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.  

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

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.

Watch Video

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.

Loeb NYC Takes Cannes, 2018

This has been a year of many “firsts” for Loeb NYC. We hosted our first activation at SXSW, our first #BlockOrNot Experience in Southampton, and for the first time, Michael Loeb, Katie Loeb and Bonin Bough are attending Cannes Lions to represent Loeb NYC. Michael Loeb is speaking at a Brand Innovators event on Monday, June 18 (details below) and will be sharing ideas with the world’s best advertisers, innovators, and thinkers in the glamorous setting of the French Riviera.

Follow Michael's adventures on Instagram

cannes, people walking and luxury cars in front of hotel intercontinental carlton
Cannes Carlton Hotel

What Happens in Cannes (Doesn’t Stay in Cannes)

June 18 – 22nd, 2018 marks the 65th Cannes Lions “International Festival of Creativity”. To win a prestigious Lion award is a feat coveted by elite agencies and the major players in “creative and marketing communications, entertainment, tech and design industries” the world over. To take home a Lion is a sign of greatness that resonates and creates ripples through various ad/tech echelons.

loeb nyc quote to take home a cannes lion is a sign of greatness

To give you an idea of the scope and grandeur of Cannes Lions, consider the numbers. This year, 16,000 attendees (28% of them members of the C-suite) from over 4,700 companies will converge on the pristine city to network, demonstrate their creative advancements and, essentially, show off their talents. The festival attracted 40,000+ entries in categories such as “health”, “reach”, “experience”, “craft” and importantly, “good” – as well as many others.

Legacy Cannes Lions participants admit that the event is not without its criticisms and issues (Too much peacocking! Too expensive!). However, despite facing critique, skepticism and philosophical questioning as to value and ROI, the festival has still seen an 22% increase in work submitted by in-house marketing teams over last year. Cannes still has the potential to elevate brands and generate powerful introductions.

Why is Loeb NYC Going to Cannes?

Many of the reasons why Loeb NYC decided to attend Cannes this year are elucidated in an insightful article by SummitSync (a Loeb NYC portfolio company), “Changing Tides: The Rise of Brands at Cannes.” As an aside, SummitSync’s razor-sharp platform “enables your team to shake more of the right hands to hit your meeting goals”. In other words, to get the most out of events and maximize lead generation.

Katie Loeb explains the benefits of participating in Cannes festival like this; “Cannes offers a style and propensity for deal flow in a way that other conferences are not able to. For us, it beautifully balances the business with the fun. We’re so excited about some of the connections we made and how they will affect our portfolio in the future.”

Loeb NYC is making moves this year and has planted its flag. Michael Loeb and Rich Vogel embarked on a decades-long, proverbial journey of one thousand miles, to conceive of and execute a company factory that grows businesses from idea, to seed, to growth-hacked company to market and potential exit. Loeb explains, “Our model – a self-funded Company Factory is 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.”

 

Loeb NYC and Michael Loeb at Cannes Lions
Bonin Bough, Brand Innovator co-founder – Marc Sternberg and Michael Loeb

 

Our full-flower, unique, marketing and startup engine is ready for the big leagues. Not only that – we have some inspiration and inventive ideas of our own to demonstrate to the world. Does this sound like hype? You don’t have to take us at our word. Witness the Loeb effect in person.

Michael Loeb’s Speaking Engagements at Cannes

There is still time to register for the Brand Innovators event (Monday, June 18th), where Michael Loeb will be speaking. Details on the event can be found here.

Register Now

SummitSync has compiled a useful list of parties and events at Cannes Lions to get the most out of your time there (or to find out about what you might be missing).

If you are not going to be anywhere near France this weekend but would still like to hear a sample of what you can expect, watch this video of Michael Loeb and Bonin Bough at SXSW.

Loeb NYC Speaker Series: Damian Woetzel

loeb nyc logo green

On May 30, 2018, Damian Woetzel attended Loeb NYC’s Manhattan offices as the guest speaker for Loeb NYC’s recurring Speaker Series. Woetzel is a world-renowned ballet danseur and recently appointed Juilliard School President.

Ed McCabe, Executive Director at Loeb NYC, moderated a verbal “Pas De Deux” which led us through engaging topics such as; the effect of tech on the arts and arts accessibility, how to maximize creativity and ingenuity, and why New York City is especially fertile ground both for the arts, and for unique companies (like Loeb NYC) which operate in its midst.

This is a blog post about Damian Woetzel’s fascinating life and career, and how what he has learned as a dancer and proponent for arts education, applies to entrepreneurship and startup culture.

Ed McCabe, Damian Woetzel and Michael Loeb at Loeb NYC Speaker Series
Ed McCabe, Damian Woetzel and Michael Loeb at Loeb NYC Speaker Series

Damian Woetzel at Loeb NYC

Damian Woetzel grew up in Newton, MA. His father, Robert Kurt Woetzel, a professor of political science and international law, was born in China to German parents. At the conclusion of World War II, Robert Woetzel migrated to the United States. His experiences spurred an idealism that ensured that his sons, Jonathan and Damian, received a broad and deep cultural education. He wanted his sons to live “big lives”.

Woetzel’s mother, Sheila, brought Damian to an international and humanitarian perspective, building off of her life at UNICEF as a program officer based in four continents over the course of her career.

As young children, Damian Woetzel and his older brother took lessons in flute, guitar, martial arts, Chinese, athletics, and ballet (Woetzel started ballet lessons at 4 years old).

It was a time of in-betweeness both personally and for performing arts in america

This is not the narrative where an infantile wunderkind is introduced to an art-form and is instantaneously revealed to be a prodigy. Woetzel acknowledges he did not love ballet “right off the bat”, but does remember certain pivotal points that kept him on the path, for example, an enjoyment of music and his performance in a production of The Nutcracker as a 6-year-old in Boston, running around backstage and knowing every “nook and cranny like it was home”.

Woetzel shared a memory from the age of 12, sitting in the car with his brother, on their way back from their Sunday morning lessons. Jonathan said he would give up dance and continue learning Chinese. Damian wanted the opposite. These early choices reflected (or predicted) the future trajectory of both brothers’ “big lives”. Jonathan Woetzel earned a Ph.D in Asian studies and has been with McKinsey & Company in Shanghai since 1985.

Woetzel’s focus on ballet first “widened and then narrowed”. Initially, Woetzel learned and absorbed all he could about ballet: history, theory, and practice. Access to information was restricted to books that could be found on the subject, as well as the occasional film. Woetzel thirstily absorbed as much information as he could. The narrowing of focus, to a particular style and genre of dance, came later in New York City.

Big Leaps in the Big Apple

The site of Woetzel’s New York debut was the Joyce Theater, at age 18. He fondly describes the Joyce as “a revolutionary startup at work”. In Chelsea, 1985, the theater’s immediate surroundings were relatively barren, culturally speaking. The success of the Joyce’s creative engine attracted public grant investment and a rejuvenation of restaurants, community, and vibrancy to the area.

Woetzel’s performance reviews were good enough for Damian’s parents to approve his pursuit of ballet as a career path. As Woetzel puts it, this was a “time of in-betweenness”, both personally and for performing arts in America. Institutional titans like Carnegie hall had reached a zenith and were moving into a new phase. Icons like Bernstein and Balanchine passed away. A new type of performance was experiencing its adolescence. Jerome Robbins, one of the creative geniuses behind West Side Story, sponsored Woetzel’s career and created roles for him to perform at the New York City Ballet.

Damian Woetzel at Loeb NYC Speaker Series
Damian Woetzel at Loeb NYC Speaker Series

New York City is culturally speaking “the room where it happens” as Lin Manuel Miranda might agree. It has, Woetzel says, “a special foothold and a gravity that matters. So and so did that on this stage. It’s important”. Artists and giants leave their footprints here and their legacies echo through streets and stages. (See: “Loeb NYC Plants its Flag at SXSW” to find Michael Loeb’s perspective on “legacy”.) The “NYC” part of “Loeb NYC”, was selected because businesses can thrive in this dynamic and vivacious environment. Art dances with technology, technology elevates art.

As contemporary American ballet grew, so did Woetzel’s prowess and profile. Woetzel joined the NYCB in 1985. A principal dancer in his early 20s, a top-tier principal in his mid 20’s and an in-demand entity in his mid-to-late 20’s, he was invited to speak at conferences and attend forums.

Damian Woetzel quote: New York City has a special foothold and a gravity that matters

One such forum was a young leadership conference in China. Woetzel remembers sitting next to another young leader, Gabrielle Giffords, who was then a State Senator (the youngest elected to the Arizona Senate). At the age of 33, Woetzel was considering retirement from ballet and his next step (so to speak). Giffords suggested the Kennedy School Masters program at Harvard. Woetzel followed this lead. Woetzel has subsequently lectured at Harvard Law School, he says if he hadn’t been a danseur he might have been a lawyer.

Woetzel’s Second Act and Juilliard School

Having retired from ballet performance in 2008, Woetzel proceeded to “carve another life”. One of his enterprises has included directing the Vail International Dance Festival (marking its 30th anniversary this year) in Colorado. Woetzel describes the festival as a “creative engine and lab” where musicians and dancers can experiment but are also “exposed” and are not insulated from external review or critique. He has also acted as Director of Arts Programs at the Aspen Institute.

In late 2016, Woetzel received a call asking if he was interested in applying to become the 7th president of Juilliard. In May 2017, the application process culminated in Woetzel being offered the role. Woetzel anticipates that he will be able to combine the threads of his passions and experiences from “arts education to education writ large, the future of arts and arts and humanities”. Woetzel will still be involved with the Vail Festival, and will bring Juilliard there – the two will “feed each other”. Woetzel officially takes the helm in July 2018, and has spent the past year shadowing his admired predecessor, Joseph W. Polisi, who Woetzel describes as a “role model”.

Woetzel’s goal is for Juilliard to be an engine for innovative work (not dissimilar to his description of his early years at The Joyce Theater), for Juilliard to produce students who edge and push each other and for it to be an avant-garde incubator that upholds and advances its global reputation. This (realistic) idealism and expectation for Juilliard’s students echoes Woetzel’s own “live big lives” philosophy.

Loeb NYC CEO and founder, Michael Loeb, is a member of the Juilliard Board and supports Woetzel’s goals and ambitions for that institution. Loeb also believes in ‘giving back’ and actively contributing to NYC’s community and culture. For example, every Halloween, Michael Loeb opens his “haunted house” to the public. Thousands of guests attend at no charge. He was also honored by Build.NYC for his contributions to that organization. Loeb extols the virtuosity and talent of Juilliard students and recognizes the extremely high standard of work that the students perform at.

The “Edge Effect” and Advice for Young Entrepreneurs

Loeb NYC is home to many trailblazers and those with great aspirations. Woetzel is a person of diverse interests and curiosities. He mentions the “Edge Effect”, a concept he learned about from Yo-Yo Ma; “When two ecosystems meet, at the edge where they meet, you have the most diversity, and new life forms”. Incidentally, the floor where Loeb NYC resides was designed by Michael Loeb and Rich Vogel with a “rainforest” theme, because a rainforest represents the highest rate of growth and a diversity of species. The Edge Effect, Woetzel explains, is “where the spring meets the valley.” Where sections overlap and diverse elements are unified, that is where the richest invention is found. New York is one of those “edge” places: The home of hundreds of cultures and a city of contradictions.

In this fascinating video, Yo-Yo Ma explains the Edge Effect and gives the example of the Napa Valley.

Within Loeb NYC the “Edge” exists in many forms, for example, it is evident in the types of companies we are investing in and the industries in which they operate, from beauty to transport and health to the beverage industry, surprising symbiotic relationships and connections are revealed daily. Our staff has a wide range of backgrounds, talents, interests, and training. One thing they have in common is the “Entrepreneurs’ Gene.”

Woetzel’s advice to his students could equally apply to our young entrepreneurs: “Don’t separate the things that interest you” the overlapping of interest is a wellspring of invention. Take risks: “Be thoughtful about the level of risk you want to take… but I’m glad I took risks as a dancer” (Woetzel says he is lucky not to have suffered any major injuries through his career).

Tech and the City

The impact of the internet and technological developments on the arts has been, like on anything else, both positive and negative. Woetzel is interested in the “democratization of education and advancing opportunities for access to culture…to see Baryshnikov when he was young took effort.” Now access to information and digital content means that the gap has narrowed. Despite the screens we surround ourselves with, Woetzel also reminds us of an “appetite for experience” that transcends our virtual culture. In this vein, Vail performances are intentionally new and context specific. You can’t experience them anywhere else.

Before the internet age, one could only learn ballet “in the room” from a teacher, in a sort of oral tradition. Today, technical aids make the art-form more accessible, both to practitioners and to audiences. Woetzel observes technological advancements have “democratized choice on what is considered good”. But the shortening attention spans of the modern audience is an issue. “Taste is a valuable commodity and arbiters of taste are missing.” The glut of available opinions makes it harder to navigate between artistic trash and treasure.

Damian Woetzel quote don't separate the things that interest you

Dance is a beautiful form of communication and expression. Having the ability to be expressive and convey emotion wordlessly takes practice and dedication to achieve. This is a concept Loeb NYC’s marketing teams likely relate to, as we strive to seek ever-more effective methods of communicating messages and connecting with people.

The Loeb NYC Speaker Series has a few quirks and rituals, one of which is that our guests literally leave their mark by writing a message on one of the walls. Woetzel’s message to us is similar to what his parents’ might be… but with a sunny addition: “Happy big lives”.

Damian Woetzel Signature on Loeb NYC wall happy big lives
Damian Woetzel’s signature on a Loeb NYC wall

Loeb NYC Plants its Flag at SXSW

I was sitting on the stairs of a packed house in the middle of downtown Austin. The room filled with people, many of them the brightest minds at South by Southwest (SXSW). Brand marketers and influencers mingled with investors, founders, artists and everyone in between. Yet everyone’s attention was fixed on the front of the room, where entrepreneur and a good friend to Loeb NYC, Bonin Bough was moderating a fireside chat, between Gary Vaynerchuk (of Vayner Media) and my boss, Michael Loeb.

The discourse ricocheted between topics like the state of entrepreneurship, the blessing of “micro failures”, parenting techniques, and tombstone carvings. Prominently marked on banners throughout the room was the unmistakable logo of “Loeb NYC”, proudly displayed our brand to the world. Michael was captivating the audience,

“I want to prove Keats wrong. Keats said, our ‘names are writ on water’…The legacy I want to have is going to be enduring. I want somebody to point to me and say I learned something from that guy, or he built something for me, or he changed something, or he made things better.”

Loeb NYC quote I want to prove Keats wrong. Keats said, our ‘names are writ on water’…The legacy I want to have is going to be enduring
Michael Loeb on “Legacy”

Select founders and operators of Loeb NYC investment portfolio companies were dotted throughout the room, as were members of the Loeb NYC team itself. Given the size of the crowd, the room was remarkably silent. There was a palpable, powerful energy and excitement that manifested in an unmistakable buzz. It was at this very moment—when the nucleus of SXSW seemed to have converged within the “Loeb House”—that I realized I was witnessing a defining moment in the life-cycle of Loeb NYC. At this moment it became undeniably clear that we, Loeb NYC, had planted a flag and boldly announced to the world, “We are here. We’re here to play. And we’re here to stay.”

Loeb Enterprises has been operating for roughly ten years, and in that span has produced results many accelerators and incubators only dream of. Three companies, most notably, sit perched within the “trophy case”: Synapse Group, Priceline, and Script Relief, each of which have achieved storied status within its industry. Additionally, as of today, upwards of 15 companies operate within the greater Loeb NYC portfolio. So why did SXSW feel like a watershed moment for Loeb NYC? What had changed? Why did this moment, in the illustrious history of the company, feel different?

loeb nyc quote we are here we are here to play and we're here to stay

To answer those questions, let’s consider that simply put, the dynamics of media and consumer attention are going through tectonic shifts in style and technique. Past operating styles and methodologies will not cut it for firms that want to survive and thrive in 2018 and beyond. Those who want to be in the game and, more importantly, win are required to take a new tack, if prominence and reputation are at all important to them. For Loeb NYC, these things matter, not only for legacy, but for efficacy.

We believe that what we do day in and day out is special. There’s a magic inside the walls of Loeb HQ that allows us to view the world with optimism and the future with possibility. In the words of Katie Loeb, Director of Innovation at Loeb NYC and the mastermind behind our Austin event, our program at SXSW was an activation, a deliberate statement to the world of our presence and vision.  

The better one gets to know the man in charge, Michael Loeb, the clearer it is that his vision and ambition for Loeb NYC is massive.  In the words of Mr. Loeb himself, the vision for Loeb NYC is “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.”

Bonin Bough, Michael Loeb and Gary Vaynerchuk at Loeb NYC's SXSW activation.
Bonin Bough, Michael Loeb and Gary Vaynerchuk at Loeb NYC’s SXSW activation.

This vision is clear and enticing. A company factory: vertically integrated company-building from an idea, to execution, to exit. The nomenclature is simple, it more or less describes the lifecycle of almost any successful startup investment. But in the case of Loeb NYC company-building, both the theory and practice are very different. Traditional venture capital firms and accelerators generally think of themselves as hotbeds for successful market disruptors and innovations. As places where exciting early-stage ventures blossom into unicorn companies with regularity. The reality is that it’s difficult to build a company – read Michael Loeb’s post, “The Entrepreneurs’ Gene” to see the proof from a man who has done it many times over. Most early-stage companies will fail, plain and simple.

So, how does one create a closed-ecosystem with better odds and better pathways to success for early-stage companies, at scale? From my perspective, the model at Loeb NYC achieves this by removing the constraint of constant-capital raising from founders and CEOs, so they can focus on running their companies. Providing back-office support and advice to the early-stage companies so that the headaches of administrative work are largely mitigated. We challenge the odds by offering portfolio companies access to expert teams of marketers so that they can quickly augment a small marketing with a larger, advisory one. A real sense of community means that companies can leverage each other’s networks and speedily earn credibility and connections with customers. Place this in a beautiful working space that can compete to attract talent with the best of ‘em. Add outstanding talent, commitment, and creativity to that mix and you have something special. We have this. We have it now. And at SXSW, we told the world.

magic inside walls at loeb nyc

Loeb NYC is a place where true talent can thrive and where meritocracy is honored and respected. Above all else, it is a place deeply passionate and committed to building successful enterprises across multiple industries. That is our foundation and inspiration. Walk around our offices at 712 Fifth Avenue and a clear sensation is realized of the kinetic energy and momentum present in this environment. Startups pack the floor, each targeting a different industry with intensity and drive. One common thread emerges; an undying commitment to results and growth. The aforementioned confluence of success-factors cannot be created overnight. It is possible through years of focus, merged with a willingness to test, experiment and iterate. You can feel it the moment you step off the elevator.

Mike Provance, the CEO of 3×3 Insights describes his company’s relationship with Loeb NYC in terms of a streamlined symbiosis:

“Our company is housed inside Loeb NYC, and we can’t go a day without spending time talking to Michael about what we’re doing. He’s very hands-on in the way that he engages with his portfolio companies and is constantly thinking of ideas that help us better execute on what we are trying to do, whether it’s sending emails any time of the day, or wandering through the Loeb NYC incubator, Michael is always available to us, as are his team of experts in various areas of marketing, of product development, direct mail, about anything you can think of he’s got some sort of experts who can support the efforts you’re trying to do.”

Personally, I have been in the Loeb orbit for the past three years or so. In that time I’ve seen expansion into two new floors in our midtown Manhattan headquarters, and a threefold growth in the size of our portfolio. Sitting on the stairs in that Austin house at SXSW, it’s apparent that the last ten years of innovation, company-building, and pure hard work have been leading up to this moment: a powerful declaration of our identity and intentions.

Our efforts at SXSW excited and encouraged me about what’s still to come. As the team returned home and settled back into our rhythm of operating and building, one resounding statement from our time at SXSW remained fixed at the front of my mind: We are just getting started.

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.