tag:blog.maxniederhofer.com,2013:/posts Max Niederhofer 2018-02-20T11:31:10Z tag:blog.maxniederhofer.com,2013:Post/1249945 2018-02-19T14:16:39Z 2018-02-19T14:16:39Z 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.
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tag:blog.maxniederhofer.com,2013:Post/1248514 2018-02-18T07:00:03Z 2018-02-19T07:00:00Z 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.
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tag:blog.maxniederhofer.com,2013:Post/1248237 2018-02-17T07:00:02Z 2018-02-17T14:32:00Z 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.

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tag:blog.maxniederhofer.com,2013:Post/1247498 2018-02-15T07:00:01Z 2018-02-19T20:49:12Z 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. 
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tag:blog.maxniederhofer.com,2013:Post/1247192 2018-02-14T07:00:00Z 2018-02-18T07:46:28Z 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.
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tag:blog.maxniederhofer.com,2013:Post/1246489 2018-02-13T07:00:01Z 2018-02-18T07:49:28Z 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.
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tag:blog.maxniederhofer.com,2013:Post/1244691 2018-02-12T07:00:00Z 2018-02-15T16:07:34Z 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.
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tag:blog.maxniederhofer.com,2013:Post/1245899 2018-02-11T12:22:46Z 2018-02-11T21:05:32Z 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.
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tag:blog.maxniederhofer.com,2013:Post/1244693 2018-02-10T07:00:00Z 2018-02-10T07:00:03Z 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. 

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tag:blog.maxniederhofer.com,2013:Post/1244360 2018-02-09T07:00:00Z 2018-02-09T18:59:41Z 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.
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tag:blog.maxniederhofer.com,2013:Post/1243988 2018-02-08T07:00:00Z 2018-02-10T01:03:23Z 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.  
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tag:blog.maxniederhofer.com,2013:Post/1243839 2018-02-07T10:57:01Z 2018-02-10T17:00:31Z 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.
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tag:blog.maxniederhofer.com,2013:Post/1243595 2018-02-07T07:00:00Z 2018-02-16T15:28:13Z 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. 


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tag:blog.maxniederhofer.com,2013:Post/1243428 2018-02-06T07:15:03Z 2018-02-20T11:31:10Z 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. 

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tag:blog.maxniederhofer.com,2013:Post/1243111 2018-02-05T11:22:22Z 2018-02-06T20:34:43Z 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. 
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tag:blog.maxniederhofer.com,2013:Post/1242586 2018-02-04T11:55:46Z 2018-02-05T01:20:47Z 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? 

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tag:blog.maxniederhofer.com,2013:Post/1242211 2018-02-03T12:48:16Z 2018-02-04T12:22:01Z 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.

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tag:blog.maxniederhofer.com,2013:Post/1240926 2018-02-02T15:58:14Z 2018-02-04T12:22:01Z 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. 


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tag:blog.maxniederhofer.com,2013:Post/1239199 2018-01-28T14:01:22Z 2018-02-04T12:22:01Z The need for silence

Last week I wrote about crazy startup schedules and what is, in my view, their main driver: fear. Since it's Sunday, I thought I'd introduce the antidote: silence.

Silence, and in particular sitting in silence for habitual periods every day, has enormous benefits. For one, silence is the only tool that is able to create discernment in a very loud and very fast world. Secondly, it throws you back on your core - mind, spirit, soul - and asks the fundamental question of who you really are. Thirdly, if you listen in silence long enough, this core will find its voice that you can take back to the world with you. And it lets you gaze at what is in wonder.

For the thinking person, there is no way around giving at least tentative answers to the big, unbearable questions demanded by our existence. The path starts out easy - there are immediate and recognizable benefits from sitting. But it becomes steeper as you go, until you get to that sheer cliff or that abyss and you start to realize that you have to climb or jump and then that it isn't really a mountain and there isn't a path and there isn't an end to this and let me just go back to check Facebook please and thank you. The dark night of the soul awaits. 

All great wisdom traditions advocate sitting in silence: Buddhism with meditation, Christianity with contemplation and centering prayer, Sufi Islam with muraqabah, Judaism with hitbonenut, and many others. You may be more attracted by something more seemingly secular, like using Headspace or learning Westernized Zen. Just note that while the latter two do change consciousness, the interpretation of what has changed is pretty much left entirely up to you. Which seems a pity given that so many have come before us and have thought long and hard about things. 

Neuroscience has made some startling discoveries about what meditation or contemplation do to our brain, in particular the anterior cingulate cortex. Recent findings suggest these changes seem more pronounced when intermingled with faith (crucially: what that belief is is not important). 

Do understand that I'm not saying that you need silence so you can improve in order to function well as an executive - I'll leave that to the quantified-self content marketers and neo-liberal self help gurus. You need silence for a life well lived, to be happy, and most importantly to be your authentic self. 

Have a good start to the week.


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tag:blog.maxniederhofer.com,2013:Post/1238744 2018-01-27T13:11:47Z 2018-02-04T12:22:00Z Music Saturday - Khatia Buniatishvili

I've decided to post non-startup related stuff on the weekends. So today I'd like to give you this wonderful rendition of the (somewhat overplayed) second piano concerto by Rachmaninov. I'm a romantic at heart. The pianist Khatia Buniatishvili is a young French-Georgian. Not only is she immensely technically proficient, but she plays with perfect temperament and immense heart.

Her latest full album has the concerto conducted by Paavo Järvi, which you may prefer. I do like seeing her play, though. 

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tag:blog.maxniederhofer.com,2013:Post/1238145 2018-01-26T10:50:57Z 2018-02-04T12:22:00Z What's on your agenda? Fear

Yesterday I wrote a bit about the crazy packed schedules I see in the startup world. Don’t get me wrong: hard work is good. Hard work is what life asks of us, sometimes. But I wanted to add a bit more on that topic.

What’s the root of the most out-of-control agendas? Something that we don’t talk about enough in the business world: fear. 

- Fear of failure (and thus a fear of being rejected, never being enough, not being worthy, etc.)
- Fear of uncertainty (and thus a need for control, etc.)
- Fear of forgetting something (and thus obsessive behaviours and manias)
- Fear of missing out (and thus an accompanying underlying dread of the unknown unknowns) 

Fear is pernicious. It makes you bungle other things: 

- Less focus: you need filters on what’s important – if everything potentially is, or if some things are suddently perceived as very threatening, it’s hard to stay focused
- Less delegation: uncertainty erodes our confidence and makes us seek control, making it harder to delegate
- Less trust: the more fearful we are of our environment, the less we’ll trust the people in it
- Less self-care: fear makes us unaware of our own needs, because threats are perceived as more important to deal with 

The hardest-working entrepreneurs I know are seen as uncaring. They’re heads-down in their work. They often know that business is about people, not things. But fear makes them forget.

At this point, I was about to write: “life is too short to live it in fear.” Do you see how subtly harmful fear is? I’m telling you how managing fear is important by trying to scare you!

Fear is a habit. It was useful when you were about to get mauled by a mountain lion and the adrenaline saved your skinny butt. But in startups, fear sucks. I’ll write more about dealing with it (as an ex-super-high-anxiety person, I’ve learned a thing or two).

For now, manage by walking around, even if it’s hard to measure the effectiveness of that. Your people need (to see) you! When you have a one-on-one, don’t glance at your computer or phone. Ask for personal background stories. Write thank you notes. Nail the basics.


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tag:blog.maxniederhofer.com,2013:Post/1237731 2018-01-25T14:23:00Z 2018-02-04T12:22:01Z Crazy startup schedules

Being a founder is hard. And the first thing to go is time for family and friends. I know you don't intend to leave behind a string of broken promises, but you're caught in the middle of this very dynamic system that often seems like it depends entirely on you.

Product issues. Upset customers. Fickle employees. And by the time you've finished everything on that to-do list, another dozen items have piled up. Not least yet another update call with your (sometimes clueless) investors. And all the while the emails keep piling up. Oh, and there's another ten Slack notifications (Dear Stewart Butterfield, it was supposed to make things _better_).

One of the analogies I take from sports coaching is: no professional athlete works 24 hours a day. Pacing is a critical part of training. Setting impossible expectations for yourself is debilitating - you feel like you're not making progress. And you just can't put in a great performance when you're exhausted.

Stop chasing the urgent and focus on the important. Give yourself time to breathe. Find breaks to re-energize. Go home to tuck in your kids and keep the romance alive.

I encourage founders to be clear on what they're not going to do. That often creates a significant amount of space in their heads and in their day.

Take that, Michael Moritz.

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tag:blog.maxniederhofer.com,2013:Post/1237601 2018-01-25T08:44:04Z 2018-02-07T08:59:18Z Constantly learning
“Everyone is your student and your teacher.” - iPEC Foundational Principle 

I got in a silly fight recently. Someone was making financial demands while their company was in a highly precarious state. I got emotional, I swore. The other co-founder took the brunt. 

And then something funny happened. He appealed to my empathy. He asked me to see things from their perspective. That the reason for their ask was that they were stressed and worried and scared. 

It totally changed the energy of our exchange. It helped me address the concerns and move the conversation forward. 

I trained for this. I am supposed to be the coach. But I’m not perfect and life (and building companies) is messy. 

It got me to thinking about one of my favorite foundational principles of the coaching program I went through: “everyone is your student and your teacher.” How true. 

I’m grateful for the lesson. Let’s hope I don’t need to learn it again and again. 
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tag:blog.maxniederhofer.com,2013:Post/1231357 2018-01-13T13:27:41Z 2018-02-04T12:22:00Z Screen fatigue

I read today that ebook sales have fallen for the second or third year in a row. I'm not sure that data is totally correct, but the big growth days in ebooks seem over.  

I love my Kindle. But I still buy physical books, too. And when I have the choice, I prefer not to read on a screen. 

Screens are too present in our lives. The car keyfob has a screen. The odometer is a screen. Your watch has a screen. That wine list the other day came on an iPad (yes, we asked if it has Angry Birds). 

Screens have been the dominant human-computer interface from the beginning. But they're starting to be so ubiquitous that they're being used in ways that are unnecessary. They're a strain on the eyes. They demand focus because they move and they're colourful. 

We are seeing more and more companies trying to change screens or do away with them altogether. I'm hearing rumors that bone induction tech will be big - a quiet voice in your head, when you need it. 

Contextual computing is already here. If we could let it sit in the background while we are living real, human lives, that would be amazing. 

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tag:blog.maxniederhofer.com,2013:Post/1229763 2018-01-10T15:32:52Z 2018-02-04T12:22:00Z Humble curiosity

"To the extent possible, we wish to re-frame the language of our time." - via Fr. Thomas Keating, in an email from the organization "Contemplative Outreach"

This line hit home in an unexpected way. So much of the misunderstanding, miscommunication, resistance and antipathy in our lives comes from language. Some of the biggest issues I have faced in organizations have been hidden "negotiations of language", rather than a genuine disagreement about things. 

The way we show up under stress has everything to do with our limbic system: it's fight or flight. And to be honest, in most people the stress response is flight. We avoid situations that make us feel powerless. We think of ourselves as a victim. We lead apathetic, lethargic lives "of quiet desperation."

Because when we stand up for ourselves, it tends to make things worse. Conflict breeds conflict, in a never-ending cycle of emotional and physical violence. 

The only way out, I've found, is consistently showing up with humble curiosity. The best book I've read in this context is by Edgar Schein, called Humble Inquiry (Amazon). Its subtitle, which apparently all books need nowadays, is "The Gentle Art of Asking Instead of Telling." Isn't that a wonderful thing. 

I don't manage it every time, but I'm getting better. The next time you're triggered, just... ask, gently. 

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tag:blog.maxniederhofer.com,2013:Post/1229046 2018-01-09T11:09:15Z 2018-01-14T23:47:35Z Flying while standing still
We woke up in a hotel at Gatwick airport this morning, en route to a friend’s birthday halfway across the globe. 

We are traveling with our firstborn, who is 20 months old. My wife is 28 weeks pregnant. We did not sleep very much. 

I used to be a high anxiety person with a quick temper. This is the type of situation that previously would have triggered all of that. And it would have made a stressful day much worse, for everyone. 

This year I’ve committed to a consistent, intense meditation/contemplation practice. I hope to relate some of the experiences. But even the sporadic, relatively shallow practice I’ve adopted over the last years is helpful. It very much feels like life spins around me, and I’m at the center - calm, collected, joyful. 
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tag:blog.maxniederhofer.com,2013:Post/1228267 2018-01-08T09:15:10Z 2018-01-09T12:31:39Z Making decisions

Much has been written about the bounds of rationality. A colleague at Sunstone has a chart up to remind himself of the most common cognitive biases. Another gave us all a copy of a Kahneman book for Christmas a few years ago. The initial investment decision is a crucial one in our business - you're going to be working with that company and in that industry for years. It's not a decision to take lightly. 

Founders call me sometimes when they have hard decisions to make. And then I tell them the quip of the three brains (originally taken from Laloux' Reinventing Organizations): did you know that we actually have three brains? The nervous systems in your heart (intrinsic cardiac) and gut (enteric) are actually quite independent from the one in your head. Discovered by Auerbach in Germany in the 1860s, science kind of forgot about the brain in the gut. Until it was rediscovered in 1990 by Michael Gershon, a US neuroscientist (and others). 

We see our entire lives through our modern/rational ideology. It's almost impossible to take those glasses off. We've been taught to treat the world, our selves, other people and our organizations like things. 

But thankfully the self isn't entirely rational. Decisions are complex and we have billions of years of evolutionary history to help us. Hence I ask anyone to do this very simple thing before taking big decisions: get your head, heart and gut to align. That means checking in with your rationality, but also your emotions and your intuition. 

If you don't have alignment, see if you can hold off, or frame the decision differently, or check your premises. Once you have alignment, go deep within yourself to your witness, the grounds of your being. And check there whether what your doing is serving your overall purpose.  

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tag:blog.maxniederhofer.com,2013:Post/1227815 2018-01-07T15:32:19Z 2018-01-07T15:32:19Z VC and gambling Though darkness covers the earth,
and thick clouds cover the peoples...
Be radiant at what you see,
your heart shall overflow. (Isaiah 60: 1-3, 5)

Yesterday a Facebook friend commented on my latest post, "How about a post how VC is some form of gambling [with other people's money] where 4 out 5 bets fail?" 

I like when people challenge me. It makes me reexamine my beliefs, which is mostly a healthy exercise. I've found that for much of my life I wasn't truly thinking for myself, but regurgitating smart things I'd heard and read. Mostly because I wanted to be liked (I still do, but it's not my primary motivation). 

It had never really occurred to me to think of what I do as gambling with other people's money. I kind of get why it might look like gambling from the outside: risk can be construed as odds, the investment is the stakes, we frequently lose money, and the whole thing looks hugely entertaining (it really is less glamorous from the inside). 

So let's start from first principles. Founding a startup is a high-beta activity. Like other such endeavours - becoming an artist, a writer, an actor - most startups fail. But considering the expected value of success, that shouldn't be surprising. If your chance of success is 1% and the outcome yields $50 million, the expected value of being a founder is still $500,000. And if you're great at founding a company, your chance of success might be much higher. No wonder people want to do startups. 

Unlike speculation, venture is an "investive" activity. It is fundamentally meant to be creative capital, to finance building something. It isn't trading and as such it also isn't a zero-sum game like gambling. While what is financed may not blossom into a popular product or large company, the attempt occurred and that attempt had value and meaning beyond its financial outcome. Trying lots of things that don't work, it turns out, is key to evolution - not just of biological entities, but of entire ecosystems like capitalist economies. If you don't try lots of stuff, your economy will stagnate. 

The capital we raise for our funds comes from a variety of different investors - pension funds, family offices, some public funds. Usually the money we raise is part of a very small allocation within a larger portfolio of fixed income, equity, real estate and other alternative assets. Venture is usually the smallest "asset class" they invest in. Their expectation is for us to try and vastly outperform the benchmark return. 

So why do the founders, the VCs, our LPs, governments and many others want startups to flourish? The main reason is the power of exponential growth. Successful startups can become very, very big. Often bigger than incumbents in their market. Something that grows 2% a month will be 2.5x as large in 4 years. But something that grows 20% a month will be 6,300x in 4 years. That's why startups are attractive. 

Now, there are lots of subtleties to consider. For example, building a "normal" (i.e., non-startup) company might be a great life choice. Avoiding institutional investment might be sensible, too. Or at least waiting to become cash-flow break-even ("ramen profitable") before thinking about that choice. But equating venture capital with a form of entertainment (vice?) like gambling probably means trying to simplify what has become a great way to finance the fast growth of potentially important ideas.

Like anything, it's a matter of perception - being able to see the beauty in it, instead of the darkness (see Isaiah above). 
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tag:blog.maxniederhofer.com,2013:Post/1227463 2018-01-06T13:23:43Z 2018-01-06T13:23:43Z Finding purpose

"The difficulties and necessities of work, like those of marriage, necessitate some larger perspective, some greater view than the irritations and obstacles of a given day." - David Whyte

To me, the path to entrepreneurship and, eventually, to venture capital has always felt like discovering not a profession, but my vocation. It has been an ongoing and at times difficult conversation about who I am, who I do or do not want to be, what the world deems useful in me, and what I need of the world. 

The overarching drive in me has always been the need to be at the edge, to be part of the conversation about the future horizon, to play a part in its creation. Like all humans, I yearn to strive. Over time, I am learning to let go of the ego of this to see myself as more of an enabler of the inevitable unfolding of the future than its seed. It has caused me to become hugely optimistic, at times giddily excited, about the opportunities of the world and humanity's evolution. 

We are, I now have faith to say, spirit-in-the-making. Our evolutionary history - from atom to molecule to cell to body to mind to soul - charts an inevitable path. As a founder, I'd encourage you to look for the part you and your company are playing in the symphony of cosmic evolution. To align yourself and your team with this greatest tide of our being is the single most integrative step you can take to instill even the hard times with meaning and purpose.

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tag:blog.maxniederhofer.com,2013:Post/1226338 2018-01-04T09:46:44Z 2018-01-04T09:46:44Z In opposition to NetzDG

Since Jan 1, Germany has a new law: NetzDG, the Netzwerkdurchsetzungsgesetz, actually called the Gesetz zur Verbesserung der Rechtsdurchsetzung in sozialen Netzwerken, i.e. the Law for the Improvement of the Enforcement of the Laws in Social Networks. As a people deeply enamored with compound nouns, the name is a good start. It also shows you that German legalese-fu is quite strong.

The legislation has many flaws, not least that it outsources the enforcement of laws limiting freedom of expression to private companies like Facebook and Twitter. What's worse is that given the massive fines that it threatens these companies with, the tendency of their service providers monitoring content is in dubio to delete. One of the first victims of this was a satirical tweet mocking a far-right politician.

Germany has some significant restrictions on speech, in particular a very broad interpretation of its incitement limitation. Incitement of the people (Volksverhetzung) has a relatively low bar and high minimum sentencing. For example, the slogan "migrants are parasites" is enough for three months in jail. In the US the incitement limitation on freedom of speech exists, but the threat of violence needs to be both immediate and likely. 

While Germany's genocidal history is good ethical grounds for specific legal restrictions such as holocaust denial and limitations on the assertion of wrongful facts, the current implementation leads to self-censorship, skews the market of ideas, selectively targets opinions that should be discussed, and in my view does little to curb threats and harassment overall.  

Now that the internet is the place where politics are negotiated, I think it's a good idea to leave the masks off. Let the crazies out themselves. By all means, call out and report harassment, threats, and incitement to violence where you find them - that's what existing legislation and the judicial system are for. 

But on a personal and local level, encourage empathy and inclusion. Avoid othering, even those whom you firmly disagree with.

People are scared and angry and reverting to a pre-modern tribalism encouraged by identity politics. I believe countering this both rationally and spiritually is a necessary and worthwhile evolutionary step in common future. 

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