I started writing this post a couple of months ago, when the world was crazy, but much less crazy than it is right now with the Ukrainian invasion. When the macro level is this out of control, when people are forced into situations they didn’t ask for, it drives home the point of what extreme lack of agency looks like. War is a time when individuals lose their sense of agency—over their own lives, and also over the direction of the world.
Agency is the ability of your effort to first affect the condition of your life, and then the condition of the world.
Without agency, you don’t believe that your effort means anything. Agency is tied to your sense of purpose — you can’t fulfill your purpose without agency. At a basic level, you must be able to
perceive a choice
make a choice
act on the choice
believe that the choice has the possibility to give you the result that you want to see.
This is so fundamental to human potential and achievement that “agency” is a driving characteristic I look for in investments.
In 2020, Nikhil wrote a post on trends for 2021, and he asked people in tech what their thoughts were. My answer was simple: individual agency. I wrote: “The next big thing in 2021 is agency – where people can construct their lives, regardless of location, and find a way to build the career and lifestyle they want.”
Over the last few years, I’ve realized that agency is the unifying idea that underpins Spero’s thesis.
It’s about investing in the things that enable agency. The 3 different components of “things that make life worth living” are all related to people’s agency—their ability to choose what happens in their lives and the world.
Wellbeing: the agency to live your life with the physically and mentally capability that you choose. To be able to access your data, choose your path to wellbeing, as you define it.
Sustainability: the agency for people to have a positive impact on the planet, while also choosing abundance. The ability to make informed choices that reflect their values while thriving and enabling the planet to thrive.
Learning, work, and play: the agency to choose your path, learn what you want to, work on problems that energize you, build the life you want to have, and enjoy yourself with the people that matter.
When investors look at companies, one of the things we try to understand is whether the company can build a moat. In tech, a moat is a conscious business design choice that allows a company to develop and maintain a sustained competitive advantage over other players in the space.
Economies of scale and network effects are two of the best-known moats. But there are others—like deep tech, etc. Today, I want to propose a new moat: hardware. I’m talking about products like Peloton, where the hardware is central to having the full experience.
In the wellness space, software solves real problems, and the app ecosystem in these spaces is thriving. These apps help with things like meditation, period tracking, sleep tracking, and exercise of all kinds. But in a crowded market like that, investors ask, “How does a company win?”
Now, when you have “just” apps in these spaces, with no connected hardware, they are fungible. To move from one app to another, you just… click. If you have paid an annual subscription, you might wait until it expires, or you might just eat the cost and try a new app regardless. With these apps, there may be UI differences or instructor differences, but the experience is largely similar. The customer choice is being made based off of relatively small differences.
As my colleagues and I have written, in a software-only space where differences are minimal, a product-led community can be a great moat. Another moat could be sales to enterprises, where a company buys the app/service as a benefit for employees. If you lock up as many companies as possible, very quickly, the employees of those companies become your customers. But this kind of lockup, while valuable, may not be driven by passion or love for the product.
So, a moat that could be longer lasting is hardware. Yes, hardware often scares VCs, because it can be complicated. You need to create processes around mailing things out, dealing with returns, production challenges, and more. There seems to be an endless list of issues.
However, hardware has changed over the past few years, becoming easier to manage than it was 10 years ago. A whole ecosystem of companies has emerged to support hardware companies with many of the logistical issues. And engineers, product people, designers, and marketers who have built and shipped multiple versions of good consumer hardware are available in the market.
In a crowded software market, hardware can be your moat.
The most successful of these companies is Peloton. If you buy a bike (or presumably a Tread), to just get your hardware to turn on, you have to pay Peloton $39 a month for a subscription. And while your parents’ generation ended up using exercise equipment mainly as a clothes horse, these new devices are a joy. They are well-designed, they are connected, they often have community elements, and they have a rich user experience that’s compelling and powerful. So, sure, much like your parents, you could turn your Peloton into a dumping ground for your shorts and t-shirts, but once you’ve bought a device that costs several thousand dollars, the additional monthly pinch of $39 is likely making sure that you are using the device. Their numbers back this up: their S1 claims 95% 12-month retention for those who buy their hardware. Even if it is a bit lower, like some analysts debate, it’s still incredibly strong. Also, just yesterday, agreeing with this point of view, Lululemon bought Mirror, a connected hardware exercise mirror, for $500M.
It is even better when the hardware gives you unique data. For example, our portfolio company Core provides your Heart Rate, your HRV, your minutes of calm, and your minutes of focus for each session. Because you are holding a device that vibrates to give you a point of focus, and that same device gives you all this data, once you’ve bought a Core, you’re unlikely to want to use anything else to meditate. Same goes for Peloton.
In addition, unlike another apps on your phone, which are all behind the black glass screen, hardware is visible. You can see your Peloton bike in your house, your Core trainer on your desk or bedside table. And by being visible, and by being well-designed, they beckon to you to use them and experience the tactile, live user experience with them. They exist in the real world.
These are still the early days of connected hardware, but between the physical presence, the cost paid to acquire the device (which could be a proxy of customer commitment), the tactile experience, and the data generated, these devices can serve as a moat in crowded software markets. Over the next few years, companies will evolve their model and create fantastic new experiences for consumers. Both as a user and as an investor, I am excited to see where this world goes, and I’m excited to use these beautifully designed products and apps to achieve my goals.
What I love most about the newsletter format is that it encourages discussion. In response to my last post, Put The Money On The Screen, a founder emailed me with some points that I want to share and discuss.
The founder rightly pointed out that there’s nuance to the idea of putting the money on the screen. Spending and cost-cutting decisions depend on the stage of the company and the unique circumstances.
Here’s part of what the founder wrote:
The problem with cutting off-screen costs is that the results over time mainly go to investors (because the great majority of the company over time is investor owned), and proportionally less to employees and common shareholders, which are asked to bring the sacrifice. Just be mindful of what asking people to sacrifice means.
This founder was speaking from a personal experience: being asked to take a ridiculously small salary after raising a significant Series A from a top-tier firm. The founder went into debt as a result of this, and it took a long time to recover.
While I haven’t heard both sides of the story, I do think putting a founder in that situation is harsh. VC firms should make sure founders and CEOs aren’t under undue financial stress—it’s in everyone’s self-interest for the CEO to be able to focus on building the company. Additionally, some expenses that might strike VCs as superfluous may be legitimately necessary for team morale or culture. Those are best judged by the company’s leadership.
All of this depends on the stage of the company. At the later stages, the tradeoffs will change. But regardless of stage, employees bear the brunt of putting the money on the screen during tough times. I’ve seen this happen in film, where the writer/director bears the highest cost in “making it happen,” and first-time founders are often in the same situation.
While that’s the nature of the beast, it’s something worth pausing on. It is not always the right decision to cut some “off-screen” costs. The best decisions may emerge when investors and CEOs have honest conversations that recognize the impact and consequences of these decisions.
A few days ago, The New York Times published an article about Usha Prabakaran — AKA the “pickle queen” of India. She wrote and self-published a niche, cult classic book with 1,000 pickle recipes from around India. I really enjoyed the article as it combined my love for pickles, my hometown of Chennai, and impressive women.
It’s also an article about an entrepreneur, and there are a number of useful lessons for those of us in the business of building businesses:
1. Bootstrapping to product-market fit is a great path to follow
But over the next two decades, “Usha’s Pickle Digest,” self-published by an unknown author, with a first print run of just 1,000, became a cult classic in India and its diaspora — praised for its precision and scope, celebrated on blogs and podcasts and hunted down in shops, where it sold out.
2. Be disciplined about product scope and get it out there; avoid feature creep.
In her book, Ms. Prabakaran limited herself to 1,000 recipes. When I finally got my own print-on-demand copy of “Usha’s Pickle Digest,” through Amazon, I was dazzled.
3. Focus on the goal. Learn what you need about other industries in order to accomplish the goal.
Ms. Prabakaran, now 64, became known as India’s “pickle queen,”but she wasn’t interested in monetizing that title. “I know nothing about publishing, and I was never interested in selling books,” she said at her home in Chennai. “My job is to keep the past alive.”
4. Sustainability is important.
A straightforward “anti-waste” chapter includes recipes for plantain skins, jackfruit seeds, ridge-gourd peels and lime leaves, which often end up in the compost heap. While restaurant chefs make headlines now for cooking less wastefully, pickling has always been about saving the scraps, developing flavor and texture with ingenious frugality.
5. Be laser focused on what actually matters. And you get to decide what matters.
Ms. Prabakaran is small-framed, with a wicked sense of humor and a big, throaty laugh. Her forehead is dimpled where the tumor was removed, close to the hairline, and she has no interest in reconstructive surgery.
“People care too much about looks,” she said with a shrug. “If I have any spare time, I want to work on my books.”
6. Don’t rest on your laurels. Move onto the next release, next product.
Ms. Prabakaran is at work on a second book, turning her attention to Indian rasam, a kind of soup.
7. Leave your customer feeling intense joy
The pickle did what all great pickles do: It revived me with a ripple of salt and acidity. The grainy oil tickled with chiles and citrus. It had the effect, with every breath, of filling my lungs with more air so I could breathe more deeply. And it made everything on the plate taste bigger, stronger, hotter, better.
“Isn’t it absolutely dynamite?” she asked. The question was rhetorical. She was grinning.
8. Founder-market fit is important. Do the work to know your space.
Ms. Prabakaran was hooked. She apprenticed herself, learning to turn jars in the sun so the fruit dried evenly, and to combine new and old tamarinds to balance out their acidity levels. She made so many pickles that she often gave jars away to friends and family, who begged her to write down a few recipes and share them. As she tried to standardize the recipes, her project became increasingly more ambitious.
9. Be unstoppable and don’t take no for an answer.
She spoke with publishers, and when none were interested in her idea, Ms. Prabakaran decided to do it herself.
10. Mission matters. Find the “why” that is bigger than yourself.
Ms. Prabakaran worried that without documentation, the gradual loss of this knowledge was inevitable — that more and more people would make fewer and fewer pickle varieties, until eventually, the expertise was lost.
“The reason for writing the book was to ensure that the vast culinary heritage of this land stays on the map,” she said.
11. Be resourceful to get what you need. 12. Focus intensely on the product your customers will see. You need to know it in extreme detail.
“My friends called me a crafty devil, because I could wriggle a pickle recipe out of anyone,” Ms. Prabakaran said. After she narrowed the recipes down from a catalog of 5,000, she tested each one in her home kitchen three times — a more thorough process than is used for many glossy cookbooks from big publishers.
13. Ignore the doubters, they may sometimes be friends or allies.
Friends who had supported her pickle book were skeptical — was there really so much variation when it came to rasam? Would she even be able to find 1,000 recipes this time around? And why devote a whole book to something so ordinary?
14. Be willing to do the hard, unglamorous work to make something great.
Ms. Prabakaran was undeterred. She sat down to write a love letter to rasam as a genre, extolling its value and declaring it worthy of celebration. Then she spent 10 years researching it, gathering and testing recipes, documenting patterns and anomalies.
15. Ignore the gatekeepers, work around them.
Ms. Prabakaran plans to self-publish the book in March. She wants to make it easy for cooks to find, right from the start, even if that means giving it away for free.
Entrepreneurs come in many forms. Ms. Prabakaran has displayed so many of the traits that make an entrepreneur successful. I recommend you read the article yourself. In addition to new lessons you may find, you will get a peek into a fascinating world.
I now own the pickle book (thanks, Amazon) and I’ll be on the lookout for the book on rasam. I’m not a great cook, but I always want to support the entrepreneurs who inspire.
Announcing Spero Ventures’ latest investment in health & well-being: Core, which promises to make meditation easy and accessible for everyone.
After my fourth cycle of chemo, my anxiety was at an all-time high. Little things I had never noticed before, like the light that beamed out of the top of my television and onto the ceiling, kept me awake for hours. My anxiety got so bad that I started to see a therapist. In one of our first meetings she asked me if I was open to meditation.
Our bodies are complex and interconnected systems. Physical and mental well-being are intrinsically connected. At Spero Ventures, we invest in technology that makes life worth living. Mental well-being is an area we believe is foundational to the health of our communities. And so we are happy to announce our investment in Core.
For decades our society has focused on improving our physical well-being, but until recently, we have largely ignored our mental well-being. Just like we can train our bodies, we can train our minds. And it is important we do so because the state of our mind has a pervasive effect on all parts of our lives.
So why aren’t all of us meditating? Because it takes real effort. When we want to change the shape of our bodies, it can take months of concerted effort working out, eating better and sleeping well. While we understand those requirements on the physical side, the same effort and focus is required for meditation. But even if people manage to find the time to meditate, focusing on something as ephemeral as the breath is hard for most people.
Core, founded by Sarah McDevitt and Brian Bolze, has developed a unique and immersive meditation experience to make it easier for everyone to meditate. At the center is the Core Meditation Trainer, a beautiful device that gently pulses as you meditate. The tactile signal allows meditators to focus on something tangible and ever-present.
The device is supplemented by a rich app experience that fades into the background as you start meditating. The device tracks your stress levels through heart rate and HRV, and the app shows you the moments when you were thinking about something else, and helps you understand your stress during a meditation session. It can also help you understand how your practice is improving your health over time.
We believe that technology can help address some of the most important problems that we face today. Core exemplifies this. We are excited to work with the expanding team at Core as they bring their vision to life.
My film school classmate Heather shared this video of Henry Thomas’ audition for E.T. Take a look.
What stands out are the choices he made. Before becoming an investor, I spent some years in film. I’ve auditioned children for roles and most of them make the obvious choice – screaming, shouting, being loud. That is likely what most of the kids who auditioned for this role did, too. “NOOOO!!! You can’t take him!!” etc.
But what Henry Thomas did was so unexpected. With such little information, he decided to very quietly cry. He made the creature his friend, he asked how the agent even knows all this. He decided to be extremely vulnerable. These are the choices that got him hired.
I’ve often said that there are a ton of similarities between tech and film1. This is one small example – when you are interviewing candidates, a majority will pick the obvious answers. That’s fine. They could be journeymen in the company. But when there is a candidate who makes an entirely non-obvious choice, something that makes you sit back and think in a new and different way, those are the candidates who can change the trajectory of the company. Hire them.