-eyed into the inevitable merge of human and machine.

We recently backed a stealthy company in Berlin as one answer to this challenge. I’d love to see more - max@sunstone.eu. 

Narrowing my focus

I joined Sunstone five years ago this coming April. Half of the investments I’ve made are companies selling to consumers; the other, to businesses. 

For a long time I resisted narrowing my investment focus. The whole point of being a VC instead of a founder, I argued, was to retain the optionality of being able to do both. 

No longer. From 2018 onwards I’ll focus on consumer investments. It’s a combination of the market having grown to the point of where I can’t cover it all. But also that I don’t enjoy (and am not world-class at) selling to the enterprise. 

Consumer, for me, includes eg personal productivity software bought with a credit card. But it excludes all enterprise software, like databases or cybersecurity. It includes B2B2C-type marketplaces, which aggregate merchants selling to consumers. But it excludes eg all adtech that only touches the consumer for data. 

My favorite consumer investments are marketplaces/platforms/networks and DTC brands. I love travel. I’m spending a lot of time on crypto. And I think social is far from done. 

I realize all this is a bit contrarian. Most VCs I know have pivoted to enterprise. Many are focusing on “deep tech.” 

I’ll continue screening these types of investments for my partners at Sunstone and am always happy to intro them. But as for me, I’m 100% consumer now. 

No fear, no greed

Last year I tried a little thought experiment in our partnership. I asked: What would a venture firm look like that removed all fear and greed from its internal discussions and external interactions with entrepreneurs? What if every challenge was construed as an opportunity? What if every time a company went through hard times or “failed”, we’d see it as an invaluable, even indispensable step to become a better organization, a better partner, a better person? 

We aren’t all the way there. But the discussion was very useful. Not least to highlight the little insidious ways in which those two very human emotions intrude to take us away from our core purpose: to back authentic founders. 

So today I invite you: what would your company or life look like if you removed all fear and greed? 

Music Saturday - Ave Verum by Philip WJ Stopford

I came across Philip WJ Stopford's work a few years ago and was blown away that this was a modern, young composer. He's currently Director of Music at Christ Church in Bronxville, NY. 

My favorite work of his is the Ave Verum here:

Ave Verum is a short, Eucharistic hymn by Pope Innocent VI (text here). It's a reflection of redemption through suffering as viewed in the transubstantiation. I'm not on board with all of that, but it's a beautiful piece of music. Enjoy.

Contemplation: witnessing

Paul Donner asked in a comment earlier this week about what I, foolishly perhaps, called the "voice" that your "core" can find in silent sitting and, further, how to distinguish between truth and ego (projection) in such realization, and to give examples of insights and their impact on my life.

Phew. Those are some great, tough questions and I feel very vulnerable writing these lines. Vulnerable to the point of putting off writing this post day after day. 

Not only are these experiences highly personal. But they are also wildly open to interpretation. Modern/rational society is uncomfortable going so deep into the self - because it isn't rational in the empiricist sense. And post-modern/pluralist thought, overly critical of the power structures of organized religion, is quick to deny any hierarchy in actualization. I would indeed ask that you realize that language is key to thought and that all experiences communicated are thus subject to the misunderstandings inherent in communication.

So here it goes.

Perhaps the second most powerful experience of sitting in meditation/contemplation for me has been the experience of what many commentators call "the witness." The best way I've found to describe what it's like is the following:

You're sitting and doing what most practices recommend: initially you focus on your breath or a "sacred" word that allows you to come back to the present. Thought arises, sensation occurs - and you bring it gently back to the here and now. So you're sitting there, just being. Over time (and I mean days, weeks, months), fewer thoughts and emotions and things arise, and you get better at letting them go. You don't drift as much. So far, so Headspace.

But this next bit is powerful for me. As you're sitting there, just being fully present, complete in the now, you gently... take a step back. And now you're contemplating yourself, just sitting there. And it's a very powerful, out-of-body, away-from-all-the-stories-you've-made-up-about-yourself experience. This is important: it's a powerful experiential shift in consciousness or awareness.

And then, of course, the interpretation of what the heck that was starts. And, frankly, that's above my paygrade but I will say this: I believe that part of you that's witnessing is probably as close to "authentic" or "soul" as we can experience in this meatbag. And isn't that a wonderful (and yes: comforting) thing.

How do I know this isn't ego or projection? How do I know that's "truth"? Well, I certainly know that it isn't empirical truth. It may not even be rational truth. But it very clearly is relatable, experiential truth. And if you look at similar experiences that other practitioners have had, I am certainly not alone in my delusions - if that's what they are.

As to what impact it has had on my life: I believe more in an irreducible "Being" principle than I have before. And I won't hesitate in calling that Being "soul" and to propose that everyone has this thing. It's just a matter of dropping the less important stuff. And that means, if we can all experience this reduced form of what it means to "Be Alive", there are significant concordant implications of empathy, compassion, connectedness and, really fundamentally, ethics and morals that result. 

Thanks for hearing me out and - keep practicing.

P.S. Did you read closely? I said "second most powerful experience...for me." Stay tuned.