Ex Machina (2015)

I had never watched Ex Machina, a 2015 film about the development of AGI, so I did last night. 

It's a good movie. Visually polished, engaging, sparse but well executed. I was a bit disappointed it co-mingled AGI with robotics so quickly, and except for the Turing test reference there wasn't any depth to the science behind the story. But that's expecting too much of a cinema feature.

What the film did do well was raise questions of power, creation, human frailty, gender, and manipulation. And the score was great. I think I'll watch more Alex Garland going forward. 

Arts & Letters Daily

For a very long time, Arts & Letters Daily (aldaily.com) was my favorite website. I think I discovered it around 2000, two years after it had launched.

It was founded and edited by Dennis Dutton, a philosopher at Christchurch (NZ) and one of the great thinkers on aesthetics. 

Its genius is simplicity: three links a day - an article, a book review, and an essay, unceasingly with a great short caption. And then a short Nota Bene section, with some current news or events, and a long list of links to other sites which, for a while, was the best blog roll out there. 

When Dutton passed away in 2010, the quality of the posts declined and it felt like ALDaily was no longer at the forefront of the more interesting debates of our time: Pinker, Hitchens, Chomsky, Singer, et al.

Over the past few weeks I feel the quality has noticeably improved, though nothing has changed (the editor, Evan Goldstein, has been in the post since 2011). 

Nevertheless, it is worth a visit especially on a weekend.

Much love,


An introduction to our framework for assessing consumer companies

My colleague Yacine has a short post on Medium about our current framework for assessing consumer internet companies

It's based on Clayton Christensen's 2016 thesis of consumers using products to get a certain job done

While that's a great starting point, we added to this four major functional differentiators: price, time, quality, and user experience. And six emotional aspirations: the desire to be special, to improve, to escape, to belong, to be safe, and to be free. 

In conjunction, these dimensions of a consumer product represent the consumer surplus derived from purchasing and using it: the delta between its cost to the consumer (not just the price!) and its benefits (not just the functional ones!). 

We'd love to know what you think about our framework. It's definitely work-in-progress. 

Please read the post and discuss with Yacine and me on Twitter. 

Ana Luisa - Jewelry for Womankind

Hot on the heels of a record female congress, I wanted to talk about a seed investment we quietly made earlier this year. It's the first investment I've ever led that's the result of a cold inbound email in response to a blog post. In this case a post about our digitally-native vertical brand (DNVB) thesis.

Ana Luisa makes direct-to-consumer jewelry that is purposefully inclusive, empowering, and accessible. 

From the same designers that previously designed fashion jewelry for brands like Kenzo, Tory Burch, Alexander Wang, and Ralph Lauren, Ana Luisa uses the same materials, manufacturing processes and suppliers as the large brands. The only difference is that they cut the brand and retail mark-up and, yes, "pass those savings on to you" :)  

High-quality pieces like these mini 14K solid gold hoop earrings start at just $65. 

I'm a sucker for value, but even more so for brands that are starting to have equitable, conversational relationships with their customers. And that are using their business to promote a particular view of the world. Ana Luisa encapsulates this in their tagline: jewelry for womankind.

From their commitment to responsible production, exceptional craftsmanship, commitment to quality, and transparent pricing (read more here), they're on to something big. Did you know that high-fashion jewelry is marked up 10-15x on production cost?

But even more than that I'm looking forward to the customer stories, the non-profit partnerships helping a diverse set of incredible women, and more product that explores the many facets of femininity and its modern interpretations.

From a venture perspective, backing a narrow vertical brand in a single market can be a tough proposition. What really excited us here was that customers are buying for themselves (most jewelry is gifting), they're returning in record numbers after a short period of time, and are telling their friends about the brand. Retention and referral are the key hallmarks of building a passionate community of customers that can be the basis for a very large company.

It doesn't hurt that jewelry, while intensely competitive, is massive global market. Fashion jewelry alone is $9.4 billion, while adding bridge jewelry makes it $20 billion in annual value. And it is growing at >10% per annum. 

So check Ana Luisa out - the discount code WELCOME15 gives you 15% off orders over $80 and the company ships globally. 

P.S. This is our first co-investment with Eutopia, the former consumer brand investment team of Otium. Really thrilled to be partnering with them. 

Decentralized software to power uncensorable free media

If you haven't, A Declaration of the Independence of Cyberspace by John Perry Barlow in 1996 is one of those early internet documents that you should read. 

From today's vantage point, JPB's words almost seem naive. The internet is increasingly regulated, monitored, censored, adulterated. Commentary of the effects of internet media on the "real" world is nearly always some lament about its pernicious influence.

I believe social media will eventually reveal itself as an overwhelmingly beneficial invention. But for that to happen, it must free itself from the shackles of political and commercial control. 

Attempts like Gab replace a flawed centralized network with another. Tools like Diaspora turned out to be incredibly difficult to use. The jury is out on Mastodon (I have not used it extensively yet). 

A new network should take some cues from WhatsApp. End-to-end encryption. Mobile first. Low, low bandwidth. No ads, with an option to subscribe. 

And then it should be open source, do all its computing at the edges, and devolve all power to the end user. 

There are some promising beginnings out there, things like Mind, Sola, Memo, Steemit. I'm going to spend time using all of them over the next few weeks and report back. If you have one that you like in particular, let me know.

Why are contacts still such a mess

I’m not a particularly organized person. I’m organized where it matters and the rest sort of… decays slowly. Especially physical documents are a mess. I forgot who said it, but someone called it the “first unused surface method of filing.”

The same is true for my computer file systems. Squeaky clean where it matters, total mess where it doesn’t. 

I’m in awe of those people who have everything squared away in an orderly folder structure. I’ve always relied on search. When Spotlight didn’t cut it, grep was my friend. It has saved my butt a number of times. 

One area of my life that reflects this organizational pattern is my address book. It’s perfect for the 100 or so people in my life that I actually reach out to. The rest are emails, randomly scanned business cards, stuff entered by an EA ten years ago, sync’d Facebook contacts, LinkedIn imports, what have you. Over 10,000 contacts.

Back when we were doing Qwerly (now a part of LinkedIn), we thought a lot about contacts sync as a v2. We ended up doing a B2B play that, if we were still doing it, would look a bit like FullContact in Colorado (they’re the ones that bought Mattermark). 

It’s crazy to me that 7 years later, contacts isn’t a solved consumer software problem. Everyone is running around with these partial, out-of-date, redundant databases in their pocket. And they’re the original social network.

vCard is a horrible format for a whole number of reasons. Contacts sync doesn’t work well (ever had the duplicate problems?). Facebook and others don’t really seem to sync down to device well for me (maybe it’s a permissioning issue); everyone is more interested in sucking up contacts and doing God-knows-what on the backend. 

When I think of building contacts consumer software, I think it should be fully decentralized. Everyone should have their own record and permission who gets to see what (name, email, phone number, postal address in increasing level of sensitivity). An app sounds like the right way to do that. 

Then scale it via OAuth to other apps: if you’re in contact with a person in Gmail, call them on the phone, meet them in person as tracked by calendar, prompt a data access permission flow. 

And don’t even think about replacing the address book. Just build it alongside it, without touching the old world. 

The nice thing about contacts, of course, is that you can grow virally (carefully, without spamming the world). 

For some reason every company we have ever seen try to build something like this has failed. I’m not sure why. 

If you are thinking about taking a crack at the problem, talk to the folks who did Bump, Brewster, Plaxo, who are now doing FullContact. I’m sure there’s a wealth of knowledge there.

And then if you are still crazy enough to try this, come talk to me. 

We're hiring an intern in our Paris office

A few months ago our colleague Yacine Ghalim moved to Paris to open a new Sunstone office there.

We love working remotely in venture as it's a great way to get full coverage of the European market. But the volume can be overwhelming and so Yacine is looking to add to the team in Paris by hiring an intern for 6-12 months. 

Clear track to a full-time analyst position with us, an apprenticeship model of development, and a chance to look at a high volume of French and European Series Seed and A stage companies. We're working out of Station F in the heart of the Paris ecosystem. 

You can read more here and apply via this Typeform

Reality as a series of connected graphs - Neo4j, the graph database, raises $80 million

Emil Eifrem and his team at Neo4j, the world's leading graph database company, today announced a Series E of $80 million, co-led by One Peak Partners and Morgan Stanley. You can read Emil's blog post here.  

Sunstone first invested in Emil and his company in 2009 in a $2.5 million seed round and has since supported the company in every financing, totaling $160 million in overall funds raised. 

We have believed in Emil's mission for a long time. Graphs are often a better way of modeling reality and certainly computationally cheaper when it comes to e.g. deeper level join operations. This advantage grows significantly with the complexity of queries. 

But graphs are more important than that. The relationships between people and between people and things are often a much better predictor of behavior than a lot of data points about a single object. 

This is not just true when you want to manipulate elections (ha!), but when you want to make purchasing recommendations, prevent fraud, analyze complicated networks in terrorist financing or money laundering, or simply power social networking applications.

For instance, Neo4j was instrumental in analyzing the Panama Papers, but it is also used by Walmart to drive personal recommendations or by eBay to speed ecommerce delivery routing

We're thrilled that Neo4j now has the funds to help power applications that go well beyond its original vision. Graph databases are a key component of predictive computing and we're excited for what the company will announce next.

Our migrant background

My wife's parents fled Romania under Ceaușescu in the early 1980s and came to the United States. It sounds so straightforward, but it was a journey racked with uncertainty and dangers.

The Ceaușescu regime was the most totalitarian and repressive behind the Iron Curtain. It caused massive famines, economic ruin, despair and death. My father-in-law went first, purportedly on a family visit to Houston, Texas. He left behind his wife and his two-year-old daughter. 

Once he had claimed political asylum in the US, the Romanian Embassy was notified. As a consequence, my mother-in-law was fired from her job as a teacher and repeatedly imprisoned and interrogated by the security services. For four years, they tracked her every move, ensuring she and her daughter had no income and no rights. In Texas, my father-in-law worked three jobs and tirelessly petitioned every government service and politician to reunite his family. 

Finally, in 1988 his wife and daughter were able to get on a plane to New York. My wife was six years old when she saw her father again. 

America for them was and remains the promised land. They're some of them most freedom-loving people I know. There's no room for "socialism" in this household - they suffered enough under it. They've worked hard here, building a life for themselves and their daughter. My wife went to an Ivy League college on a scholarship and then worked in NYC and London, where we met. 

My background is less dramatic, but I did spend most of my life in countries in which I was a foreigner. Always legal, mostly tolerated, but I know the desire to chase opportunity across borders. I grew up in Germany, the US, and Canada. Since then I've studied, lived, and worked in the US, the UK, France, India, Denmark, and Germany. 

Migration is a significant challenge for the world in the coming decades. We're starting to see the downsides of mass unregulated immigration in Europe. My heart is torn here, but it's a debate that's worth having between the extremes of fear and open borders. 

I'm writing this because my eldest daughter received her US citizenship today, on the basis of jus sanguinis (not the jus soli that's being debated). She's too young for the full-on ceremony, but it's an emotional day for us. America still holds the promise of freedom and exceptionalism in this family. It's still the shining city upon a hill. 

May it return to its senses and prosper. 

The Ackerman Bargaining Framework

I'm not a great negotiator when it comes to venture deals. 

The consensus seems to be that the VC has the power in negotiating venture deals, but I don't think that's true. We invest in less than 1% of the companies we see. So when I'm sitting across from founders that I want to back, I really, really want to make a deal work. 

My costs of walking away are very high. That's a terrible bargaining position to be in.

What's worse is that I'm an accommodator. I like to please people. My expectation of reciprocity is very high. I tend to give before I get, expecting the other side to improve my deal in return. And often that doesn't happen. 

So I've been reading a bit lately about how to be a better negotiator. The book I liked the most is Never Split the Difference, by Chris Voss. Chris is a former FBI agent who led international hostage negotiating. The book is simple but fun, with lots of interesting tidbits, and it has paid for itself a hundred times over by getting me an unexpected 30% off a recent shopping trip.

While you have to read the book to truly appreciate it, the part that really stuck with me is the haggling framework he calls Ackerman Bargaining. It avoids the predictable result of meeting in the middle and has some counter-intuitive bits that stuck with me. Most negotiations will include some haggling, and it's the part that most people would rather put behind them.

As Voss never tires to point out, however, "you fall to your highest level of preparation."

The framework has four steps, all fairly simple to remember:

1. Set a target price (the goal you want to get to).

2. Set your first offer at 65% of the target price.

3. Calculate three raises of decreasing increments (to 85%, 95%, and 100%). 

4. Use lots of empathy and different ways of saying no ("how do you expect me to do that?") to get the other side to counter before you increase your offer.

5. When calculating the final amount, use precise, non-round numbers. $15,630,200 pre is better than than $15 million pre. It gives the number credibility and weight.

6. On your final number/offer, throw in a non-monetary item (that the other side probably doesn't want) to show that you're at your limit.

So let's dig into this a little bit. The first offer is an extreme anchor. It rattles the other side because it's way outside the usually rational ZOPA range of what they expected. It pushes them into action.

You give the next offers sparingly, asking well targeted questions to see if you can get them to bid against themselves. I recognize that well because I do it to myself all the time. 

The next offers are staggered to signal that your opponent is squeezing you to the point of where they've gotten all they can. That makes them feel great about themselves - even after the negotiation is complete.

The non-round number is just human psychology. The more exact the number, the more we believe it has some basis in concrete reality. 

Finally it's key not to lose sight of the person on the other side of the table. You're negotiating a thing, not each other's value. 

Every bit of negotiating advice I've read makes it clear that empathy and respect is key. 

You're playing a game, but the objective is not to destroy each other. It's to come to a workable deal.