Penrose Hill: Bringing Wine Into the 21st Century

Philip James is the founder and CEO of Penrose Hill – a wine company aiming to bring the wine industry into the 21st century. Click on the underlined text to jump to the section you want to read!:

1. Background on Penrose Hill their algorithm-based business model and the 3 branches driving growth.
2. Wine pairing advice from Penrose Hill CEO, Philip James.
3. Q&A with an entrepreneur: advice, startup breakthroughs.
4. Cheddar video interview (and transcript) with Philip James on Firstleaf wine club.

The use of data analytics means that Penrose Hill has gained unconventional perspectives into a somewhat conventional industry – to see wine differently and in ways that allow them to eliminate inefficiencies. James says his goal is to “provide consumers a better product for a better price”.

bottle of wine with toy truck

Turning Data Into Wine

Data is at the heart of what Penrose Hill does. They use feedback from customers and partners to optimize every aspect of the winemaking process; from label design to flavor profile. As an independent winery, Penrose Hill eliminates the layers of middlemen between the producer and consumer, giving customers exclusive access to small-batch wines for less, while delivering higher margins to their partners.

Firstleaf Wine Club

There are three distinct branches driving Penrose Hill’s growth. The first and largest being the Firstleaf wine club. James says, “Penrose Hill wants to build the world’s most customer-centric wine company, and Firstleaf is our key to achieving that. Using a specially designed algorithm that combines machine learning and wine chemistry into an AI-based platform, we are able to match wines to customer’s tastes with unprecedented specificity. We’re constantly innovating new ways to please customers.”

Direct-to-trade Wines

The second branch driving Penrose Hill’s growth is a line of direct-to-trade wines. The company diversifies their sales base by venturing into the largest segment of the wine market: traditional, distributor-driven sales to retail and restaurants. Leveraging the savvy gleaned from market testing by Firstleaf, new packaging options and dynamic customer experiences allow them to “Breathe new life into this segment of the industry. We are introducing several new brands in 2018”. Canned wine Right Now Red no. 8 is already in some stores in New York, “it’s made to be enjoyed anywhere you are it is perfect for a busy city.” 

penrose hill quote we focus on making wines that our members love and that are incredibly high quality at a fair price

Another of their wines to look out for is Bodewell—a collaboration with the charity Wine to Water. The proceeds from the sales fund their mission to provide access to clean water to those who need it the most globally. For Bodewell, Penrose only sources from exciting and distinct wine regions, “in an effort to highlight our interconnectedness through the land.”

Corporate Partnerships

The third branch of Penrose Hill is corporate partnerships. They have been working to launch wine clubs and build labels for brands interested in diversifying client outreach, for example, a “really fun” Loeb NYC “family” partnership with the team from Thnks.  

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Wine Pairing Advice from Penrose Hill CEO, Philip James

Here is some practical wine pairing advice. In my opinion, wine pairings are all dependent on what you are eating and what you like, but here are a few quick tips that may help lift any meal or dinner party. The most important “rule” is to have fun and drink what you like, there are no hard-and-fast rules when it comes to pairing wine! That said, here are a few typical recommendations:

● Start with something sparkling! Champagne is often saved for toasts, but sparkling wines deserve a place at any dinner table, as they pair well with nearly all foods. Our Clarabelle Sparkling Wine was a club favorite this past holiday season.

● For whites, we love anything with higher acidity. Acidity allows a wine to highlight and mix with the food’s flavors. Our Play Riesling is a great option for such a meal.

● If you prefer reds, I’d suggest a Pinot Noir, like our Cassiday Blare, or a medium-bodied blend. You want wines with the fruit and acidity to stand up to a meal with a lot of different flavors present.

penrose hill bottles and audience match

Interview with an Entrepreneur – Philip James Takes Our Questions

What are Penrose Hill’s goals?

I’ve been in the wine business for almost 15 years and have started several companies. With every iteration, I’ve grown more and more focused on delivering quality and value to the end customer. With Penrose Hill, we focus on making wines that our members love and that are incredibly high quality at a fair price. We want to offer the best of both worlds (quality and fair pricing) because we believe it can be done.

Why did you choose to work with Loeb NYC?

In 2015, while raising our seed round of funding, Primary Ventures introduced me to Michael Loeb and Rich Vogel as people who could give expert insight into running a successful direct to consumer business. Our first meeting was in the construction site of what is now the “rainforest” floor of Loeb NYC.

One of the things that drew me to Michael is his ability to perceive customer pain points and inefficiencies and work to find a way to fix them. Loeb has a proven track record of success with subscription economics and consumer-focused goods, and we feel incredibly fortunate to be working with Loeb Enterprises.

What has been your startup breakthrough?

There have been a few notable breakthroughs at Penrose Hill. Most recently, it has been focusing on offering even more robust services to our customers. We grew our Member Experience team from 2 to 15 employees in the last 12 months, and are starting to offer more ways to buy and enjoy our wines. Very soon we will be launching our online store and selling wines by the bottle.  Our members will be able to easily reorder wines or order a gift for someone else. It will also allow prospective members the opportunity to try out our award winning wines before joining the club!

canned red wine

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Cheddar Interviews Penrose Hill

Watch Cheddar’s video interview of Philip James, Penrose Hill CEO. Cheddar asks about how Firstleaf differs from its competitors, Philip’s background in computational chemistry and how Firstleaf uses an algorithm to match subscriber’s taste preferences.

Penrose Hill’s algorithm is able to ascertain on a chemical level what an individual likes or doesn’t like about the wines they try. The algorithm also adapts when a person’s taste changes.

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Cheddar Video Transcript:

 

[Edited for clarity]

Cheddar: Philip, Firstleaf is not the only wine subscription service on the market. So what makes you different from the others?

Philip: There are a lot of places to buy wine. You want to set up two things. You want to make sure that the place you buy from has very good wine, and then you also need someone or a service to help pinpoint which of the wines is right for you. And I think we do both those things very well. We have a very talented team, a very good wine, but our algorithm also helps us figure out the perfect wine for you.

C: You’ve got a very interesting background to be able to successfully do this. A Master’s degree in Computational Chemistry and Business at both Oxford and Columbia. Tell us what that means for the service that you provide?

P: I have an undergraduate degree in chemistry and then I have a Master’s thesis in the mathematical modeling of chemicals. I don’t actually build the algorithm, we have a data science team that does it, and they are much smarter than I am. So my hope is that I’m the one who can help set the goals, and they’re the ones who have to go build the algorithm.

C: I know the Sommelier tests are incredibly difficult to do. How does that background that you have maybe help with your understanding of how to pair flavors together and to suggest flavors to your customers?

penrose hill quote when someone says, “I didn’t like this wine, I liked that wine” to be able to understand chemically what it is about those wines that they like.

P: I think having a science and math background is helpful. I mean, the service we have created – like I said, having great wine is like table stakes, you have a start there, but having an understanding at the chemical level of what’s in that wine, and maybe there’s someone who doesn’t like tannin, or you know, like acidity and they don’t like the feel or it gives them a stomach ache or whatever it is, being able to use the algorithm. So when someone says, “I didn’t like this wine, I liked that wine” to be able to understand chemically what it is about those wines that they like and then we can go recommend a fourth or fifth wine, based on –

C: – You apply it to everything in your catalog.

P: Yes, that’s right.

C: There are two different types of wino’s out there, there’s the ones that are consumers and the ones that think they’re connoisseurs but really they are just consumers, and then there’s – well, there’s perhaps three, there’s the ones who are actually the really good connoisseurs. How do you make sure that the ones who are the consumers and the ones who are the connoisseurs who are really just consumers, how do you make sure that you’re maturing their tastes and diversifying their experience in the right way as they do go along this process and the algorithm arguably will stay the same but match them up with something new as they go along?

penrose hill quote wine has acid right, but what kind of acid? There’s citric acid and malic acid, right. You have to get down to a really deep level

P:   I think this is something we actually do really well, right. So your tastes change and they might change just stylistically in the summer you’re going to BBQ a lot and maybe you’re going to be outside and you want rosé or maybe with the heavy meats that you BBQ you’re going to want big red wines or maybe you got on a health kick and now you want a different kind of a wine because you’re having lighter food. The algorithm is constantly updating. It’s kind of like Pandora for wine, so you don’t just stay at the seed song that creates the station, but as you rate songs the radio changes over time and so for us as you rate wines up or down, as you give us reviews, humans read them and the computers process it and it is continually updating as your tastes evolve.

H: Yeah, I love that analogy a lot. Speaking of kind of Pandora, one of the benefits of using Pandora is that they have a lot of data on you and what you like. What about on the supply side, we talk a lot about big data with our other guests, big data in healthcare and obviously in social, is there data in the wine industry? Are wineries getting more, I don’t know, sensors, uploading more of that information into a service like yours to make it easier for you to select the wines and to offer it to customers?

P: There is a lot of data, so our head winemaker has a masters in oenology and a masters in chemistry as well, and I talked about our data science team, and that’s led by a guy with a PhD in Chemistry so there is a strong, so we have a strong focus on the wine and the chemistry of the wine. We take a lot of chemical analysis of the wine. So wine has acid right, but what kind of acid? There’s citric acid and malic acid, right. You have to get down to a really deep level. Some of that comes from the wineries that we work with and some of that is our own chemical testing then all of that gets fed into a database along with customer ratings.

Penrose Hill quote You want to make sure that the place you buy from has very good wine, and then you also need someone or a service to help pinpoint which of the wines is right for you.

H: How many of these databases are out there for wine? Is there like a central one? Or like an open source?

P: No.

H: How do you guys all work together, then? I find it fascinating.

P: There is no universal, centralized, like rating system or information about wine like that, not at that level. So wines that we are making or wines that we are buying we have to run the chemistry on them and we have to take that data and we work with wine laboratories in California to do that.

H: Is that where the highest concentration of the wineries that you work with are? In California?

P: Yes, about half the wine that we sell is from California and the other half is from the rest of the world. Our facilities, our production, and shipping, our winemakers are in California.

H: And how much does your service cost?

P: We sell an introductory box of 3 wines for $15 and we lose money on that, but the idea is that’s what gets the algorithm going, it seeds it for us and then thereafter, shipment is 6 bottles and it’s $79 plus shipping.

H: Philip James, CEO of Firstleaf joining us here today on set – very interesting stuff.

Profits and Losses of Employee Appreciation

A company’s ability to retain talent often has consequences to its reputation and the quality of productivity and culture.  A 2013 Gallup survey report entitled, “How to Tackle U.S. Employees’ Stagnating Engagement” which studied almost 5 million employees, concluded that actively disengaged employees cost the United States economy $450 Billion – $550 Billion in lost productivity every year.

To contextualize the scale of this cost, the Federal Government has budgeted $412 Billion for mandatory Medicaid spending in 2019. Employee disengagement and workplace departures risk lowering morale amongst remaining employees and results in recruiting and training costs. While some employee turnover is natural and to be expected, consider the following eye-opening, preventable reason for disruption to employee retention.

The OC Tanner Learning Group published the results of a 10-year, 200,000 person study, “Performance: Accelerated.” Managers and employees were interviewed for the study, which centered on employee engagement and retention. The results revealed that 79% of people who left their jobs cited ‘lack of appreciation’ as their reason for leaving. Forbes online recently cited a poll which showed that more than 35% of employees consider “lack of recognition” of their work as the biggest hindrance to their productivity. The Wall Street Journal commented that this report provided “a startling link between recognition and profitability.”

Reasons for quitting work pie chat and statistic

Given the extremely high number of people who attribute their reason for leaving a job to feeling (or being) under-appreciated and the resulting costs to business, one would think that employers would make appreciation and gratitude expression a top priority for themselves and managerial staff.

Over the past thirteen years, I have managed the operations and functionality of teams in a range of industries. I am now an (appreciated and thankful) administrative member of the Corporate Development team at Loeb.NYC.  

Throughout my career, I have witnessed numerous acts of appreciation, as well as some demoralizing methods for seeking performance results. Eventually, people who didn’t feel they were treated well always resigned, and sometimes did lasting reputational damage to a business. The reputation of one company suffered so severely as the result of complaints by a disgruntled former-employee that relationships with other businesses and customers were severely impacted. The situation attracted enough community attention that sales drastically decreased. The company closed its doors late last year. 

Nina Lichtman illustration two people in meeting

Fortunately, there are simple ways to mitigate the risks and costs associated with employee turnover and low morale, as well as to boost Return on Investment (ROI) of retained employees. Genuine and well-timed expressions of appreciation have multiple benefits (financial, time, production output, etc.), and are not costly or time-consuming.

Say “Thanks”, Show Thanks

A verbal “thank you for [specific of what you’re thankful for],” can change a colleague’s mood and outlook, and let them know that you care about their professional well-being. Brendan Kamm, CEO of business-centric, mobile gifting app, “Thnks” has founded an entire venture on the premise that expressing gratitude has a ripple-effect and is a valuable workplace exercise with multiple rewards. He states,

“The most powerful tool you have for creating success is to appreciate others. Simple, considerate gestures, like saying ‘thank you,’ have the power to completely change another person’s perspective. It demonstrates that you value their time and respect your relationship. The Art of Appreciation is the ultimate game changer.”

Thnks’ platform allows users to send (customizable) gifts with personalized messages and requires only the recipient’s email, twitter or SMS address. Kamm cites the following effective examples:

Send someone an Uber Ride on a rainy morning to make their commute a little easier and their day a little brighter.”

Coffee for the Week is a great way to show your appreciation to someone who you know has a trying week of work ahead of them. Help keep them caffeinated!”

For the person who is always on the road, a more legroom seat upgrade or carry-on cocktail kit can make their life on the move a little more comfortable while demonstrating your thoughtfulness.”

To gain further and more immediate insight into the effects of appreciation in the professional context, we conducted an anonymous, external “Workplace Appreciation Survey.”  We asked, “Have you personally been shown appreciation by someone at work?”. Most examples provided in answer to that question were not major pecuniary or grand gestures, but rather tokenistic or verbal acknowledgments, not tied to a formal reward or review program. For example:

Nina Lichtman illustration appreciation gift ideas

 

 

“I got a cookie.”

“Praise, recognition, gratitude.”

“Kind words in a card, token gifts, food.”

“I was rewarded with praise from my supervisor and a gift card.”

“Thank you emails, shout-outs in meetings or at events, thank you cards.”

“I frequently hear from other team members how much they appreciate having me there.”

 

 

These examples may seem simplistic, even infantile, but what these responses demonstrate is that people remember small, timely expressions of gratitude. And that genuine expressions of gratitude, rather than the monetary worth of the gift itself, is meaningful and effective for building morale and improving employee retention in addition to team building and a formal pay increase structure.

Showing appreciation is not a one-way street or exclusively “top-down” in nature. While it benefits both parties (and business) for employers to show gratitude to their employees and subordinates, it is also pragmatic and valuable for the recognition or consideration to flow in the opposite direction as well. Managers and high-level executives deserve thanks too. A survey respondent added,

My partner and I tell each other “good job” frequently. He’s very good about giving positive feedback. We meet daily and go over our agenda and pending requests from clients. We also talk about ways we could both improve. I feel extremely valued at work, not only by my partner but by our clients as well.”

It doesn’t cost you anything to say “thanks”, but it might cost you not to.

it doesn't cost you anything to say thanks

Team Building vs. Targeted Gratitude

Lest one think that group offerings like company events and team building exercises are enough to prevent or cure “under-appreciitis”, this way lies false hope. While group events and team-building are important in their own right and may serve to demonstrate collective recognition and morale-boosting, team recognition does not adequately tackle the problem of an individual employee feeling despondent, undervalued or taken for granted. Group activities are not designed to focus on the performance of any one individual.   

Sandra is an experienced accounting and finance professional in New York City. She has worked both as a low-to-mid-level employee but has also held managerial and CFO positions. Sandra has experience across enormous, big-name corporations as well as smaller hedge funds and companies. She makes the case that while team events can be useful for boosting morale, some employees would also like flexibility for “priorities outside work” and that team-building works  best if it feels organic and not forced:

“I have a life outside of work; I have priorities outside of work… [which take] time to maintain. Organic colleague bonds are really strong, but… I prefer an organization to respect the individual. If you’re on a good team with good people who support each other, it’s hugely instrumental in defraying feelings of unfair work or lack of appreciation.”

Nina Lichtman illustration happy employees

One person who answered the survey made the following point about group versus individual appreciation:

“Although I didn’t leave the job because I didn’t feel appreciated (it was a one-year residency), I will not return to work at that organization because I felt like the morale was so low. A huge part of that [decision] is lack of recognition and appreciation from management for the efforts of those in the department…The manager explicitly stated that she did not believe in recognizing people individually because it creates “animosity” between staff members… She was not even supportive of getting people candy bars on their birthdays. It fostered an environment full of animosity and a focus on the negative. Hardly anyone in the department felt appreciated.”

Our external “Workplace Appreciation Survey” asked a question derived from the OC Tanner study mentioned earlier, “Does the person you report to do a good job of recognizing employee contributions?” One answer stated, “Currently, no. I no longer work in an environment where we are praised or recognized for the things that we do.”

How do I manage?

I realized that a good manager is a great leader

For three years, I was a manager at an ice cream company.  When I started, there was one small store in San Francisco.  There were eight people on staff, including two founders. We received investment capital, and suddenly I was opening stores and hiring at pace. At that time, I had a conversation with a team member, which impacted how I view the importance of appreciation and myself as a manager.  

He had been working overtime, late shifts and sacrificing weekends. He was drained. I didn’t notice until it was too late.  In one of our final conversations, he told me, “I feel like I am doing everything for everyone else and no one is doing anything for me.”  I felt like I had failed him. He left shortly after that.

From that point, I realized that a good manager is a great leader. I started having weekly one-on-one check-ins with people I managed. We discussed roadblocks in operations and what I could do to set them up for success.  We held manager meetings where staff could showcase their wins. As a result of these efforts, day-to-day operations were smoother, and the team more cohesive. It was a tangible improvement. Taking the time to hear employees out, address concerns and provide individual feedback, made my team feel appreciated.  Sandra (hedge fund CFO) agrees,

Part of learning how to manage is to be actively trained on what your staff is doing. In my position, I like to keep a list, for people I work with when they’ve done something really positive. If it’s something negative, I will usually address that right away. If [one] think[s] reinforcing positive behavior is far more beneficial [than only noting negative behavior] you’re in better place at the end of a reporting cycle if you track performance in real time, to more accurately weigh the employees’ pros, good qualities, and development areas.”

Low-Cost Methods to Help Staff Feel Appreciated*

*With High ROI.

Give regular, constructive feedback

Set aside some time to go over changes your staff could make to improve. Express what you genuinely like about a team member’s performance, contribution or abilities.  Avoid creating a situation reflected in this survey response: “My boss was not into positive feedback. It was just assumed we should work well. He only let us know when there were issues.” Inform individuals precisely what you like about their work. Contextualize your comments by identifying how their efforts contributed to the team’s goals.  

Timing is everything

Giving feedback when the timing is not linked to formal performance reviews or deadlines will be perceived as more genuine. Sandra comments,

“There has to be out of cycle performance rewards for people who you value. Too many times only when someone is leaving, has [the employer] pulled the ‘money card’ and at that point it’s disingenuous and it’s too late. A clear indicator [of disingenuousness] is people who express praise only when there’s a pressing deadline, or there’s a linked benefit. But that’s why genuine feedback or taking time out of the normal stress and routine of work, or taking someone for coffee and informally going through their strengths and development points, has been a much better way to give that kind of information because it’s a conversation in somewhat isolation.”

By showing appreciation you can significantly lessen recruiting, re-hiring, training and gap-filling costs

Be aware of your employee’s time

Employees can feel taken advantage of if their manager is not mindful of personal time, is not aware of what the staff-member does with their work time, or lacks a realistic picture of how long tasks take to complete. According to a survey respondent, “When my shift was over, I wish [my manager] could have been more aware that I am tired and I want to go home. Not have me linger around longer ‘cause my employer wants to talk… I think some people are not aware of how much work goes into some of the projects I work on.” 

Advocate for your staff

Have a system to remind yourself of the positive work your team members and colleagues are doing and spread the word.  An extra step is being an advocate for a person. Managers may not have a say over their team’s pay, but it is meaningful for a supervisor to inform a senior person or HR member of the value a person adds and their strongest skills. A respondent claimed, “When people promote the work I do for them or acknowledge the effort and love I put into it, it brightens my life up.

The Profits of Proactive Appreciation

By showing appreciation, you can significantly lessen recruiting, re-hiring, training and gap-filling costs. You can mitigate the risk of damage to morale and business-reputation caused by employee turnover due to feelings of unappreciation. The prophylactic for this scenario is to offer small and timely words or gestures of thanks, and it makes financial sense to take those steps. If those words and gestures not only prevented loss, but stimulated profit, growth, and productivity, it would be suboptimal business not to consider it.

Happily for me, Loeb.NYC is an environment that cultivates a fun and rewarding employee culture, and actively cares about staff satisfaction. I’m grateful for that.

 

 *Original Illustrations by Nina Lichtman, (Dashride). Graphics by Alyssa Liegel. Leigh Adler, Editor. Contributions by Brendan Kamm. 

Driverless Cars, The Future of Ground Transport

Dashride, by creating software for ground transport companies,  has empowered their customers to compete with companies like Uber and Lyft. I interviewed Dashride’s CEO and Co-founder, Nadav Ullman, about their work with the tech for driverless cars and the future of the automotive industry.

As an Administrative Assistant, my seat at the reception desk at Loeb.NYC gives me the perfect vantage point to learn about all of our companies. I meet everyone who steps through our doors. Working here and seeing everyone and everything, every day is incredibly exciting. One of our companies in particular has stood out to me lately. A software company in the taxi and transportation services industry, Dashride.

Dashride’s work in creating software for taxi/limo companies both large and small has helped empower their customer base to compete with “transport on demand” companies like Uber and Lyft. Dashride is also finding the best ways to introduce autonomous cars (self-driving cars) in the very near future.

What is Dashride? How did you build the company?

Nadav Ullman: ­Dashride is a B2B SaaS [Business to Business, Software as a Service] platform. The platform allows ground transportation companies to modernize their operations and consumer offerings. Our platform helps these fleets by adding automation, reducing costs, and allowing them to properly compete in a rapidly changing industry.

 

When Tom [Bachant, Dashride co-founder] and I were still in college, we were working on a B2C ridesharing app that connected college students who needed safe rides to the designated drivers on campuses [Sobrio]. We had launched the app on 8 different large college campuses across the country and had thousands of people using it to get around safely.

Before long, Uber and Lyft began to come out of beta and launch in major cities. Existing fleets started to call us saying “Hey, that technology that you built for the universities, we need that for our business.” We quickly realized there were two things going on: one, existing fleets were using antiquated systems to run their companies, which inevitably led to antiquated processes, and two, Uber and Lyft were acting a forcing mechanism to push these companies to modernize. The demand was obvious, and with over two-hundred-thousand fleets in the US alone, it was clear there was a massive opportunity. We soon pivoted the college-focused app to an enterprise platform.

Today, over four-hundred fleets from across the world use Dashride to run their businesses. Our customers range from legacy taxi companies to US municipalities to, more recently, driverless tech companies who are looking to launch a consumer offering.

Interior driverless cars

What is the future of ground transportation?

Nadav: Today if you want to get from point A to point B, you can buy a car, rent a car, get a taxi, or use mass transit. These options are quickly converging in a variety ways. Driverless technology is coming to the consumer in the very near future. Alphabet’s Waymo is already expanding their trial in Phoenix and driving folks around every day without a human controlling the wheel. There are at least twenty to thirty other companies who are not very far behind. Right now on average eighty percent of the cost of an Uber goes to the driver, so by cutting out the driver we’re drastically reducing the cost of ground transport. By adding complex pooling functions on top of that, we’re able to cut the costs even further.

Existing bus and shuttle routes will become dynamic, based on real-time demand. Existing car manufacturers who have built massive businesses by selling expensive assets are now all investing heavily to figure out how to start providing transportation-as-a-service instead. Car Rental Companies, OEMs (car manufacturers), and ridesharing solutions, and new tech startups are all finding themselves competing with each other to deploy the most highly accessible and cost-effective fleet.

Are driverless cars a good ownership investment? What does car ownership look like in a self-driving world?

Nadav: The average person uses their car for thirty minutes a day, and at any point, there are over a trillion dollars worth of parked cars just sitting around unused. For the average person, owning a car will certainly not make sense. In the short-term, there will continue to be a consumer market for buying cars, and during their under-utilized times, owners will put them up on a driverless network. As rides continue to commodify, car ownership will continue to drop over time. This is both an existential threat to the existing OEMs and car rental companies, as well as an enormous opportunity. The Dashride platform is well-positioned to help usher these companies into the future of driverless cars by providing a proven platform to launch a consumer ride-sharing solution.

If everyone uses driverless taxis, will companies like Uber dominate the market, or is there room for competition?

Nadav: Uber’s greatest value right now is that they have the closest available driver to you. Once drivers aren’t in the equation, their greatest competitive advantage disappears quickly. Soon, it will instead come down to who has the closest available autonomous vehicle. By 2025, the AV (autonomous vehicle) industry in the US is speculated to be forty-five billion dollars and seventy-seven billion dollars by 2035. Some project far higher. It should not come as a surprise that there’s massive companies are investing and vying for a portion of the driverless cars market. The coming disruption in the ground transportation industry is going to be far larger than the disruption that Uber and Lyft have been creating. We still have a long way to go before there are clear winners in the industry.

inside driverless carsWhen are driverless cars going to hit the market?

Nadav: They already have. Waymo is currently providing rides to a handful of communities in Phoenix and has already announced expansion plans of the taxi service to a larger territory. There are driverless shuttles available to the public in places like Greece, China, the Netherlands and even in Las Vegas. Autonomous transport on public roads isn’t just speculation. Dashride is currently providing software to several autonomous technology companies to help them bring their technology to consumers, and these companies are most often waiting to be approved to operate by local governments. The technology is built, and regulations are just starting to catch up.

How will autonomous cars affect the environment?

Nadav: The important trend in the industry that’s happening as it relates to the environment is the uptick in production of electric cars. India, France, Britain, and Norway have already announced that they plan to phase out gas-powered cars altogether through regulation. Other countries and even US states like California have hinted at similar moves in the future. Car manufacturers are responding quickly with electrified future lineups, so we’re going to see a lot more EVs on the marketplace. Between regulations, and the rapid decrease in the costs for battery tech, we are seeing there are a lot of reasons to be optimistic.

Caroline: Elon Musk’s The Boring Company has been designing underground highways with the expectation that we can use these for faster long-distance travel and use existing roads for shorter distances. Alphabet, Google’s parent company, has started building its first “techified” city in Toronto through the Sidewalk Labs project. We appear to be heading toward designing cities and infrastructure with tech and innovation in mind.

Nadav: Designing cities with the latest technology has always been the case. Ancient Rome became successful in part due to their innovative techniques of constructing concrete buildings and installing aqueducts in their major hubs. Innovation is certainly happening at a faster pace now, so it becomes harder for governments to keep up. Public/private partnerships like the one between Sidewalk and Toronto will be an important way to balance the pace of the tech sector, and the promotion of general welfare for citizens. We’re seeing this happen first-hand. Dashride has partnered with US municipalities to help modernize their city taxi offerings. They are using our tech to increase accessibility to reliable transportation, an important function of a local government.

new york city street view

Will we need to change infrastructure to work for driverless cars?

Nadav: I think about it from the other way around. What we’re seeing is that in the effort to bring products to market, companies are designing their autonomous vehicle technology to accommodate to our current environment, and reacting to existing signals. We don’t need new highways or signage to make it a reality. Where it gets interesting is how our surroundings will be designed differently once the adoption occurs. Right now, when you look out the window, think about how much of our environment today is designed around the behavior of human driver – how much space is taken up by massive roads and driveways, parking lots, and highways.

It’s not the case that we should start building new infrastructure to accommodate for upcoming driverless cars, it’s that these new vehicles will allow us totally redesign our towns and cities to better accommodate for other priorities – more bikers, communal spaces, and parks.

Tom Bachant and Nadav Ullman were included in Inc. Magazine’s list of “30 Under 30” Most Brilliant Entrepreneurs, 2017. 

What is Loeb NYC's "Company Factory"?

Michael Loeb, Entrepreneur and CEO of Loeb Enterprises

Michael Loeb, a serial entrepreneur, is the Founder and CEO of Loeb Enterprises, a New York City venture capital firm. He and Richard Vogel (COO/CFO, Loeb Enterprises) used their expertise and legacy of success to create Loeb NYC, a privately funded lab. Loeb NYC builds and grows startups from inception to exit. Here Michael Loeb describes his concept for a “Company Factory” and Loeb NYC’s unique Shared Services model.

Michael Loeb quote michael what you have at loeb nyc is uniqueLoeb NYC’s Company Factory

Swinging by Loeb NYC’s Midtown Manhattan office not long ago was a brilliant and remarkably successful entrepreneur, Jonathan Klein. Jonathan and Mark Getty were founders of the eponymous Getty Images. All that company did was revolutionize the stock photo, editorial photo, and film business. With his work largely done – Getty was sold years back to Carlyle for $3 billion-plus. Jonathan serves as Getty Images Chairman, has sat on the boards of two other unicorns since their relatively early days (Etsy and Squarespace), works with various non-profits and advises multiple VC businesses, all while traveling the world to seek out great companies and investments. To be sure, Jonathan has seen a thing or two … but not our model, not once.

“Michael, what you have here is unique, isn’t it?” Jonathan is South African but has lived in England for 20 plus years, so he can be British in tone. So, the quizzical “isn’t it” is at once charming, colloquial, rhetorical, and by turns confounding.

His words were high praise. Our model – a self-funded Company Factory – is, I suspect, accurately referred to as unique. It’s what my partner, Rich Vogel, and I envisioned a decade ago when we concluded that for us Synapse was not the last chapter but the opportunity for a bold new one. What was then a germ of an idea is now burgeoning into full flower.

helen rothberg quote loeb nyc vision

Accelerator vs Incubator vs Company Factory

When described, our factory model sometimes draws comparisons to an Incubator, or its cousin the Accelerator. I describe these as ‘pieces in the middle’: desk space where cohorts of startups or young companies, filtered in by type (adtech, health-tech, fintech, whatthehecktech) are paying tenants for 3 to 12 months, and enjoy, ostensibly, the benefits of sage advice from some grey hairs and community.

What a traditional Incubator is not, is the pieces in the beginning – the ideas, capital or talent. Nor is it the pieces in the end – more and more capital and the exit. For its trouble ‘the house’ gets a sliver of equity and may or may not write a check for a modest $50k or thereabouts. The true value of the incubator model for the entrepreneur? Connections to capital. Famously, Y-Combinator, la creme de la creme, has a queue of VCs – the likes of Andreessen, Sequoia, Greylock – lap up its graduates like Skittles at a Halloween bash.

Add to this the disadvantages of this common startup model. They don’t tell you this in entrepreneur’s school, but founders spend half of their time raising round after round of money, and then more time keeping the money happy. Other hours are spent coding bills, planning payments, nudging receivables, pouring over leases, contracts, and the like. Alas, what about the business building? Um, well, not so much.

Another thing they don’t tell the newbies: the game is kinda-sorta rigged. VCs know that the universal rules of construction apply: the business of building a business takes longer and costs more than the business builders presuppose. Starter-uppers are optimists who ask for too little at first, and upon the re-ask, VCs often invoke the ‘down round’ edict; that is, more equity for less. Ever hear of Waze? A friend and founder Uri Levine told me he owned just 3% of his company when it was it was sold to Google after the VCs had their “waze” with him.

Greedy? Attribute more to odds and probability. Most VC’s will candidly tell you that only 2 startups in 10 have an appreciable return. A little verity from a shot of Casamigos and they will confess to less. Moreover, they are counting – banking actually – on the performance of a rare winner (the most profound of which are fancifully referred to as Unicorns) to pay for all the losers … and their wood-paneled offices, partner mortgages and a long list of green fees.

Shared Services – a Turnkey Solution

By contrast, our model spans the business lifecycle from ideas-to-execution-to-exit. We are self-funded, so our starter-uppers spend not their precious time soliciting investors, but rather soliciting results. Our Shared Services are world-class talent in tech, digital business development, accounting, finance, analytics, data science, promotional design, manufacture and a dozen direct-to-consumer marketing sources, which allows small startup teams to punch way above their weight and have access to capabilities other companies can only dream of.

We think our model is also a magnet for talent. With so many companies in the factory, the odds of collective failure are markedly reduced, and the work is more varied and interesting. The net effect: the chances of success for each company and its rate of growth is markedly increased. The #1 cause of death for a start-up is not the lack of a good idea, it is the lack of capital. But not at our shop. #2 cause of death is dismal execution. But all the less likely with our accomplished and experienced practitioners. I say of us today that once every 5 years we start 10 companies. In truth, it could be twice that number at this very moment, depending on how you count ’em.

‎Another promise of an incubator is a community. But inasmuch as all startups in a conventional incubator are more than a little bit competitive – they share the same physical and metaphysical space after all – not much is collaborative. And that is also part of the dream that Rich and I had: the making of a bonafide entrepreneurial community. A band of start-up pirates, all sharing best practices, and best resources, all participating in the spoils.

michael loeb quote time

Loeb NYC Speaker Series

We believe in giving our staff every tool they need to grow professionally. One of the opportunities for enrichment comes in the form of our Speaker Series. This is a program where “persons of excellence” in any and all fields (from high net-worth business people to actors and dancers), are invited to Loeb NYC to speak. The Speaker Series ramps up in frequency in the summer months, with a weekly guest speaker. This is so that our cohort of paid summer interns can benefit from learning from the successes, failures and philosophies of inspiring and motivating personalities.

Speakers have included Carolyn Everson (Facebook Head of Global Marketing), David Blumberg (Blumberg Capital, one of Silicon Valley’s most prescient Venture Capital firms) Tim Blake Nelson (actor/director), Katie Meyler (a Time Magazine “Person of the Year”) and Damian Woetzel (famous ballet danseur and president of Juilliard School).

When Dr. Helen Rothberg, Intelligence Strategist and Corporate Consultant visited,  she “got” the Loeb NYC vision right away,  “This whole place feels like one big, buzzing vision to me. I was in the “rainforest” and that place is pretty amazing. As an outsider who’s walking in, who’s been to many different companies over the years; Fortune 500, small tech startups, there’s a buzz, there’s an energy, there’s a vision here.” 

The “rainforest” refers to the floor of Loeb Enterprises where all of our startup portfolios are based. The theme was chosen deliberately, as rainforests have the fastest growth rate and highest diversity of species. It is a fertile environment which fosters life, evolution, and renewal.

katie loeb quote shared services

Loeb Enterprises Paid Summer Internship

One of the programs that we are most proud of is our paid summer internship program. In 2018 we received over 1,000 applications and hired 40 interns. The interns gain immersive, hands-on experience in New York City startups and are matched with portfolio companies with which they share a mutual interest and passion. We welcome the contributions, ideas and drive offered by the enthusiastic interns. Many go on to gain full-time employment at Loeb NYC, and have attained positions at our startups like AllTheRooms, Thnks, 3×3 insights and more.

At Loeb NYC we still have much to do. Unique is hard, unique takes time. But we are getting there one groundbreaking startup at a time. And for that, I thank you – our community, our merry, exceptional band – all.

Things You Didn't Know About Bitcoin's Blockchain

Loeb NYC logo hamptons background

Once a speculation point among those involved in startups, finance, or investing, Bitcoin, Initial Coin Offerings (ICO’s), and Blockchain have entered the broader cultural lexicon. You probably have a good idea of the basics and are aware of the social, philosophical, and economic issues, but what follows is a list of things you may not have known about how Bitcoin’s Blockchain actually works.

A slew of Silicon Valley startups and opportunists (some with legitimate intentions, other with get-rich-quick agendas) are raising capital to launch ICO’s on the back of newly invented tokens and cryptocurrencies. A report published by “Bitcoin.com” in February 2018 and cited by Forbes indicated that, “46% of startups that raised capital via initial coin offerings (ICO) are “dead already…despite raising over $104 million.” and that “The failure rate for ICOs is nearly double that of the one-year failure rate for an average startup going the traditional route of venture capital.” You can read more about inflated Silicon Valley valuations in this blog piece by Loeb.NYC CEO, Michael Loeb.

Despite wild volatility and steep trading peaks and valleys, people are still asking “is Bitcoin still a good investment?” Let’s go back to some basics about the Bitcoin blockchain to gain a better understanding of its underlying technology (which I predict is here to stay, no matter what happens with the value of the coin itself).

1: The Bitcoin Blockchain is a public ledger

Anyone can inspect every transaction that has ever occurred

Here is the very first block #0 in the chain, and here is block #492435. Within each block there are many individual transactions, and the flow of value in a transaction can be explored visually, using tools like this one where we can click through any orange circle that represents a spent value. Because everyone can see every transaction, anyone can confirm that the flow is valid – such that the receiver of value always comes from sources that have sufficient unspent value.

2. Transactions are not from one sender’s address to a recipient’s address

The inputs to each bitcoin transaction in the blockchain are the outputs of previous unspent transactions. So, if Alice wants to send Bob 50 BTC (Bitcoin units of currency), she would do so by specifying one or more of her previous transactions where the total output is more than 50 BTC. This is a subtle but important difference from using Alice’s Chase or Paypal account as transaction deposits are not aggregated into a single identifiable account, and they remain anonymous.

3. Transactions spend all the inputs

In order to efficiently verify transactions, every transaction uses the total value of the inputs and will create a new output address for any change. So for example, if Alice wants to send 50 BTC to Bob and she has 3 prior transactions where she received 25, 20, and 15 BTC, her bitcoin client or wallet software would use all three prior transactions to send 50 BTC to Bob and would result in 10 BTC to a new address as change, and all three prior transactions would be marked as spent and no longer usable.

 

4. The Bitcoin Blockchain Ledger stores every transaction and is currently ~140GB with over 11k copies in nodes distributed globally

Anyone can start a node, download the ledger, and start verifying and confirming transactions. This makes Blockchain highly resilient to data loss or central control. Natural disasters or individual or company failures will have no adverse effect as long as there are sufficient copies running.

The “Game” of Blockchain…

5. Confirming a block of transactions is a 10-minute guessing game

In order to prevent Alice from using the same coins more than once, all the nodes need to agree on the order of transactions so that once a previous output is used, it can’t be used again.  This is achieved by setting up a difficult guessing game designed to take approximately 10 minutes to win so that a single order of transactions is accepted.

Each player puts together a block of valid transactions that have occurred since the last confirmed block, including the hash of the last successful block, a special transaction to deposit winnings to the player, and a number the player can change called the nonce. The player then runs a hash function over the data and tries to win by producing a hash that is less than a certain target number known as the difficulty. If the hash result is higher than the difficulty, they change the value of the nonce and try again. When a winner succeeds, that block is confirmed and broadcast to everyone, and the game begins again with the next block containing the hash of the last one, hence the name, blockchain.

6. It generally takes a mind-boggling number of guesses to win each game

The process of confirming a block is called mining, and the players are called miners. The combined guessing rate, or hash rate, of all the miners, was approximately 11 million TH/s at the end of October 2017, where 1TH/s is 1 billion hashes per second. At the current difficulty level, this means that it takes an average of approximately 6 billion (10^18) guesses. That’s:

 

6,000,000,000,000,000,000

 

7. The difficulty of the game adjusts every 2 weeks

Since the purpose of the game is to demonstrate Proof of Work and is designed to take 10 minutes to solve, the difficulty of the game is adjusted every 2016 blocks (approximately 2 weeks based on 10 mins per block) in order to keep the length of each game close to 10 minutes. This is done by adjusting the target difficulty number to be higher (easier) or lower (harder) proportional to the amount of time it took to complete the last 2016 blocks being greater or less than 2 weeks.

8. The winner gets rewarded in Bitcoin until the entire 21M prize pool finishes by the year 2140

The first transaction in a newly confirmed block is the reward the miner awarded themselves according to the rules and is called the coinbase. The reward started at 50 BTC per confirmed block and is halved every 210,000 blocks or approximately 4 years. You can see this yourself by looking at block 209999, and then block 210000. This mechanism results in a total supply of 21M BTC awarded, after which there will be no more new BTC entered into circulation. At this point, miners will be paid by transaction fees for their work to confirm new transactions in a block.

9. Confirmed transactions are irreversible

By design, once a transaction is confirmed and added to the blockchain, every subsequently confirmed block creates an increasingly long chain making it virtually impossible to rewrite history and undo the transaction. This results in low transactions costs because similar to paying in cash, there is no need to account for chargebacks.  

10. Proof of Work currently costs more than $1.1B annually, using more electricity than many countries

While the blockchain mechanism is effective in its objectives, it has drawn criticism for the increased use of electricity and resources consumed by an activity that is an artificial means for introducing difficulty and effort. Several alternative mechanisms such as Proof of Storage and Proof of Stake are intended to address this.

If you learned something interesting and would like more information about the inner workings of the Bitcoin Blockchain, I recommend watching this excellent Khan Academy series hosted by cryptographer Zulfikar Ramzan.

Michael Yoon CTO, Investor, Advisor

Michael is Principal and Founder of Yono Consulting where he provides product, strategy and technology consulting services and helps companies like THNKS to design, implement, and scale their products and technology. He is an experienced product management and technology executive with a track record of success in top-tier financial, consumer and technology companies.

THNKS

We are a team of sales and client service professionals who wanted a better way to say “thank you” to our clients. Our mission is to strengthen business relationships with instant, relevant and meaningful gestures of appreciation while increasing efficiency and control around gifting for compliance, legal and finance teams.