#taketheexit? Not quite yet, METRO

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

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

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

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

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

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

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

Insta shoppable posts go global

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

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

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

...and we're back!

Meet Audrey:

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

Much love,


Brief hiatus

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

Much love,

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

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

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

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

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

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

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

Much love,

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

P.P.S. Pretty links below! 

Zero-sum markets and CPG

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Autonomous cars should be free software

So you probably heard by now that an autonomous Uber killed a woman in Arizona. There was a human operator behind the wheel, but the car was in autonomous mode. 

Of course we don't yet know what really happened (EDIT: preliminary police statement indicates likely not fault of self-driving car | UPDATE: the video is pretty damning - suggest huge problem for Uber). 

The promise of autonomous mobility is fewer deaths. I'm very excited about self-driving cars for other reasons as well. I love the vision of living further outside of cities that are less full of cars, with fewer traffic jams and less wasted time commuting. 

But what I don't understand, on the road to self-driving (sorry), is why we're letting proprietary tech take over such an important part of our lives yet again. Or, as a comment on Hacker News put it, "Why can a private, for-profit company "test" their systems on the public roads?"

Socialize the losses, privatize the profits? That doesn't seem right. And so, as with other software that has such enormous potential, as long as it's using public infrastructure we should probably insist that it be free software (as in freedom, not beer). You should be free to inspect, to modify and to share both the training algorithms and the machine learning models that result. At least as long as you're purchasing or leasing the vehicle. The same should probably be true for government licensing bodies above all. 

Otherwise we'd have no idea what that software is meant to do. Which is crazy if you think about it. 

What to eat (while building a startup)

Stop clicking on that 'bait!

But while you're here, I very much enjoyed this Q&A-style article about current knowledge in nutrition: "The Ultimate Conversation on Healthy Eating and Nutrition."

Maybe it's confirmation bias, but I do believe the best diet while building a startup is the one that cuts out all the things that actually _have_ nutrition labels. Also cheat days. You gotta have those. 

On a more serious note, most founders I know don't self-care enough. Go work out. Eat healthy. Get more sleep. If you're feeling down, there's no shame in talking to a professional - be it a coach or a therapist. Both will make you a better founder. 

Sunstone seed investments (€100K to €500K): investing earlier and earlier

Over time my partners and I have learned that we care much more about the "Who" and the "Why" of a company, rather than the "What." That's not to say that the "What" doesn't matter. We think that our companies should win because they make products that deserve to win.

But in the context of our investment strategy, who the founders are and why they do what they do are our key criteria for making an investment. Not only are we much better at assessing people and motivation than we are at predicting what's going to sell. But we've also found that companies usually take a few iterations to really settle on product and market. And finally that when great people meet even a mediocre market, they tend to build something sustainable and special.

In the areas where I'm focused - B2C, direct-to-consumer brands, marketplaces/platforms with a consumer angle - I'm therefore going to be investing earlier-stage than ever. I'd like to be your first cheque (how American!), even if it is only €100-500K.

Over the weekend I looked at our median investment size in Sunstone Technology Ventures Fund IV and it was over €2M. I'd like to bring that back down to €1-1.5M. And the way to do that is to back 5 or more companies at inception in the next 12 months.

If you want to show us your company, the fastest and easiest way is to put your information directly into our Dealflow system via this link (Typeform). The old school way, via max@sunstone.eu, still works as well (but slower).