Today, we shift gears from our normal programming and get inside the Mind of a NYC Venture Builder!
In the hot seat today is Michael Loeb, who founded Loeb Enterprises in 2006 and has recently launched Loeb.nyc, which Michael calls a “venture collective.” Loeb.nyc develops both internally and externally-generated ideas, surrounding founding teams with the domain experts, operational support, resources, and capital needed to successfully execute, de-risk, and scale a business – all under one roof. Names in the portfolio include Fetch Rewards, SummitSync, PopWallet, Payoneer, Penrose Hill, and Mercato.
Deeply entrenched in the NYC entrepreneurial ecosystem since the 1990s, Loeb founded Synapse Group which was sold to Time Inc., his former employer, for $800M in 2006. Loeb was also an early funder of Priceline with Synapse cofounder Jay Walker – Priceline today trades at an $80B+ market cap. We joined Michael at the impressive Loeb.nyc headquarters in Midtown East for an engaging and candid discussion that covered the state of venture capital today, the need for a new model in building and supporting startups, how companies are developed within Loeb.nyc, and much more…
If you are a NYC-based VC interested in participating in this series, please send us an email. We’d love to chat. If you are interested in sponsoring this series that showcases the leading minds in venture in NYC, we’d also love to chat. Send us a note
Reza Chowdhury, AlleyWatch: We all know incubators and we all know VCs. What exactly does Loeb.nyc do?
Michael Loeb, Loeb NYC: We combine ideation, entrepreneuring, executional know-how, management, talent and, of course, capital. I should say ‘our capital,” nobody else’s. I have been told that we may have just invented something brand new. It’s a venture collective.
A “venture collective?” Can you unpack that a bit?
We aren’t in the business of giving millions of dollars to kids in their early 20s. We pair capital with guidance and provide our startups with the support of experienced minds across various business disciplines. Loeb.nyc companies are not simply funded and left on their own. Everyone works together toward the same goal. This is what we mean when we call our shop a venture collective.
We’re a people-first company and we look for a specific kind of entrepreneur. To use the word ‘passionate’ sounds cliché, so I’ll put it like this: the best type of founder is the person who believes in their product so much that they’d chop their arm of and hit you over the head with it if you’re in their way. The right founder will work tirelessly to find the path that gets them to their goal – they’ll crawl over the hurdle, run around it, dig underneath it, whatever it takes for success.
What is the State of Play at Loeb.nyc?
We are building 20 or so companies today, half are outside ideas or early-stage companies we brought in and half are our start-ups which sprung organically from internal inspiration. The bulk of our ventures are located in NYC; the others all around the country, and located based on the needs of the specialized talents that run them.
Do you have a particular investment focus?
We are situational, not sector-focused. We have businesses in healthtech, retailtech, beautytech, fintech and more. We like disruptive platforms and the first mover advantage that comes with innovation. We are also theory-based and have many examples of pursuing a thesis through many years and many millions and two or three executional pivots — including management team swaps — until we were ultimately successful.
You offer a significant amount of resources and expertise to your portfolio companies. Can you tell us about that please?
I often refer to the Loeb.nyc “tool shed” which consists of proven experts within the various skill sets that a growing company needs or will eventually need. In-house, Loeb.nyc offers everything from back-office accounting and structural support, to branding, marketing, technology, and legal services.
I often refer to the Loeb.nyc “tool shed” which consists of proven experts within the various skill sets that a growing company needs or will eventually need. In house, Loeb.nyc offers everything from back-office accounting and structural support, to branding, marketing, technology, and legal services.
Is the traditional venture model broken?
Those that keep score claim that only 2 in 10 start-ups succeed. Some would cut that number in half. That has all sorts of implications on the cost of venture capital and the availability of talent.
When we started our company, we asked: “why all the fail?” And we concluded that much of the casualties are self-inflicted and avoidable. We attacked the cause of failure with the goal to have a dramatically higher success rate.
Please give us an example.
Let’s take capital. First, if the rare winner has to pay for all the losers, as it does with the venture model, it necessarily comes with strings and at a high cost, reinforcing the fail-rate and igniting a vicious cycle. And then there is the business cycle. In good times, optimism reigns supreme and capital is plentiful. Come a recession and it is drier than the Mojave Desert. With us, we fund our companies irrespective of current economic conditions.
What are the keys to the Loeb.nyc model?
I will list three. First, everything – the ideas, talent, capital – is under one conceptual roof. This allows us to compress decisions and cycle times. Second, we make it safe; we’re the founders’ friend. Our entrepreneurs bring in projects as they conceived and we build them out together. What others call failure, we call learning. Third is our shared services, the tool shed I spoke of earlier – a comprehensive and always-on set of world-class quality tools that every company needs to launch and scale, from tech to marketing to finance.
You spend a significant amount of time involved with philanthropy and supporting the next generation of entrepreneurs. Can you tell us more about that and why this is important to you?
At Loeb.nyc we have established an internship program designed specifically for college students who want the opportunity to learn about entrepreneurship from actual entrepreneurs. This spring we received more than 1,000 applications from students throughout the U.S. and we have selected 40 students and placed them in paid internships. Some students are matched with Loeb.nyc companies and others are matched with various startups in the city. These students aren’t fetching coffee, they are experiencing an immersive work experience and we conduct weekly progress reports to ensure this. In addition, we run a speaker series where the interns hear from successful individuals in the worlds of business, the arts, and philanthropy.