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.

Loeb NYC Brings Inclusivity to SxSW

Loeb NYC logo forrest background

While Loeb NYC has historically participated in various conferences as attendees, in March, 2018, we hosted our first activation at SxSW in Austin, Texas. With Bonin Ventures, we hosted two days of content with some rockstar panelists, including Gary Vaynerchuk (CEO of Vayner Media), Swan Sit (VP of Global Digital @ Nike) and Kris Skrinak (Machine Learning Architect @ Amazon) — not to mention our inspiring leader, Michael Loeb.

In addition to a lively conversation between Michael Loeb and Gary Vaynerchuk, moderated by Bonin Bough (you can find the video here), we also hosted the Real Inclusivity panel. Some pretty badass women discuss how to generate cultures in which all voices are heard:

At SxSW we also promoted the second annual “___OrNot” conference to be hosted in Southampton, NY (at “the Billions house”) on May 18th, 2018. The Or Not conference aims to help brand marketers separate marketing hype cycles from the real opportunities that are appropriate for their brands. Visit the OrNotExperience.com for more information.

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Loeb NYC Inclusivity Panel at SXSW

Loeb NYC Speakers Series: Cryptocurrencies with Alyse Killeen

Around the Loeb.NYC offices, I’ve noticed chatter about cryptocurrencies and blockchain. Given the nascent, confusing, and somewhat mysterious nature of the technology and its ecosystem, I suggested that we host Alyse Killeen for the monthly Loeb NYC Speakers Series. Alyse is a Los Angeles-based venture capital investor who focuses on data science, network infrastructure, fintech, e-commerce, and blockchain. She has contributed to two books on cryptocurrencies: “The Handbook of Digital Currency” (2015) and “The Handbook of Digital Banking” (2017).

The Bitcoin Surge and Decentralization

When I first met Alyse at Michael Loeb’s Founders & Funders event in 2014, the price of a Bitcoin was around $400. Now, in late November 2017, Bitcoin’s price is approaching $10,000. With this massive surge in price (+2,400% in just three years), Bitcoin has generated major interest from the mainstream. As talent and capital have poured into the space, it’s become clear that Bitcoin and other cryptocurrencies are here to stay. One of the goals of the Loeb NYC Speaker Series is to promote company-wide understanding and discussion of new ideas. Given the amount of buzz in the space right now, hosting Alyse to explain Bitcoin, blockchain, and its implications going forward was a no-brainer.

Above: Fintech Silicon Valley interview with Alyse Killeen on what drew her to the blockchain, and on inclusivity.

For Alyse, the importance of blockchain technology can be boiled down to its power to decentralize structures and institutions that are traditionally relied upon to establish trust between multiple parties.

Alyse explained that Bitcoin emerged in the wake of the 2008 financial crisis, partly in response to eroding trust in financial institutions and governments. She explained that Bitcoin users can choose to transact on their own terms without the consent of any intermediary. As more people earn, buy, and use the currency, its price increases. While rampant speculation has obviously contributed to Bitcoin’s rapid price increase, adoption and usage has grown substantially as well.

Alyse explained that instead of a central institution like a bank maintaining a ledger of balances, the Bitcoin blockchain is maintained by a worldwide network of financially-incentivized “miners” — people who have set up computing hardware to verify Bitcoin transactions. Miners earn Bitcoin rewards in exchange for their participation in the network. Mining is intentionally expensive, requiring high-powered computers and substantial electricity consumption. Thus, miners have begun to set up shop in regions like China and Venezuela where electricity is relatively inexpensive.

Alyse Killeen signs the wall at Loeb NYC Speakers Series Decentralize all the things
Alyse Killeen signs the wall at Loeb NYC Speakers Series

How does Bitcoin Mining Work?

The system is designed to work as follows: as Bitcoin’s price increases, more miners will participate in the network. As more miners join in, the faster and more secure the network becomes, ideally creating a virtuous cycle that allows for seamless, borderless, and secure exchanges of value without the need for any centralized intermediary. This is particularly important in nations without the institutional stability that we tend to take for granted in the US. In a country like Venezuela that has experienced hyperinflation, Bitcoin has become a viable alternative to its national currency. For those interested in investing in Bitcoin, Alyse had a few recommendations: only invest what you’re willing/able to lose and store your cryptocurrency in a hardware wallet like the Trezor or Ledger.

Initial Coin Offerings

Another subject that came up was the recent Initial Coin Offering (ICO) craze. Alyse warned that a lot of these ICOs are scams but believes this financing model will ultimately democratize access to capital. To briefly explain an ICO, companies seeking venture funding can create and issue their own token as a means of financing rather than traditional equity or debt deals. Presumably, as the company grows, the value of its token will increase. Token holders are immediately liquid, unlike with traditional venture capital or angel investments. Alyse recommends doing serious diligence on ICOs before investing, as one should with any investment.

It is an exciting time in the world of cryptocurrencies. There is a lot to learn and sometimes answers to the questions you have may not even exist. From all of us at Loeb, we’d like to say thank you to Alyse! For more information about Alyse, visit her website and follow her on Twitter.

Adam Rice

Adam is a Venture Associate at Loeb NYC, where he sources, evaluates, and pursues new business and investment opportunities. He is currently focused on fintech and blockchain. Prior to joining Loeb.NYC in 2014, Adam received his BA from the University of Michigan.

Silicon Valley Valuations - Let it Be Real

My Dad, the great Marshall Loeb, told the joke of “this guy” (joke maker-uppers are evidently misogynists – or is the opposite the case?) and the $10,000 dog. Each day he goes to a bar, mangy mutt in tow. This guy is subject to unrelenting derision from his fellow revelers, which only intensifies when in defense of his pet, he declares ‘this dog is worth $10,000’. After a time, he has quite enough of the mutt-busting. “Ok, I will prove it to you”, he countered in defiance, “Be here tomorrow.” The following day, like clockwork, he reenters the bar with a smirk wider than the gulf between Pelosi and Trump, and matching cats under his arms. “You see, I told you pagans that the dog you made so much fun of was worth $10,000 and now I have the proof”.  “Say what?”, asked the confused chorus. “I traded him for two $5,000 cats”.  

A Herd of Silicon Valley Unicorns

In 2016, the VC ecosystem echo-chamber fabricated 160-something unicorns, a.k.a startups with billion-dollar-plus “valuations” (why the quotes? Read on). I asked two-dozen start-up CEOs, carefully selected for some gray hair wisdom, two questions:

How many of these mythical creatures will be more than myths? And; How much green ($) will the founders ever see? Answers: few and little.  

Fund managers are subject to a number of pressures, one of which is finding deals. On the spectrum of asset classes, venture is illiquid, risky and in theory, high returning. Committed capital from investors is ‘called’ over time as deals are consummated, requiring that funds are held in highly liquid, safe and therefore low returning instruments – in sum – the opposite end of the asset spectrum. Investment outcomes are generally thought to be highly dependent on a specific asset allocation formula. Investors count on VCs to make their investments with alacrity so as not to, egads, wither in the wrong class.  And while not all entrepreneurs are serial entrepreneurs (and not all would-be entrepreneurs have the “entrepreneur’s gene“), fund managers are invariably promiscuous, always on to the next and bigger fund for the increasing fees – which investors are subject to shine (good returns) or rain (bad ones) – and marketplace juju.

In a low return world sloshing in cash, (why else would the Nets, a team that last ruled their conference during the Internet winter of 2001, be worth $2 billion?) startups are bid-up and are ‘marked to market’; that is, valued from the last overheated investment, often by another VC firm. This is long before the mutated unicorns become sickly, but in time for display on the VC-scoreboard to impress the big wallets for the next fund in the series.  I know what you’re thinking: the government (oy vey) should do something about this. Watchdogs are obliged to protect the little guy, and venture targets the ‘sophisticated’ investor. You better know what you are doing to ski the black runs or you may just fall – hard. You’ve been served; fat-cats beware.   

A case, from zillions of postulants, in point. A VC fund in which I have invested (does this make me a hypocrite?) marked-to-market a lipstick-on-a-pig startup (old product, pretty digital interface) for which revenues this year will drop by a predicted 1/3rd, will lose over $200 million, owns little unique IP, but has a brand-name VC money sponsor (hint: there is an intimate connection to the White House’s alpha male) to $2.8 billion. Huh? For a negative growth newbie? Oh, but management has projected revenues to triple in 2018 with a $300 million swing on the bottom line to profitability. And no, it’s not in cannabis so ‘eating home cooking’ doesn’t explain the hyperventilation.   

Real Growth and Real Time

‎There is a reason why Warren Buffett doesn’t touch this stuff – he takes a long-term view. To be sure, the market puts a premium on innovation, novelty and first-in-market positions – that is where you find big growth and the big opportunity. Investor insanity is fleeting and corrections are violent: my founder’s shares in Priceline went from $16 at IPO to $163 in months to $1.28 months later at the nadir of Internet meltdown #1 (there will be more). In the long run, the market values what is real: real companies inventing real solutions, real revenues, real profits, real value. Not unicorns, nor $10,000 dogs, nor two $5,000 cats.  

We live at a time of great transformation, in which every industry will be subject to wrenching disruption. As an entrepreneur, nothing could be more invigorating. There are great ideas – big and brilliant – which will be sown and burgeon in vast new companies.  The ones that will stand the test of time, the ones of which Keats would say are not ‘writ in water’, will be made of sturdier stuff. So entrepreneurs, summon your genius and courage to build something good that lasts, something that fuels the soul, something that will make you and your investors’ money and your Mama proud. Let it be real.  

What is Our "Company Factory"?

“Michael, what you have here is unique, isn’t it?”

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.

Loeb.NYC rejects the traditional incubator model

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 start-ups 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.

Michael Loeb Quote

Add to this the disadvantages of this common start-up 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. As a related aside, consider this post about the importance of office culture to startup success.

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 start-ups 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.

whiteboard with loeb.nyc logo

Our unique ‘Company Factory’ model

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; world-class talent in tech, digital business development, accounting, finance, analytics, data science, promotional design, manufacture and a dozen direct-to-consumer marketing sources, allows small 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 start-ups 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.

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


Michael Loeb CEO and Founder

Michael Loeb, a serial entrepreneur, is currently the President and CEO of both Loeb Enterprises (LE) and Loeb.NYC. He knows success, past and present. Loeb.NYC, Michael Loeb’s privately funded venture lab leverages his expertise and vision to build prosperous companies from the ground up. World-class analytics, design, marketing, and tech-development pave the way to rapid growth and significant scale.