Days like this - our algorithmic future - LOT2046

Bone-weary today - new-parent-tired.

There is a fatigue that is an unfamiliar place. It heightens awareness, fever skin consciousness. 

I have a deep empathy for Berlin, this place between worlds, but on days like this where I can't blend, the city rejects me. I am the gentrification. And I can see past the brave faces to the urban dystopian hellhole that is their socialist utopia.

On days like this I can see how close we are to the future.  How close we are to:

- WeWork giving you a job, not just an office

- Airbnb telling you where to go, not just listing places

- Facebook making friends for you

- Soylent feeding you your prescribed nutrient blend

- Amazon sending you what you need

Did you think we were going to stop at Netflix telling you what to watch?

On days like this, I am not that naive. So I subscribed to LOT. There's hope in surrender.

The rise of micromerch

Micromerch is an even bigger deal than this NYT article would have you think

In a world where supply chain access has become a non-issue, long tail merchandise will become ubiquitous. There's no reason why anyone of any influence, and be it simply the taste and time enough to curate, shouldn't launch their own line of merchandise. The only limiter is attention and discretionary spend. 

Note I'm not saying everyone _should_ have their own line of merchandise. That ship seems to have sailed. We stopped calling this "selling out" quite a while ago. The future will be monetized.

That said, the micromerch world is in need of quality suppliers. We need to vet for sweatshops, make supply chains transparent, limit the environmental harm of throwaway culture. Encourage reduce, reuse, repair, recycle. 

And then we need someone to aggregate the explosion of supply into consumable shops. A new kind of Farfetch, really. 

All of this was the original promise of Cafepress and Spreadshirt. We're coming full circle. 

P.S. Image from the rather wonderful Ayesha x Cult Days


Customer experience is the main dimension of competition in direct-to-consumer brands

There are limited dimensions you can compete on when it comes to new brands, especially since a great product is now table stakes. Yes, core product innovation can still win. But it isn't a guarantee by itself. 

The first dimension after product is price. A lot of commercial founders gravitate here. But price leadership is generally a bad business model. To win online, you have to be able to outcompete on acquisition cost ("the new rent"). Thin margins make it much, much harder to outspend your competitors. Even if you have good repeat purchase rates, that potentially means floating a long payback period. And the costs of capital, especially in the beginning, are high. A low price may also be bad for your brand.

The second dimension, which a lot of brand/design founders pick, is exclusivity. But limiting access to the product is fairly diametrically opposed to building a very large business. As I like to say to a friend who works in luxury business: the only good thing you do in the world is to make rich people slightly less rich. Which is a joke, but also not. We are about democratizing access. 

That brings us to the last and really the only dimension you should compete on, which is customer experience. Start with what's wrong with the shopping experience for your product or service vertical. And then rethink that experience completely. How can you make it an amazing experience? Think 7-star customer service. 

Lean Luxe had an interesting piece on defining modern luxury last year, which also stresses the overall experience of interacting with the brand. Traditional brands should take heed. 

The rules of the game are changing. 

On simple, true leadership as per Laozi

"True leaders 
are hardly known to their followers. 
Next after them are the leaders 
the people know and admire; 
after them, those they fear; 
after them, those they despise. 

To give no trust 
is to get no trust. 

 When the work's done right, 
with no fuss or boasting, 
ordinary people say, 
Oh, we did it." 

from: Acting simply in: Tao Te Ching by Laozi (translated by Ursula LeGuin). 

There is leadership without coercion, without violence, without manipulation. It is "doing without doing" - not competitive, not hurried, not worried, extending trust, devolving power. It is the truest voice in a group of singers, the captain of a team, its coach.

Great DTC branding is a spiritual exercise

I'm not the one to come up with that. That's original Gapingvoid aka Hugh MacLeod, in the Hughtrain, ca. 2004. But I've been revisiting a lot of brand literature lately as I'm hard at working becoming Europe's "VC for DTC Brands." Hugh's work, like Seth Godin's, is prescient. It's mind-blowing to me how it isn't evenly distributed yet. 

Here's the first secret from the branding work we're doing: features/benefits aren't even the start of the journey. They're a hygiene factor (maybe). Necessary to but far from sufficient. I'd wager I'll use a worse product any day if it's from a founder or a company that I can believe in. 

So here's secret number two: a great brand tells a story that restores your faith in the human experience, if only for brief moments. The bigger that belief, the longer it lasts, the deeper the faith, the more your brand will matter on our joint journey.

Which is why (secret three) I ask every founder I work with to start with purpose. And not the purpose of the company, but their own. What are you put here on earth to do? What does the universe ask of you?

To do X, you say? Why is that important to you? Go deeper until you can go no more. Until it's so real it hurts.

Here's the fourth secret: everyone's inner purpose is the same. It's evolutionary. It's what we are all here to do. Once you realize this, the fog lifts. The scales drop. Everything shifts into focus.

With that focus, you need to pursue your outer purpose. It's easy to lose the clarity. Make rituals to get back to you. It's why I encourage self-care so much. As founder you are the keeper of the vision. Keep it.

A company is just a collection of people having conversations. The quality of those conversations determines so much. What are they coming together over? What are they meant to achieve?

Now extend that outer purpose to your customer in a way that touches their soul, that appeals to our shared inner purpose. The future of brands is this interaction, this conversation. It's not something you buy, but something you participate in. Brands are places to come together over a conversation.

And now you understand how you slot into the universe (secret five). Brands are information - the molecules are secondary, says Hugh. Before you think about that Unique Selling Proposition, think about the Unique Being Proposition. That's where true differentiation lies. Not features/benefits but identity/ability. By being a customer, I can be more of an X that knows how to Y better. 

And that's the point you realize Brand is Culture. Brand is Ideology. Your customers are the Faithful who carry the Word into the world. 

The job is not to sell. The job is to let them Be who they are meant to be. That will blow their minds. To align them to the greater purpose of their lives and the universe.

You say you can't do that with a lipstick. I say you can do that with water. Marketing is just a tool. Just a way to start the conversation. But a great brand... a great brand is forever.

Much love,

Will GDPR kill small M&A in European TMT?

It can be cheaper, on a cost per acquisition basis, to buy a company that has customers who could also be interested in buying your product. That thesis has driven a lot of small M&A, not just in Europe but around the world.

With GDPR just around the corner, I'm sure like me you've been asked to renew your opt-ins for many email newsletters. I like it for the same reason I like when my credit card expires: it feels nice to be asked once in a while. And to be able to reset all that stuff.

But if that a new opt-in needs to happen when you buy a company, and the conversion rate of consumers opting in again is low (30%? 50%?), you won't be able to move a lot of the customers over. And consequently the math stops working for a lot of the smaller M&A transactions that work on the customer acquisition logic.

I'm sure there are lawyers working on this. Maybe it's not a real, real problem. Maybe there's a way to stay compliant (we're advising all our companies to err on the side of caution). But I've now heard it mentioned several times so thought I'd flag it here. 

Ivory Ella

I learned about Ivory Ella today (showing my age again), a three year-old Connecticut-based company that donates 10% of its net profits to Save The Elephants. And since I'm a sucker for elephants, especially the baby ones, and this is one of my favourite charities, I thought I'd give the company a shout-out. Which they really don't need because they're amazing at Instagram

(Photo by Kiana Eyestad). 

Here's the backstory on Ivory Ella in Forbes. Now go buy some clothes and save some elephants. And then think about what else could be a good product x charity collab and be an entrepreneur who makes this world just a little bit better. 

P.S. My EWR-CPH flight was cancelled. I'm sitting in an airport hotel in Newark. Yay. 

Let's raise the bar together - Europe should be competitive in DTC brands

I'm writing this at 35,000 feet from the confines of a Wifi-enabled SAS Airbus. I just watched Blade Runner 2049 which was visually uh-mazing but sadly didn't have a Tears in the Rain type moment... C-beams glittering in the dark off the Tannhäuser gate. Totally improvised nonsense but some of the strongest scifi poetry ever. 

I know I said I bleed blue and gold, but really at my core I'm not big on patriotism. On the other hand, I also don't believe in no nations, no borders (or sumsuch nonsense) because I'm not an anarchist and I actually enjoy the freedom that comes with security. I grew up as a Third Culture Kid in Canada, Germany and the UK, so I really have no home and few roots. Except cyberspace, really, but even that place has changed beyond recognition in the last 15 years.

As I was leaving Schengen, the new automated gates scanned biometric passports and took portrait photos. That did feel pretty Blade Runner and had me wondering how long I'll feel comfortable in Europe. It does feel like we're continuing to surrender freedoms on the continent.  

We're about to start our descent into Newark and going through my notes I'm struck by how massive the DTC segment has become in the US over the last few years. That Inc article mentioned 400 active companies. I don't quite understand why it should be so much bigger in the US than in Europe... once again. This isn't really out of a sense of patriotism as much as healthy competition. 

We have such a strong history of building luxury brands. That said, my theory is that many European companies have been competed upwards - meaning they've become luxury brands not necessarily by choice but because they couldn't keep up with the commoditization of their markets. They retrenched to what they were good at (making pretty stuff in small batches). 

When I compare companies like Horizn Studios and Away, part of Europe's losing ground again is a continued lack of access to capital. We just don't have the funds that do a fast-follow $10-25 million in an early-stage company. We desperately need a set of more aggressive, conviction-driven Series B investors in Europe. Which requires doubling or tripling the $6 billion or so invested in European venture per annum. 

But there are other reasons as well (this will probably get me in trouble): often European management lacks experience - domain expertise, prior entrepreneurship, strong corporate experience, etc. Or they don't have great advisors (there are some truly awful advisors in European venture). Some European companies - compare e.g. the European shaving startups to DSC or Harry's - also just seem to be OK with making decidedly worse product. And others yet seem strategically inept or much more shortsighted than their US competitors. I often also sense a pervasive lack of optimism and a lot of risk aversion. When in doubt, Europeans prefer to run lifestyle businesses. 

So I guess I'm here to remind you that we owe it ourselves to stretch. Reach higher. Raise the bar. If you and I don't do it, who the heck will? 

If you want someone to coach you on the journey of reaching your full potential, we're very much looking for aggressive DTC teams in Europe. We're fine if you're still in stealth or looking for pre-seed. All we ask is that you have an idea or part of the supply chain figured out. And the desire to build a really, really big company with us. 

Just leave a comment or send me an email to

The Meta of DTC - investing in the pickaxes of DNVBs

We're continuing our big push in direct-to-consumer (DTC), digitally-native vertically-integrated brands (DNVB) at the moment with trips to New York, Copenhagen, and Stockholm this week. On the back of a few trends (easier to access supply chains, ecommerce logistics, variable marketing channels), there's a Cambrian explosion of these types of companies.

I'll write a post soon about what we look for in a DTC investment, but in the meantime I'd like to draw your attention to the meta layer of the secular trend of DTC: i.e. "selling pickaxes during the goldrush."

As you may know, this is an allusion to the California Gold Rush and entrepreneurs such as Levi Strauss selling supplies to miners, which turned out to be the better business.

Of course these are very different markets: there are orders of magnitude fewer people buying pickaxes and than people buying gold. But while gold is a commodity (and a non-zero-sum market), if your pickaxe is a lot better at helping people mine gold, then you're going to corner the pickaxe market pretty rapidly. And if your pickaxe business has network effects, e.g. you get better at helping people find gold the more people are using your pickaxes, then your position can become unassailable.

So what's the meta or "pickaxe" layer in DTC investing?

The big play here has been Shopify. The stock has been doing very well and we think it will continue to outperform relative to market. Incidentally, it makes me sad that we still don't run a hedge fund on the back of the insights we derive from private market investing.

I would not be surprised if the Shopify toolchain, like plugins and associated businesses like Printful, yield a few good DTC infrastructure investments. As with any "tools" business, there's a question whether it can meet venture investment criteria.

Logistics: while these are typically the same fulfillment providers as in retail ecommerce, we have seen a few businesses that lend themselves to DTC brands, e.g. by allowing businesses to start selling internationally at low volumes. Seven Senders in Berlin is an example, but we think there will be other ones. As Amazon increases customer expectations to same-day or overnight, we will see multiple attempts at building out competing infrastructure.

Packaging: we have seen a few businesses that innovate around packaging, making high quality, custom packaging accessible at smaller lot sizes. A good example is Packhelp in Poland.

Wholesale/Retail Aggregation: this has been a horizontal function that has seen relatively little innovation. Indigo Fair aggregates DTC brands and offers stock to relevant retailers. We love the concept and would like to see it in Europe. Let us know if you're working on something similar.

Marketplace/Shop Aggregation: next to operating your own shop, a lot of DTC brands are doing experiments on Amazon. For a whole bunch of reasons this might not be a great idea. We think there is space in the market for several non-Amazon marketplaces for innovative DTC brands, a little concept stores with distinct demographics. Think Farfetch for DTC. For example, I think an Outdoor Voices, a Cotopaxi and a Mafia Bags could very well sell alongside each other while increasing conversion and boosting AOV for everyone.

Marketing/Branding: of course these are mainly services and some design agencies have done much to help the DTC phenomenon (in Europe: Otherway, Proxy). But arguably the largest driver is variable online marketing costs (FB/Insta, Google). We've seen scaled influencer campaigns that are working and while we have not seen an influencer marketplace that we've liked, we think e.g. what Harper from Berlin is doing is very interesting.

Sourcing: it's not a secret that many DTC brands are using the same factory infrastructure as e.g. private label or even luxury brands. Making this a more transparent, even more accessible market could be an interesting business. Right now the approaches here mostly consist of classifieds type listings databases.

Have we forgotten something? Do you have an interesting company to suggest we look at? Leave a comment or send me an email to

Truth is a pathless land

If what we seek is Truth, the only thing we should let guide us is an unflinching readiness to admit that we're wrong. 

If we follow a teacher, are we following truth? 

If we can look at the world only through the images we have made of it, only through all our learnings and our memories, are we seeing, really seeing it? 

What space between the observer and the observed?

Some of us are so proud of our intelligence, it traps us. We are abstract people leading abstract lives. 

The final barrier to Truth, of course, is truth itself. But surely truth is not a barrier to Truth? To which the sages say, the donkey that brings you to the door is not the means by which you enter the house.

Happy Sunday. 

P.S. Lots of Krishnamurti and Anthony de Mello in there. Somehow I doubt they'd mind.