On Thought Leadership in European VC - Week in Review 20/01
This is a special edition of the newsletter. I hope you enjoy. Please share and engage, would love to get a discussion on Twitter going :)
|Max Cutler||Jan 20|
Thanks for roasting me grandma <3
Since today is my birthday (23, meh), which means no one is allowed to be mean to me, I decided to write a longer-form piece on what I see as a disinterest in thought leadership and a lack of thoughtful content being created by European VCs. I just want to preface this by saying there is zero ill will or mean intentions here. Rather, as I have had the chance to meet so many different folks in this ecosystem, I have experienced the intelligence, ambition and thoughtfulness of the people here. Thus, I seek only to encourage my European friends and colleagues (especially my young friends!) to write more and to not be afraid to think critically out loud, rather than just internally.
Hope you enjoy. Discussion on Twitter is most encouraged :)
The Dearth of European VC Thought Leadership
I was asked last week by a partner from a top VC fund here in Europe a question that had been posed to me at least three separate times prior: “What funds impress you/are doing things right?”
It’s a tough question to answer on the spot because A) everyone who has asked me that has said different firms themselves and b) as an outsider, one does not have knowledge of past fund performance, IRR or any kind of internal benchmarks. Thus, if you choose to answer the question reasonably, it is mostly centered around who has the best brand or reputation.
In fact, I wrote a mini-thesis back in Spring 2019 about the role of reputation in VC financings using the contracting theories of Herbert Simon, Paul Gompers, David Kreps and others. My big takeaway was essentially that companies are not simply selling equity in return for financial capital but more so, access to the VC’s ‘sacred hall’ of reputational capital, which, once acquired, allows portfolio companies to grow faster and with less friction than simply receiving capital from an unbranded source.
When I first arrived here 6 months ago in the Summer, I sent it to over 20 partners of different funds in Berlin and received gar kein engagement around it. No judgement, I understand people are busy and I was (am) just an absolute random from America, but (un)fortunately, this fits my narrative, so I will include it as some food for thought.
Now, since I specifically was asked this question, I will offer my biased, entirely subjective response. What impresses me about VCs is the willingness and ability to grind on behalf of the founders you engage with, both pre- and post-investment, and the outwardly-facing reputation one has as a thought leader/writer/podcaster/content creator/whatever you want to call someone who publishes themselves online.
The first and most important facet, let’s call it ‘founder attentiveness’, is quite difficult both to quantify internally and disseminate in external media. This is so because signalling around that virtue is rather loud and fuzzy, it is extremely subjective and understanding if one is actually doing it right takes many iterations over long time-frames. Mostly, one just can’t know if one is actually ‘founder attentive’ until one has been given enough chances to be attentive (or not) and has proven themselves to multiple cohorts of entrepreneurs.
This is true, regardless of whether one sits in Berlin, New York, Menlo Park or Paris. Only a long time horizon and commitment to the grind can prove ‘founder attentiveness’. Calling oneself a “founder-friendly” VC on the firm’s website is simply not enough.
However, with the second facet of this concept, that of publishing and thought leadership, one can quickly and meaningfully impress with new ideas and signal to the outside world that one is ‘doing things the right way’ and is ‘attentive’ to what is happening around them (not just in the tech scene either). This is the case because publishing oneself is quite the opposite of cultivating ‘founder attentiveness’ from above.
Signalling around the thought leadership virtue may seem noisy, in the context of all the voices coming out of SV, but actually, given the conspicuous dearth of writers and large-scale content producers out of Europe, there is little noise to compete with on this continent. There are no Fred Wilsons over here, no one has been as successful as Bill Gurley has been and no one can touch the brilliance and clarity of Paul Graham.
Going further, while the content itself may (and likely should) contain subjective opinions and ideas, what is in fact not subjective at all is that informative, useful and incisive content, in the long run, will be consumed more widely and readily than bad content. The objective truth is that if one produces “stuff” that people enjoy/make money using it will be consumed hungrily. This certainly extends to thought leadership.
On the third point, it is indeed the case that the real way to both develop and prove out that one is actually attentive to founders is through iterated interactions that take years to congeal into meaningful data. Not so with writing, where one can, if the content is thought-provoking enough, receive valuable and detailed feedback about the usefulness and impact of published material in a rapidly implementable way. One will know quickly if they are saying impact and thoughtful things.
Before I begin on this section, I just want to acknowledge that there are indeed some strong voices coming out of Europe. My former boss at Project A, Founding Partner Uwe Horstmann, has done an excellent job leveraging his world-class communicative talents into a well-deserved place as a European VC thought leader. In fact, an article he wrote for the German language business journal Capital, “Warum Gründer intellektuelle Demut brauchen (Why Founders need Intellectual Humility)”, was how I initially became interested in/aware of Project A. Heartcore Capital has done a great job of writing insightful content as well. In particular, Yacine Ghalim’s Soulful Aggregators and Framework to Assess Consumer-facing Products and Services are both wonderful examples of thought-leading and reputational-capital-increasing content that is characterized by an objective goodness which the reader (and writer) can quickly recognize. Finally, Point Nine, which is, relative to the other German VCs, the most well-known fund in the Americas, has been producing thoughtful content for years following the example of Christoph Janz (5 ways to build a $100 million business, anyone?). In October, Julia Morrongielo of P9 published the excellent WTF is Marketplace Liquidity, which gained considerable attention both across Europe and stateside, as well.
My point isn’t that VC folks here are not producing content. Instead, I think European funds should publish with greater velocity. If a firm has 3 associates and two interns, say, I reckon each of the associates should be publishing something at least twice month. Ideally, everyone would write at least once a week, but that is a difficult ask and folks have different priorities.
I take inspiration from my first job in VC, at Bowery Capital, one of New York City‘s best enterprise seed funds. Mike Brown, the GP, has been steadily publishing one podcast a week for the last three years. As interns, we often wrote three essays/blog posts per week. Content is the way Mike has built the reputation of the firm, which results in better deal flow which leads to better returns. Simple. This is definitely a way European funds can differentiate and drive better results.
Some will say “there are only so many hours in the day. How could I possibly find the time to produce content while I must hit Inbox Zero on Superhuman every day?”. I think that’s an easy one, to be quite honest. Just take less meetings. VC is chock full of 30 minute Zoom calls where the the investor is either uninterested or unprepared while the entrepreneur is likely, after a minute of analysis, probably not a good fit for the fund’s investment focus. If associates take three less meetings per week, the 90 minutes gained are more than enough to collect some ideas and publish some rough thoughts. Rough thoughts are enough! One will develop polish over time. I know it’s a great signal to meet with everyone, seeming super busy to ones colleagues and bosses. But trust me, if one produces good content that people like, share and talk about, there will be a discernible increase in deal-flow quality. Taking it a step further, the funds that don’t commit to this will be left behind by those who do. It is very quickly becoming a must to produce thoughtful content. If you can’t bring yourself to decrease founder discussions, just do one less lunch per week with your friend who works across town at another VC fund. Boom, that’s 90 minutes freed!
So, you may wonder, what does this “thoughtful content ” or “thought leadership” I write of look like? Well first, let’s look at what it is not. If one only publishes content to commemorate a significant event, like raising a new fund or moving into a new year, and then never pushes out anything after that, one is not engaging in thought leadership. If you’re an associate at a fund and your Twitter presence consists mostly of Quote Retweeting Steve O’Hear’s TechCrunch article about your firm’s new investment by saying “Congratulations to Max Mustermann and team! So great to have you as part of the family”, you are not producing thoughtful content. Thoughtful content is not contingent on external events occurring. Thoughtful content is created whenever one has thoughtful ideas to share.
What is rather ironic is that we all know what thoughtful content looks like. In the European scene, Harry Stebbings’ Twenty Minute VC podcast series is the local champion. Garry Tan of Initialized Capital over in SF has a YouTube channel where he posts videos both of entrepreneurs and investors sharing best practices along with interesting history of technology content. He reports he doubled his YouTube subscribers in the past month to 5K. Not bad. Then there are the more traditional channels. Blogs (such as this one) are the leading platform and we should expect this channel to grow considerably due to Substack’s awesome product. Excellent blogs engaging in thought leadership (in addition to the threesome of GOATs I mentioned earlier) include Tren Griffin’s 25iq, Alex Danco, formerly of Social Capital, and the entire a16z machine (D’Arcy Coolican has been on fire recently).
Twitter is, of course, a massively crucial platform. The Tweetstorm is a great tool of thought leaders. Eric Paley and David Frankel, partners at East Coast seed fund Founder Collective, consistently post strong Tweetstorms. Frankel a few days ago on B2B2C biz models and Paley’s thoughtful thread on stock options are good starting places. Finally, there is simply the incisive Tweet, weaponized effectively by people like Brett Bivens and Jeff Morris.
Every fund needs to have at least one partner active on Twitter. I can basically guarantee that the entire next generation of investors will have established their brands through Twitter, so really it is an inevitability. Long Twitter!
So to quickly recap: As an outsider, the best way to evaluate VCs is through their thought leadership and content. In 2020, there are countless tools at one’s disposal to produce and disseminate ideas across multiple channels (i.e. Substack, Twitter, YouTube). European VC has, thus far, mostly been happy to leave thought leadership to Americans. Therefore, there is significant opportunity for people/funds to lead the way on this and build a brand moat that should lead to better deal-flow and consequently, better returns.
Write your book!
Your Thoughts for the Birthday Boy
Finally, I believe that I am uniquely well-positioned to help your fund build a thoughtful content strategy. I was educated in Economics AND the Liberal Arts at an Ivy League university, where I wrote on topics ranging from Freud’s influence on Pink Floyd’s The Wall to the effects of Confucian tradition on Christian missionary work in China. I have worked at top funds in both Berlin and in New York and have some pretty strong opinions on how to build brand moats in venture capital. Plus, I can handle all the day-to-day of due-diligence, entrepreneur meetings and internal initiatives too! And, cherry on top, I know German!
I’m looking for the next challenge. Email: firstname.lastname@example.org WhatsApp: +49 1788709038
Thank you for reading and have a great week,