tag:blog.maxniederhofer.com,2013:/posts Max Niederhofer 2018-06-17T11:28:58Z tag:blog.maxniederhofer.com,2013:Post/1294938 2018-06-17T11:28:13Z 2018-06-17T11:28:58Z The sins of our fathers

I'm a huge fan of Fred Wilson's. He has made time for me when I needed guidance both as a VC and a founder. And I've read his blog, on and off, since he started. I remember when he started because I was running Myblog.de, a blogging software company, at the time. 

I tune out a bit when Fred gets political. I think it's perfectly understandable to be left-of-center in the US, just as I think it's more sensible to be right-of-center in Europe. I'm a Burkean conservative at heart, though the current GOP would consider me a RINO. I like to think we share the same transcendent values, though he'd likely call them humanist.

Fred has a post today - on US Father's Day - on the policy of separating migrant children from their parents at the border. And I think you can agree with this administration on some things, and disagree with it on others. I sympathize with the concerns of Trump voters rather than hold them in contempt. And I'm highly suspicious of the SJW thing. 

But forcibly separating children from their parents is insanely evil. It is nihilistic in the extreme and reminiscent of the unspeakable evil that we did in the 20th century, from Nazi Germany to the Gulag to Maoist China. It must be stopped and it must be stopped today.

I'll often follow arguments about how some policies "look" bad but are actually sensible. And I do think there's massive lobbying and PR work at play here. But that doesn't change the facts that a civilized country is forcibly separating kids from their parents and it's just plain wrong. 

Whatever pressure you're able to apply, now is the time to do it. 

tag:blog.maxniederhofer.com,2013:Post/1294720 2018-06-16T18:05:32Z 2018-06-16T18:14:23Z Robert Crumb documentary

Slightly failing on my daily posting regimen, but that's because I'm fighting an inner fight of what I should write more about: venture capital (the outer life), leadership (the inner life), spirituality (my own journey), or just what I'm thinking about on a given day. 

I'm overthinking this, I'm sure. Let me know in the comments. 

Also the last few weeks have been incredibly intense, with us seeing quite a few doable seed investments - all DNVB/DTC - and hence a lot of time traveling - London, Madrid, Copenhagen, Romania... 

I spent two hours today watching the the 1994 documentary of Robert Crumb today, which is an absolutely devastating piece of art. I had heard about it after being sent an excerpt from a Jordan Peterson lecture (part of his biblical series) by a friend. It's absolutely terrifying to the part of me that identifies with high trait openness and creativity. I am lucky to come from a more functional family - Crumb's childhood sounds like absolute hell. 

It's a film worth watching if you are interested in underground cartoons of the 60s/70s, counter-culture, the condition of artists' lives, psychology, and perhaps more generally if you like good documentaries.

tag:blog.maxniederhofer.com,2013:Post/1293353 2018-06-13T06:00:02Z 2018-06-13T06:00:02Z The sage and the king

It's a travel day for me, so here's another story I told recently. Many of these come from Anthony de Mello, perhaps this one as well. They're kind of blending at this stage. Which I think is fine because they're stories and they're meant to be retold.

There was a wise man - a sage, a sadhu - who was walking in the capital city of a small but happy kingdom and he found a coin on the street. Since he was very wise and had taken a vow of poverty, he decided he would give the coin to someone who needed it more. And so he spent the rest of the day walking through the city and talking to people, be found they were all very satisfied and had all they needed. So he had his evening meal and he went to sleep. 

The next morning he was roused by a marauding horde. Soldiers were conquering the city. Houses were burning and there were screams and the stench of death was in the air. And as he looked, he saw in the midst of the throng the conquering king, his arms bloody up to the elbows. And the king caught his eye and he said: "Sage! We have captured this entire kingdom, from coast to coast, and now we've conquered the capital city. See how mighty we are! Give us your blessings, wise man!" 

And the wise man reached into his pocket, took out the coin and said: "Here, I think you need this more than me."

So now there are two endings. In one, the king is stopped in his tracks, stricken at the truth. And he withdraws his army from the city. This is, in my view, the more satisfactory but also unrealistic ending. We all know what happens when we accuse people of greed - they get angry. And so the other ending is that the king chops off the sage's head and is done with it. Which is just as well, because homelessness is a real scourge on that kingdom I've heard (#nimby).

This story was part of my talk at Techsylvania, with the point that founding a company from a place of "more, more" is... unhelpful. So what are better places to found from? That's for tomorrow. 

tag:blog.maxniederhofer.com,2013:Post/1293260 2018-06-12T10:00:24Z 2018-06-12T10:05:21Z The fear of failure... it's not failure that's the tough part, it's dealing with the fear

I'm sitting at Techsylvania listening to a panel with the awesome Ondrej Bartos of Credo Ventures who has backed companies like Brainient and UIPath. Credo are our co-investors in Kontakt.io, the world's leading makers of beacon hardware and software. 

The panel is talking about failure, its varying cultural acceptance across geographies, and I find myself shaking my head - which means it's time for a blog post.

First off, failure sucks. It's draining, painful, and if you do it wrong you keep carrying it around for years and that energy will attract more failure. The world is magical in that way. It's what we mean by stigma and the reasons for that are deep and evolutionary. You have to free yourself from failure through a shift in perception, what I call raising your consciousness. That's the main capability of the human spirit over its mind, the realization that consciousness is a constituent element of reality, which means that perception is a choice. And so not just talking about but truly understanding the (at some level) "failures" of your life as opportunities or even calls to personal growth is absolutely pivotal for a long-term good life, including health, wealth, and happiness. This is not some spiritual mumbo-jumbo, it's as real as things get.

So where do I like to focus? Look at the book titles below. These are part of my talk later today:

The hard thing about hard things. Sounds bloody difficult. Zero to one. I mean, think about that for a second. You want to get to one, but where are you starting from. You’re a zero! Ha! Only the paranoid survive. I mean, Jesus. Who would ever want to be a founder? They are right of course. You should be afraid. You should be scared. Very, very afraid! 

Can you feel it in your body? Can you feel what it does? Fear contracts. It activates the amygdala. Fight or flight. It’s scary. It’s also a little bit exciting, mind you, but that’s just your body getting ready to fight to the death.

And that’s an interesting realization: fear is at its base always the fear of death. It’s the fear of disappearing back into the void, of being nothing, not having mattered.

So if we explode that a little bit, what is this that we’re scared of when it comes to founding companies?

  • Disappointing people (ostracization)
  • Ending up broke (survival, ability to provide)
  • Failed self (self-esteem, self-worth)
  • Starting from nothing (social hierarchies)

I mean, your entire evolutionary history is aimed at avoiding pain. And here you’re about to run a great risk of getting into a lot of pain. Having to start again from nothing. At the bottom of the heap, so to speak. Also not what evolution sets you up for.

Here’s an interesting scenario: imagine you are at a concert. The lights dim, the music is about to begin. And you remember you forgot to lock your car. You can’t get out, too many people. And now you can’t enjoy the music. You’re caught between two things! And this is an image of running a startup from a place of fear. It takes you out of the moment, out of the present, it reduces your awareness. It blinds you. It makes you more likely to fail!  

And here’s the crazy thing: fear doesn’t exist in the world. Fear only exists in your mind. It’s a matter of perception. Nothing has the power to upset you unless you give it this power. You’ve been trained to be fearful. You’ve been programmed to react this way. But here’s the secret: perception is a choice. How you look at something is a choice.

And we don’t talk about this! We don’t talk about this because we’re pretending to other people that everything is always amazing and great. Instead of sharing the journey, we are actively communicating to each other: I’m doing AMAZING! Everything is working out SUPER WELL. And we think: Oh. No one else has these problems. It must be something wrong with me. I’m weak. And then we’re wondering why even someone as successful and seemingly strong as a Kate Spade or an Anthony Bourdain can’t talk about the pain of the journey. The hardest thing of all the hard things is the demons in our head. The pioneer is always in a minority of one, which from a social perspective means you’re crazy until you make it.

If you're here, come to my talk. I'll share the secret of how to deal with all of that. 

tag:blog.maxniederhofer.com,2013:Post/1293058 2018-06-11T19:17:23Z 2018-06-11T19:19:08Z Forerunner Ventures' new website

A few weeks ago, Forerunner launched its new site and, while I've never met the partners there, the manifesto resonated deeply with me

"We champion the companies who rewrite the rules of culture."

Isn't that a fairly wonderful thing when you let it sink in. It has that humble backing of founders, combined with shouting their names from the rooftops to anyone who will listen. But championing something is more than just backing or supporting; it is fighting for its idea and underneath its banner. It's proselytizing. It's reminding the company who it is when it loses track. 

Rewriting the rules of culture: when I first saw that, it blew me away. It's very reminiscent of Douglas Holt's Cultural Strategy, of course, which I currently think is the bible of building innovative brands. Identify your market's orthodoxy. Align with the social disruptions that are challenging that orthodoxy. And then go and rewrite the rules of engagement in that market. 

But again, it's more than that here. Rewriting the rules of culture means looking at longer term, secular and even moral trends. Think sustainability, empowerment, more conscious lifestyles, more thoughtful consumption, ... Those are the rules of culture that deserve to be rewritten. It is a statement not just of intent, but of purpose.

Go read the whole thing. It's one of the better takes on our market and business that I've seen. 

tag:blog.maxniederhofer.com,2013:Post/1292698 2018-06-10T19:22:12Z 2018-06-10T19:22:12Z It might be luck, but you have to buy the ticket
There was a good, faithful man who had worked hard all his life. As as he was nearing retirement, his wife fell very ill and he lost all his money caring for her until she passed away. So there he was: old, bent, alone and penniless, and he was very sad. So he started praying to God to let him win the lottery, so that his old age might have some comfort. And he prayed and he prayed: "I have been so good, Lord, let me win the lottery." And nothing happened. So he did it again, and again. This went on for years. 

Eventually he was quite mad. He shook his fist at the sky and cursed the heavens and shouted: "I have been so good, I have worked so hard all my life, why can’t you just let me win the lottery." And the heavens opened up and the voice of God boomed from the sky: "go and buy a bloody ticket already!"

So there you have it. We make our own luck. Or at least: we navigate ourselves into the position of possibly being lucky. And that’s what startups really are: the very small chance of making “it” big.

But you gotta buy the ticket. 

P.S. I am at Techsylvania this week and this is the opening of my talk there. 
tag:blog.maxniederhofer.com,2013:Post/1290693 2018-06-04T15:09:06Z 2018-06-04T15:09:06Z The Global Purpose Movement

This weekend I attended The Purpose Summit Berlin. Well, on Saturday. On Sunday I took a three hour nap with my daughter and learned all the names for the Paw Patrol pups (Ryder needs us!).

Purpose is an issue close to my heart. I believe it is at the heart of all large companies. I believe all great leaders have it. And - more controversially, perhaps - I believe that while there are many outer purposes, there is one shared inner purpose. And that's really "faith", that this one purpose exists.

I think as we grow up most of us struggle with the pace of change around us. Technology is really in the process of changing everything - every relationship, every organization. Algorithms increasingly run our lives. Change is accelerating. The singularity (perhaps) is near. At the very least our lives are always on, hyperconnected. As a species we have never been closer together. And yet, never further apart.

We are facing grave environmental, social, and political crises. From climate change to top soil erosion, inequality and discrimination, mass migration and ethno-nationalism, political Islam and government surveillance, ... I could go on. 

And yet we have lost faith. Our one joint belief, the scientific method, insists there is no answer. Oh, there are dozens of studies proving that purpose is incredibly valuable - to longevity, to productivity, to satisfaction, to health, etc. But regarding what that purpose could be, science is rather silent.

Which is baffling because, to me, evolution is everywhere. Things are moving in a direction that we can recognize. Fractal patterns that move from chaos to order, from incoherence to coherence, from separateness to unity. Life strives towards the light.

And so to my colleagues erstwhile consternation I sum this up with: we are the Burning Man generation. We seek to rewrite this culture. Change trajectories. To back the transformational leaders and technologies that will change our joint future. That's the purpose of what we're doing here. 

The next event in Berlin that I'm attending on this topic is the Catholic Academy's conference on evolution and transcendence. Contrary to popular belief, the Catholic church are some of the deepest thinkers on this stuff. And they're hosting an exciting range of international academics (program is here). 

tag:blog.maxniederhofer.com,2013:Post/1289821 2018-06-01T15:19:08Z 2018-06-01T15:19:08Z If the eye is unobstructed, the result is sight

I wrote about the insidious effects of being raised to seek approval this week. There is an extension of this attachment to validation, which is that we lose our ability to love.

What the media calls love, what the entertainment industry calls love, what society calls love, is attachment. You give me what I need, so I will give you what you need. If you take away your love from me, you lessen me. Oh how I hate you now! 

But was that love to begin with? Anger, fear, jealousy, ... these are so present in our "special" relationships. And thus we create expectations of the other person on which we let our happiness depend. Instead of, you know, loving them. 

H/t once again to Anthony de Mello. 

tag:blog.maxniederhofer.com,2013:Post/1289544 2018-05-31T17:19:45Z 2018-05-31T17:21:18Z Challenging cultural orthodoxy: brands as ideological innovation

The tech industry frequently thinks of innovation as a “better mousetrap” game. Where’s the significant innovation or invention? It’s all features and benefits.

With DNVBs, we find that that innovation is often both softer and deeper – it’s ideological. This works when the cultural orthdoxy in the market is tired, frequently caught in some sort of dead end. Sophisticated, minimalist, utilitarian, aspirational… all of these can be endpoints from which it is hard to recover unless the brand takes a “stance.”

Coca Cola pioneered fighting for social change. Nike made everyone an athlete. Starbucks democratized the artisanal-cosmopolitan aesthetic. Jack Daniels rediscovered frontier masculinity.*

Of course this is only one way to think about cultural innovation, but it seems to me a particularly fruitful one. With the decline of trad sources of identity and cultural meaning – religion, arts, the nation, other institutions, etc. – brands have over the last fifty (?) years emerged as the primary form of cultural expression. With DNVBs, they may become crucibles of identity and social movements that serve to rewrite culture globally.

* These are all examples from Douglas Holt’s book Cultural Strategy, which so far is excellent. Yes, I’m once again learning in public.

tag:blog.maxniederhofer.com,2013:Post/1289237 2018-05-30T20:33:09Z 2018-05-30T20:33:09Z Copenhagen-Berlin and return
Following the collapse of airberlin, my bread and butter route of Berlin to Copenhagen and back has become a slight nightmare. 4:45am alarm for 7:20am flight out, only return at 9:20pm, touches down 10:30pm, home by 11:15pm. 

It’s crazy that two European capital cities are so poorly connected. When I look at the construction projects that have been completed in China in just the last five years, the failure of Berlin to successfully build an airport and give out existing slots is laughable. 

What’s lacking is the political will in Germany overall and Berlin in particular to tackle the infrastructure projects that make the city and country a long-term viable place to do business.

Don’t even get me started on the lack of fiber infrastructure that is a direct result of government interference at Deutsche Telekom. German internet connections are some of the worst in Europe and among the worst in the developed world.  

Alright, I’m done. 
tag:blog.maxniederhofer.com,2013:Post/1288657 2018-05-29T07:34:05Z 2018-05-29T07:34:05Z The most dangerous drug in the world
The most dangerous drug in the world is approval. I didn’t come up with that. Anthony de Mello SJ did. But I wholeheartedly approve! Ha!

If someone approves of you, it feels good. If they deny you approval, it makes you feel bad and crave more approval. And thus we recognize the mechanism on which society operates. 

I have a friend who has a small girl. When she’s in a group of people, she dances and does tricks until people clap. For a long time this bugged me and I didn’t know why. Until I realized: we’ve turned her into a little monkey! She dances to the tune of our social conformism.

I have a friend who works at a large luxury house in Milan. She makes products that people buy so they can show to others that they’re worthy of approval. This bag makes me great! I told my friend: the only good you do in the world is to make rich people slightly less rich. This was mean-spirited and also plagiarized from Terry Pratchett. She did not approve of my disapproval. She felt bad and I still (still! this is years ago) feel bad. What little monkeys we are.

Approval is the ultimate attachment on which you let your happiness depend. It traps you. It blinds you. It keeps you asleep. What a world we could live in if we could free ourselves from these prison walls.

It reminds of another story de Mello tells: 

[An] Irish prisoner... digs a tunnel under [a] prison wall and manage[s] to escape. He comes out right in the middle of a school playground where little children are playing. Of course, when he emerges from the tunnel he can't restrain himself anymore and begins to jump up and down, crying, "I'm free, I'm free, I'm free! A little girl there looks at him scornfully and says, "That's nothing. I'm four."

Look at me! Look at me! Look at me now! 

tag:blog.maxniederhofer.com,2013:Post/1288404 2018-05-28T15:21:17Z 2018-05-28T18:31:07Z TL;DR: Too long... make it shorter

"Make it shorter" is one of my favorite pieces of advice. 

Even if we weren't living in the attention economy, there are mostly only benefits from making "it" shorter. It being the memo, the meeting, the film, the book, the deck. I've rarely had someone tell me something was too brief. Just that they wanted more of it.

Shorter doesn't mean less content. It means more precision. More sophistication. And hence more power.


tag:blog.maxniederhofer.com,2013:Post/1287442 2018-05-25T17:40:03Z 2018-05-25T17:40:21Z Email subscription and GDPR: sad to see you go

Some of you have requested that you receive my blog posts as email. Thank you for that. 

Unfortunately the GDPR going into effect today means that I won't be able to continue having that functionality. I don't want to risk managing your personal data (aka email addresses) on a blog that blurs the line between personal and commercial. 

The GDPR is well-intentioned but will end up like the cookie directive. It benefits large companies and consumers just click "OK." 

Ultimately the solution to data ownership and privacy needs to be technical. I'd like true control of my personal data, allowing corporations and governments to access it only as needed (similar to OAuth), but making sure it isn't distributed in a thousand different places and being able to revoke permissions as I see fit. 

Unfortunately legislatures, including the European one, aren't sophisticated enough to mandate such changes. And so all we do is enrich lawyers. 

At least we all get a full Reset on email newsletters. For a few months. #cynical 

tag:blog.maxniederhofer.com,2013:Post/1286940 2018-05-24T07:46:18Z 2018-05-28T15:07:17Z Beyond "authenticity" and towards transcendence: what is your true inner self and what if you ran your company (and your life) that way?

What is your true inner self? Of the many viewpoints you’ve adopted, the thoughts you now have that aren’t originally yours, the mental models and patterns that were given to you by birth, by teachers or through circumstance, what below all that is really You? 

It’s easier to say what the true Self likely isn’t. It’s not the fear that makes us lethargic. Not the anger that makes us lash out. It isn’t the ego that makes us greedy. Those are layers we’ve built up to deal with a world we have been taught is a place of scarcity and violence. Of winners and losers. Of right and wrong. 

What are the masks you wear? What are roles that we just act out? What if you strip away the protective layers, the self-destructive patterns, the conditioning and reflexive reactions?

When you peel away at that onion of Self, what is there in the end? It begins, perhaps, with taking responsibility for ourselves in a world that just seems to compete on victimhood. Taking responsibility not just for our situation, but also for our perceptions. If psychedelics have taught me anything, it is that perception is a choice, and so we are responsible for how we view the world. Remember that next time you read an article that is trying to scare you, whether it is to entertain you or to rally you to a cause.

Taking responsibility for even our unconscious reactions (id), learning to practice circumspection and tolerance, breeds cooperation. This is the logical approach to surviving in a social species. You can’t do it alone. It is still egoic ambition, but rationally channeled.

As you gain self-mastery and the needs of the ego change - isn’t it insidious? - we develop compassion. Emotionally such empathy allows us to operate from a place of genuine concern or care. In service to others, rather than ourselves, or so it would have us believe. The motivation is too often that we want to be liked, accepted, perceived as better, in a position of power over others.  

As you approach authenticity in individuals, the perspectives of "responsibility-for" and "in-service-to" are reconciled by discovering a wider purpose to dedicate yourself and your organization to. This purpose suffuses the world with meaning. It creates opportunity everywhere. It inspires others. It is perhaps egoic in its need to achieve, but in its creativity is is an extension of the true “authentic” Self. 

So what lies at this very core, once we have shed all the layers of id and ego? There was a time we used to call this the soul, atman, spirit, anima… Liberated from a conditioned self, the mystic-sage is in essence Being, life that has consciousness. 

Authenticity is when this true essence of ourselves shines through the layers. The leaders we follow, the causes we support, the purpose we find it meaningful to dedicate our lives to - these all touch our true authentic selves, our “soul.” All wisdom traditions encourage the transcendence of the outer layers of “self” to live from the inner core of “Self.”

Authenticity, viewed in this way, isn’t a canvas of tastes, styles, or fashions. Authenticity isn’t “personality”, but how true people are to their real inner selves. It also isn’t relativistic - it is a firm absolute: there is, really, only one one true inner Self. It can find different expressions, can create in different ways. But the core is the same for everyone and, most importantly, it is a shared core.

The consequences of operating from this realization, both personally and as an organization, are radical. I hope to meet more startups and founders who do. 

May 2018

tag:blog.maxniederhofer.com,2013:Post/1286758 2018-05-23T19:51:43Z 2018-05-23T20:10:53Z Be Here Now
I saw this photo on Reddit today. Part of my practice for the past few weeks has been to be more in the moment. Less in the story. More like her.

Tech will move into the background as the backlash against its ubiquity grows. I hope voice and AI will help. And I hope that we relearn to: be still (Ps 46:10). 

Sent from an iPhone on night shift at 9:48pm while my 2yo daughter is asleep on my tummy (Ps 8:2) 
tag:blog.maxniederhofer.com,2013:Post/1286401 2018-05-22T16:07:26Z 2018-05-22T16:39:04Z The DNVB Cambrian Explosion: an unprecedented opportunity to build category-defining consumer companies for the 21st century

Over the last decade, technology has become ubiquitous in our lives. Internet connectivity has grown to over 90% in the US and Europe. There are now over 4 billion people connected to the internet globally; 3 billion use social media, 90% of them from their mobile device. As a species we are well on the way to being always on, always connected.

As a consequence, the consumer economy has been changing dramatically. Retail is being radically reorganized, from the paradigm of the 20th century, the automobile, to the paradigm of the 21st, the smartphone. Footfall at malls and big box stores in developed countries is down. Ecommerce continues to grow at a brisk 20% globally, now well above its ceiling penetration projections. Amazon is emerging as a possible monopolist, likely to take up to 10% of all retail sales. Selection, convenience, and price looks set to dominate all commodity categories.

And yet… consumer preferences seem to be fragmenting. Big is less and less better. Emerging tastes skew small, local, authentic, purpose-driven. Consumers used to trust big brands. Scale conferred huge advantages in pricing power, margins, access to supply chain, and ubiquity on the shelves of retailers. No longer. An increasingly economically, commercially, and environmentally literate and conscious younger consumer increasingly distrusts big brands. The 2008 financial crisis exacerbated feelings of being cheated and precipitated a flight towards authenticity and perceived value for money. In conjunction with the hyper-growth of natural, organic, and wellness (see LOHAS), consumers are flocking towards brands that either confer meaning or are fully utilitarian.

At the same time, the rise of ecommerce means shelf space is no longer a moat. Educated by Amazon et al., consumers are comfortable buying online and companies can sell directly over the internet. What’s more, over the last 20 years an ecommerce infrastructure has been built  that is able to perfectly serve even the smallest of players. Third party logistics providers (3PL) operate massive warehouses that offer full pick-and-pack services and integration with last mile delivery companies that can service consumers almost anywhere in the world.

The flip side of the logistics revolution is that supply chains have become increasingly accessible. Shenzhen as the belly button of our global materialist culture is open for business to the entire world. Increasing competition and decreasing prices are forcing original design manufacturers (ODMs, as opposed to OEMs), to accept smaller batch orders, albeit for prepayment. China has quietly morphed from a merely inexpensive to an extremely sophisticated, high-quality manufacturing hub. In response, European manufacturers focused on luxury, fast fashion, and core product innovation (for example, tech athleisure) are also accepting smaller clients. The decreased cost of doing business globally, along with well established container and air shipment routes, are making product sourcing accessible to any well-financed or well-networked startup.

The upshot? It used to take millions of dollars and several years to launch a brand. Now it takes weeks and $25,000. The result is a Cambrian explosion of new brands in nearly all consumer categories.

Our thesis is that there exists, certainly in the next five years and perhaps well into the next decade, an unprecedented opportunity to build new category-defining digitally-native, vertically-integrated brand (DNVB) companies that dominate specific verticals or niches within verticals.

If that's what you're building, come and talk to us. max@sunstone.eu will find me.

tag:blog.maxniederhofer.com,2013:Post/1285967 2018-05-21T15:48:43Z 2018-05-21T15:51:23Z After Authenticity by Toby Shorin: if you want to understand new brands, it's the most important essay you'll read this week

I am quite serious: go read it. And reflect on the rise and (proposed) fall of authenticity as a central driving force of culture. Because most of the authenticity we come across is as faux as the top-down mass media broadcasts that came before it. Worse: it pretended to be something different. 

What Shorin proposes, and what rings true to me, is that network effects of meaning are emerging. Under authenticity, scale decreases value. But for a connected consumer, this is clearly not true - we revel in the memes, the hashtags, the shared experiences. 

"We live in a time where brands are expected to not just reflect our values but act on them. Trust in business can no longer be based on visual signals of authenticity, only on proof of work."

Amen. You can follow Toby Shorin on Twitter here.  

tag:blog.maxniederhofer.com,2013:Post/1285551 2018-05-20T14:11:39Z 2018-05-20T14:13:10Z Yanxuan, the "knock-off" marketplace, shows you why the luxury emperor is wearing no clothes

The wonderful Forerunner Ventures newsletter (new website, check it out) brought to my attention Yanxuan, an incredibly rapidly scaling marketplace by NetEase. Check out the front page (Google translated):

The concept is simple: source unbranded product from manufacturers that also produce for large brands. Use same or similar designs and much lower price points. Will they eventually get in trouble with the brands or lose some ODM manufacturers because of their claims? Possibly. But until then it feels like a scaled Chinese Everlane... and it also does $1.8 billion in revenue :)

Good life, less expensive indeed. Did you know that Prada already sources 20% of its range from China (WSJ paywall)? Chinese manufacturing isn't just cheap, it's also gotten incredibly high-quality. While Europe was mucking about with its Euro bs. 

If you are thinking about launching a Yanxuan type of business in Europe or the US, get in touch. max@sunstone.eu will find me. 

tag:blog.maxniederhofer.com,2013:Post/1285235 2018-05-19T14:46:02Z 2018-05-19T14:46:02Z Fail_Succeed: an interview exploring how to overcome failure
A few years ago, when Harry Stebbings got started doing The Twenty Minute VC, I turned him down for an interview because I'm generally not happy to make the story about me. I like putting founders front and center. But over the years I've learned amazing things from Harry's podcast. 

So when Dom Fendius, a fairly new podcaster, got in touch about an interview exploring how successful people overcome failure - the focus of his podcast Fail_Succeed, I hesitated again but ended up saying yes. 

I was very open with Dom and what we talked about makes me feel vulnerable. I hope some of you like it.

tag:blog.maxniederhofer.com,2013:Post/1284935 2018-05-18T18:06:45Z 2018-05-18T18:06:45Z MindTheLeader by Jenny Jung, ex-VP People & Operations at EyeEm

The startups that successfully scale in our portfolio consistently invest in leadership development. It's probably the most impactful thing you can do as a CEO. 

The problem with most generic leadership training programs is that large companies are so different from startups. That's why I was very pleased to hear that my friend Jenny Jung has started MindTheLeader, a program run exclusively by coaches and professionals with operating experience in startups.

MindTheLeader is running its first program focused on HR & People Operations professionals, offering a six month leadership training group with peer coaching, guided introspective work, and case studies. This will be a serious, senior group that comes together not just for the program but is designed to be a lasting network of peers. 

Kick off is in Berlin on June 29. You can apply here before May 31 (I've heard they're almost full). We're recommending this to all our portfolio companies with more than 50 employees. 

tag:blog.maxniederhofer.com,2013:Post/1284519 2018-05-17T17:22:40Z 2018-05-17T17:32:32Z Open Position: VP Product, Travelperk (Barcelona)
Following its Series B led by Felix Capital and Target Global, and with participation from Spark Capital and yours truly, Travelperk is starting to scale. The company is now looking to complement its wonderful Barcelona-based management team with a VP Product. We’ll happily relocate you from less sunny places around the world like the Bay Area or London. 

The low-down:
  • Massive opportunity: $1.25 trillion annual corporate travel market
  • Incredible growth: 1,200% last year (fastest growing SaaS company in Europe, #4 in the world)
  • “Hottest startup to watch” by Forbes and Wired
  • Deep domain expertise in a team led by ex-Booking.com and Skyscanner folks
  • 5 stars on Glassdoor
But perhaps most importantly, corporate travel is a segment with historically low product innovation. A few large incumbents that are far from digitally native. High frequency/repeat rate of customers, with high brand loyalty. A quasi-zero-sum market. The ability to massively improve the experience for hundreds of millions of people worldwide. And hence a unique opportunity to build a very large, category-defining company that changes things for the better. 

Go hear to read more about the opportunity to be Travelperk’s new VP Product. The entire team at Travelperk and I can’t wait to meet you. 

tag:blog.maxniederhofer.com,2013:Post/1284010 2018-05-16T09:58:20Z 2018-05-16T10:32:48Z Starting with the Who (and the Why) rather than the What

A few years ago, Simon Sinek's "Start with Why" re-introduced the age-old idea of purpose. We're big fans of purpose at Sunstone, so much so that the dolphin emoji is part of my fave lists (it's a porpoise!). 

I believe everyone shares the same inner purpose, but that we translate that into different outer purposes. 

For us, starting with the Who and the Why means: we believe the founders and their purpose should be our primary reasons for backing the company. The What (the idea, the market, traction, IP, etc.) is secondary.

But when founders pitch us, we also listen to their Who: the customer. How deep is their customer insight? Do they understand them intuitively? What data do they look at? What hypotheses do they test?

If you start with your Who in a pitch with me, you're very often on a good trajectory to allowing me to appreciate the depth of the work you've done on the opportunity so far. I had a great conversation yesterday with an entrepreneur I initially believed had bad "founder/market fit." Turns out I was super wrong. He had a deep, intuitive understanding of his customer despite being a different gender as well as socio-demographically and ethnically fairly distinct from them. Certainly made me check my biases (again). 

tag:blog.maxniederhofer.com,2013:Post/1283674 2018-05-15T09:18:22Z 2018-05-15T09:25:31Z The pleasure of focus

On February 5 this year I wrote about narrowing my focus to consumer investing. Within consumer, I focus on marketplaces (e.g. GetYourGuide), new platforms (e.g. Dubsmash), and direct-to-consumer (DTC) brands (e.g. Lillydoo).

Since that time, we've worked internally on sharpening that investment thesis, paying special attention to what kind of consumer propositions we want to back. I hope to share some of that work in the coming weeks. We have led one large investment in a digitally native vertical brand (DNVB), are in the process of closing another, and just yesterday made a third commitment. The latter two are both seed (€250K-€1M).

Technology's ascendance over the last decade has left everyone I know distracted. There's so much going on, so many things and people vying for your attention in different ways, that it's hard to gauge what's important. And the temptation in venture is to stay horizontal. After all, I used to say, if I wanted to be focused on a vertical I'd be a founder. 

I also used to believe that since we're mostly picking founders/teams, ideas were secondary. That's probably wrong - ideas are pretty crucial. And I do think a deep understanding of the idea/market makes me a much better partner. 

But the other thing that makes me a better partner, and one that I underestimated, is being able to say "sorry, that's not what I'm focused on" to most things that come across my desk. All the while being able to spend real time on the things that I am focused on. There's a lot of beauty in reducing the noise. 

So the benefits of focus are immense, and getting bigger. I'm about to invest in my first ever company that reached out cold to me. No network introduction, no warm lead. Just an email. That's a direct result of the blogging about DTC investing that I've been doing. So I'll try and keep doing that every day (in true OKR fashion, 70% complete is a win!). 

tag:blog.maxniederhofer.com,2013:Post/1282712 2018-05-12T06:02:29Z 2018-05-12T06:10:00Z Rome
My two-year-old daughter Charlotte and I are in Rome for the communion of my goddaughter and the baptism of her little brother. 

It’s incredible watching her start to socialize across language barriers and with the backdrop of 28 centuries of history. 

Europa my love.
tag:blog.maxniederhofer.com,2013:Post/1282160 2018-05-11T07:00:04Z 2018-05-11T07:00:04Z We should be decelerating fashion, not adding to the collective insanity

My favorite textile brands are quality. Slowear's Incotex. Patagonia. 

I understand the appeal of high fashion and of following trends. But fast fashion (Zara, H&M) has always seemed highly inauthentic and wasteful to me. 

As we are rethinking textiles from a digitally-native vertically-integrated brand perspective, I do think we should heed Queen V:

"Buy less. Choose well. Make it last. Quality, not quantity. Everybody’s buying far too many clothes." —Vivienne Westwood 

I think simplifying wardrobes makes sense. Rediscovering utility. Making clothes reusable, repairable, recyclable. Reducing waste water and dyes (check out SpinDye). 

In my mind there's an interesting brand to be built here that takes back its old clothes to repair them, recycle them, or pass them on. And then credits the sent-in items towards new purchases. There's a Tribe to be built there, potentially a subscription business. Lot2046 is still too much Shenzen and not enough Ventura, CA.

Go check out The Real Cost of That Dress that looks at these issues in more detail. And if you're building a more sustainable textile brand, hit me up at max@sunstone.eu. Fashion isn't our favourite vertical, but clothes with a purpose could be. 

tag:blog.maxniederhofer.com,2013:Post/1281988 2018-05-10T07:01:41Z 2018-05-12T14:35:53Z Vertical streaming: a thesis-in-progress

Ever since I saw Crunchyroll (yet another David Pakman investment - I'm starting to be a fanboi), I've had a gut feel that vertical streaming media would become a thing in one form or another. I was gutted that as a Last.fm angel investor the firm I was at at the time (Atlas) passed on both Spotify and Deezer. But believe me, both companies looked far from obvious in the late aughts.

Perhaps vertical media streaming is really just "channels" and with YouTube, Twitch, Amazon Prime Video, HBO and, of course, Netflix, vertical is already here. But I'm not sure that's true. The move from linear to on-demand has just accelerated over the past few years. We've just seen the launch of things like Dazn for on-demand sports. My gut is there will be lots to come in both video and audio entertainment.

Two other European companies come to mind in the context: IDAGIO, a Spotify for classical music (a great vertical) and MUBI, a curated Netflix for... intellectuals that deeply care about long-tail film? Both are interesting companies that are now unfortunately slightly too late stage for Sunstone (we only really do Series Seed and A). 

If you are building a vertical streaming company, we'd love to talk to you. max@sunstone.eu will find me. 

tag:blog.maxniederhofer.com,2013:Post/1281689 2018-05-09T07:49:51Z 2018-05-17T13:28:29Z Hermès is a luxury brand, but it might just be the wrong kind (follow-up)

As you can tell, I'm learning in public at the moment. Which is a vulnerable thing to do, because you frequently look like an idiot. But I've learned not to care. Not least because:

In starting to learn about luxury, I had a delightful lunch yesterday with Anton Jurina, founder of Armed Angels, who is now running Maison Héroïne, a line of functional and beautiful bags for women. He recommended The Luxury Strategy as a good intro read. As I was discussing with my wife this morning, there's a real question whether we should be thinking about it as investing in luxury at all. Perhaps just the "modern luxury" as defined by Lean Luxe. 

In that respect, I particularly enjoyed the extremely different perspectives that people had on Facebook. Lover of all things beautiful Charles Nouÿrit, founder of SmartPay.me, said "Hermès has always been there and will remain a luxury brand for ever", stressing the importance of status signaling and identity seeking that is the traditional domain of luxury brands. Alexandra Depledge, who I've wanted to back for a while but who seems to have gone off VC totally after her experience founding and selling Hassle (!), put it as succinctly as I would have liked to have done it:

"Unless you are accessible and authentic today, you are writing your own demise."  

I mean, we should just print and frame that as part of our direct-to-consumer/DNVB investment thesis. We're seeing it first with "millenial" brands, but the older crowd will catch on soon. Just look at this chart by McKinsey - there is no more discernable difference between the "silver surfers" we invested in at Audibene and the rest of the market. Except for social media:

80% of luxury sales are digitally influenced. By 2025, a good 20% of the luxury market ($74 billion) will be online. And the digital touchpoints are growing: already consumers *are* the channel: the volume of chatter dwarves the brands' official communications.

Chanel has 700 official posts on Instagram, but 48 million hashtag mentions (Source: Instagram 2017). It's silly to think they can continue controlling the conversation in any meaningful way. The Cluetrain has well and truly left the station.

Right now our thesis is that the trends we see in the broader "new consumer economy" are as relevant for luxury as they are for mass market or premium goods:

1. Consumer preference is fragmenting, with clear preference emerging for smaller and local. 

2. Distrust of big brands is growing, with millenial consumers actively distrusting scale and seeking out purpose-led brands.

3. Online has killed the moat of shelf space, with direct-to-consumer distribution backed by an online conversation dramatically reducing the costs of starting out (and hence the "Cambrian explosion").

4. Continued hyper-growth of natural, organic, wellness, eco-conscious, meaning-making brands.

If you're founding a direct-to-consumer DNVB along those lines, we'd love to chat. max@sunstone.eu will find me. I'd love to keep learning.

tag:blog.maxniederhofer.com,2013:Post/1281508 2018-05-08T07:36:28Z 2018-05-17T19:19:21Z Hermès is not a luxury brand
We own a lot of Hermès. Bags, sneakers, lots of beautiful scarves. We have a full Balcons du Guadalquivir set of china (it was wedding gift). I have some of their cuff links, ties. I've bought those enamel bracelets as a gift. The more I think about it, the more we've bought or received as gifts. It's hard to go wrong with those orange boxes as a gift for my wife. Those Twily scarves... John Lobb chelsea boots (they're owned by Hermès). I estimate we own a few tens of thousands of Euros of Hermès stuff.

And yet, when I walk into an Hermès boutique, they make me feel like crap. Maybe it's because I'm wearing jeans and sneakers. Maybe it's because they hire to maximize snootiness. Maybe in retail once you work at Hermès, you've made it and you get to look down on everybody, including prospective customers.

It's a consistent brand experience. It's been the same in their store in St Tropez to their store in Houston. From their boutique in "the German Hamptons" Sylt (probably the worst) to the one at New Bond and Conduit in London. They suck at making me feel welcome.

I used to think this was a "CRM" problem. They didn't know who I was. I mean, once you see how much Hermès stuff I own, you'd realize I was a high-value returning customer. Ideally if I walked into the store, they'd realize that and drop the attitude. And you know, once you give them your address and tell them about your interest in a Birken or whatever else they artificially limit access to that year, they do kowtow to the cash.

But on reflection, that's the problem. The entire customer experience is contrary to the brand. Hermès wants to stand for craftsmanship and for beauty. And what they end up standing for is the subordination of the human to money. Instead of beauty, it's just... ugly.

A brand that is built on the unrelenting reference to deference to the sublime fails at the very moment where it has the potential to share that feeling with people. Instead it says: you are nothing.

Interbrand ranks Hermès at #32 with a brand value at $14 billion. As the world becomes more aware and more conscious, I'm short folks like Hermès unless they wake up to what's happening with consumers. Because this isn't a 1% or not issue. It's a broad, fundamental change in how consumers think about luxury.

It's becoming less about status signaling. Less about artificial exclusivity. Less about a big fat H on the belt. And much more about the core product and its surrounding services, transparency, purpose, environmental consciousness, inclusion, tolerance, optimism, ...

Lean Luxe wrote about the definition of modern luxury early last year. Part of that is rethinking the brand as a holistic customer experience. It's an equal relationship that is built with the customer. A brand is a conversation between people, not a half hour of being shouted at in a sensory deprivation chamber and then sold something because of a perceived feeling of lack.

So I'm sorry for picking on Hermès in particular. But even relative to folks like Louis Vuitton or Chanel, their customer experience has always been particularly horrible. And I'm happy that we're getting to a place where that's no longer seen as acceptable and where "luxury" is being redefined by digitally-native, vertically-integrated brands (DNVBs).

If you're working for Hermès and you'd like to build a better brand, come talk to us (max@sunstone.eu will find me). 
tag:blog.maxniederhofer.com,2013:Post/1281418 2018-05-07T18:55:47Z 2018-05-07T21:22:00Z The dark side of direct-to-consumer brands: selling you crap with some pretty pictures

The DTC thing for me isn't just a well calculated pivot to a new opportunity as a venture capitalist. It's also a personal, visceral, emotional experience. I'm finding more and more brands online that I love trying out. Take Cotopaxi. Faherty. Farer. Lillydoo. All brands I had never even heard of until last year - all brands that are driven by purpose, that care about more than just making the sale, that understand the customer experience as a holistic journey together.

So far, so good. But this new brand craze comes with a dark side. As Ana Andjelic commented for Lean Luxe last year, "for every new brand that takes the long view on customer service..., there are countless more where the customer relationship ends at the moment of sale." The Atlantic followed up with a pretty good piece in January about The Strange Brands in your Instagram Feed

Fraudulent ecommerce has been a thing from early on (see these amazing online shopping fails on Bored Panda), but the Cambrian explosion of brands really underlines: read the reviews. Watch the unboxing video. Generally you get what you pay for. And if it's too good to be true...

Disclaimer: I'm an investor in Lillydoo and an advisor to Bored Panda. 

tag:blog.maxniederhofer.com,2013:Post/1280635 2018-05-05T12:38:18Z 2018-05-05T12:38:18Z Build community first - a startup strategy neglected to Europe's detriment

I've previously written about how customer experience is the #1 dimension of differentiation for digitally native vertically integrated brands (DNVBs). Which is why it's baffling to me that the "community first" strategy seems to be largely neglected in companies we see in Europe.

Starting with building an engaged audience first can be a huge boon:

- It helps you truly get to know your customers. DNVBs depend massively on this intimacy. Over time you can use data to monitor every interaction, but in the beginning you need to learn qualitatively. Talking to hundreds of potential customers means building the intuition you need to nail product and voice over time. And this is really your moat - no traditional brand that is disconnected from its customers by the channel is able to do this. 

- Building a community first means having built-in distribution later. A lot of the DNVBs we see in Europe are too dependent on paid acquisition. Margins may be high and lifetime values much higher than in retail ecommerce, but continuously paying 30% of your LTV in CAC makes your business much less profitable than it could be. Building community focuses you on organic or even viral acquisition. 

- Hiring outstanding talent is really what turns a great founding team with a great market opportunity into a category-defining, multi-billion dollar company. Recruiting from inside a community that is already passionate about your vertical means people will come to work for you with a spring in their step every morning. Your dreams are their dreams. That's how magic happens, especially at the early stages.

- A community passionate about a vertical will forgive many, many missteps as founders try to build a business. The engagement is emotional - this is true connection and support. It's hard to overstate how helpful this can be as founders invariably screw up along the journey. 

- The authenticity of a community with the founders as leaders at its center will drive enterprise value: both when you're raising from angels and VCs, but also when you're considering an exit. Community is a moat from a finance pov as well. 

- And beyond all that - it's truly scrappy: much cheaper to start with just content than trying to make a product and sell it right away. 

Building a community can work across all social platforms: Instagram is the most obvious one for DNVBs, but it can work on Facebook, Pinterest, Twitter, Snap or even through good old email and text. 

I currently recommend trying this path rather than relying on desk research or cloning a US competitor perceived to be doing well.