Stephan Uhrenbacher

What is Stephan up to?

• Mentoring startups through Creative Destruction Lab
• Product strategy and organizational structure for larger startups.
• Researching sustainable aviation.

Spending more time in Europe these days, my Q1 2020 was dedicated to help Gunnar Froh, the founder of Wunder Mobility to refine the organizational structure of his startup. Wunder has recently closed a $ 60 million round. I worked first as a coach and then in a very hands on to streamline the organization. We were able to streamline the business. The Wunder leadership team bolted on a new acquisition and could focus their growth on the most promising areas.

COVID obviously disrupted my life along with everyone elses. I feel we were lucky to have a relatively mild lock down in Germany. Most of my mentoring is remote anyway so that continues unchanged.

In my own venture portfolio, COVID has not slowed things down. At least two of the 15 founders I have currently the pleasure of working with completed funding rounds in Q2, and several companies, including Wunder mentioned above, seem stronger now than before.

Going forward:

Mentoring:
I am a mentor at the Creative Destruction Lab in Toronto since 2016. At the CDL, I will focus on Oxford, where I am a mentor in the AI and health stream. Recently, I joined CDL in Paris in the climate stream.

Operator:
I realized how much I enjoy the operator role and high pressure situations. Organizational change, restructurings and particularly pivots have been my life blood over the past 20 years. I intend to do more of this.

Environment:
If you take this blog as an account over the past couple of years, you see a strong interest in the environment (I cofounded Avocadostore.de, Germany’s eco marketplace), technology (I started out as a mechanical engineer with a thesis on fuel cells), and also in aviation.
If you add all these things up, you won’t be surprised to learn that I am currently putting a lot of research into sustainable aviation.
I hope to be able to shift this research project into something real soon.

(I am writing this from a cottage in Quebec with 5% battery left, so no perfect formatting…)

FLIO is in process to be sold to SOS Travel SPA in Italy.
If you are a user of FLIO, this means that you get to continue to use FLIO, the most used airport app in the world. FLIO has now more users than ever before and nobody else in the space comes even close.

For me as founder, this is the first business in my career where I have lost money, as have our investors. As I spend most of my time these days mentoring startup founders and investing in early stage deep tech and AI startups, I would like to share a couple of learnings.

The opportunity. “The golden hour on the sixth continent” 

This was an article in The Economist which prompted me to to move into the airport space. Passengers are confused and stressed at airport, at the same time, the “trinity” of airports, retailers and travel brands make a lot of money with them. And they are all very far from being digital. And the industry is huge, global and seems forever growing.The business logic was to build something that is useful enough for passengers to find mass adoption, then charge the industry for advertising on it.

Most of my VC friends passed on FLIO. The ones who I respect most now gave me one reason: A oligopoly in supply is not a good bases for a marketplace.

I was not held back. There are more than 300 commercially relevant airport in the world. So we got started at the very end of 2014.

Here is a rough chronology how we evolved FLIO:

Phase 1. 2015 FREE WIFI AT AIRPORTS
In its first incarnation in 2015 we built a hack to log people into the varying free wifi without having to fill the often stupid questions airports asked before they let you in. This worked often. But we could not get past the Boingo portals, which are most used in the US. Worse: whenever we successfully logged a user into the Wifi, passengers complained that the Wifi was slow and buggy. we could never fix poor airport Wifi, and they were very poor in 2014.
So while our customer acquisition was flying, we did not have a great product then. Many people are surprised when we tell them today that Flio is not about airports wifi anymore.

Phase 2. 2016-2017 FIND WHAT YOU WANT AND GET A DISCOUNT
In a pivot, we worked with some of the largest food & beverage companies to provide discounts, maps and directories. The logic was that very often you don’t find what you want, and both airports and retailers have no way to personalise and experience. We we were thrilled to have very positive feedback from some of the largest duty free retailers (did you know that the largest airport retailer has more than 40% market share globally?).
We had lots of discussions, and also sold some advertising campaigns to top brands. Yes, airports are the most expensive environment to advertise in, so why not extend this into our app.

There were several problems in this phase:

We were not that exciting for passengers (discounts?), and while we had a good liquidity in our market place in some pockets like the UK, we were far from having a global footprint.

While our cost to acquire customers was super low, they just did not stay. Our user numbers did not develop as fast as we need them to grow in order to justify continued interest from advertisers.

Most importantly, even though some of the very largest retailers scheduled meeting after meeting with us, it took us too long to realise: Retailers were not prepared to pay us any money. They did like to work with us to show to the airports how digital they were. But retailers did not need us in 2017. The way the industry works is: Retailers bid long term contracts with airports. Nearly all of the profits go to the airport, hence the profit margin of a well run airport is very high. The profit margin of even the best run retailers is extremely small. While we were always able to generate some extra margin, we did not move the needle for them, at least not in 2017.

If you are a founder of a startup depending on industry buy in, always ask yourself if they take a meeting to look good internally or if they genuinely need you.

Phase 3: 2018: The best flight tracker
In order to overcome FLIOs problem with not enough repeat users, we built a very very good flight tracker. You connect your calendar to FLIO and FLIO updates you on late departures, gate changes etc. We worked with generally available data sources, large airports and airlines directly, and were able to build a really good flight tracker which fixed the problem of repeat usage. That increased our usage dramatically, but pushed us away from our original USP.

Phase 4: 2019: Predicting what happens at the airport.
Based on my work as a mentor in the Creative Destruction Lab in Toronto, I finally had the realisation that we had to offer true innovation for passengers to be truly useful. To put it bluntly, we realised that the industry would never pay us and we had to make passengers love us.
We built two, I believe amazing products:

• FLOW measures how passengers progress through airports and predict security waiting times. This went live for Hamburg airport in June and can be scaled out to any airport. 
• DEPART predicts when your flight will actually leave depending on when your plane comes in.

Both are super useful, and nobody else offers these tools to passengers. Also both were technically not possible even 12 months earlier as phone accuracy was not enough and the databases were not available to use for the second problem.

In Phase 4, this year, I was truly excited in the potential of FLIO again. We  finally had discussions with VCs again despite being on the market for so long. We spoke to strategic investors which looked promising.

As you can guess by now, these four iterations meant that we lost too much time. We were never able to raise a lot of money for FLIO, our investor from Phase 2 lost patience with us through Phase 3 and had no interest in Phase 4. 
In June, it became clear that we would not get fresh money quickly. We had taken too long and were stuck with a capable that did not look great for new money coming in.

So now, FLIO GmbH, the German subsidiary which actually runs operations, as well as the assets from FLIO Ltd, a UK company have been sold on to SOS Travel who already have a model to make consumers pay. The parent company, FLIO Ltd UK has been put into administration as the lead investor, who gave the latest investor as a loan, did elect not to convert this investment loan into equity.

Most staff of FLIO have long found other opportunities. If you read through the above you can guess that we’ve found and kept excellent developers who were able to excel at any new challenge once we finally gave them to them. As for the sales people: Anyone who has worked selling something successful that was always „too early“ must have been stellar. Our content team and business analysts are amazing. So I am hugely grateful too anyone who had devoted their energy to making airports less confusing and less stressful.

For me, this means finally freeing up valuable time and being able to focus on working with deep tech which does excite me massively. One of the startups I work with can help people get the best treatment for cancer. One can help aircraft engines save fuel. One will help monitor global methane emissions. Lots to do.

As a mentor to startups after 6 successful startups and now one partial failure, I am more sensitive to the following topics:

1. If it is a marketplace: Make sure the key players need you.
2. If all your VC friends say no. Could they have another reason than “not getting it”.?
3. Is your investor flexible enough to go the next pivot?
4. Convertible loans sound nice, but what happens if the next round doesn’t happen?
5. Always decide who your customer is. And love them.
6. Make sure your USP is crystal clear. A new USP sometimes justifies a new brand. It is hard to sell a „Swiss army knife“ for x.

As Warren Buffett has become mainstream, it is now easy to confuse the forest and the trees of the headlines. I made my first trip to the annual meeting of Berkshire Hathaway in 2008 and have been to the event seven times in total. Going back to Omaha is not so much about learning something new, but to be reminded of the important bits that I forget in between. Buffett and Munger consider themselves business pickers not stock pickers. They offer wonderful food for thought for entrepreneurs.

The best Interviews and speeches:

• Warren Buffett: advice for students: Lincoln University Speech from 2015
• Warren Buffet: the best speech about leadership and how he runs his business the probably this video from 2003.
• Charlie, of course, is amazing when he gets to speak and there are a lot of good ones on youtube. I like the recent ones best. Watch from Minute 23 onwards here in 2017, where he goes on about doing something that you enjoy doing.

The essence of Charlie Munger and Warren Buffett  in writing:

Many of the books about Buffett and Munger obscure more than they reveal: As both are very good communicators, it is always a good idea to read the source:

• The essence of Berkshire Hathaway:
  Special Letters to the Shareholders, the present, the past and the future As they’ve written both their versions, you get two very different approaches.
• The essence of Charlie Munger. Charlie has been quoted and quoted again, and I think his unique approach to critical thinking is the consistent theme. This is best visible in his 1995 speech The psychology of human misjudgement, which is also the centrepiece of his own book “Poor Charlie’s Almanack”.
• The essence of Warren Buffett is more difficult to pin down into one core piece. But in his original writing: The Superinvestors of Graham and Doddsville from 1984. Buffett essentially proves that value investing works. This was before value investing became super hyped. Since then Buffett has evolved many times over.

Some of the blogs that I enjoy most:

• Farnam Street Shane Parrish fs.blog
• 25iq by Tren Griffin: 25iq.com

Should you take advice from a guy who draws cartoons for a living? Generally not. Scott Adams, who does the Dilbert comics, is the exception to this rule. His book ‘How to Fail at Almost Everything and Still Win Big’ is one of the best books about life and happiness that I’ve read recently. It has triggered this piece. (EDIT 2017: Since I posted this, Scott Adams has correctly predicted Trump winning the elections, however, he then turned into an unabashed self-righteous Trump-supporter and continues to explain the worst US president in history. I keep this post as a document, nothing is wrong with the book recommendation)

As entrepreneurs, most of us are goal achieving machines. At least those entrepreneurs who are successful. A lot of my close entrepreneurial friends are fantastic in achieving their goals. In our organizations, it  is much easier for people to work together if there is a common goal.

I am by all accounts good at achieving goals. Get a great university degree, become an entrepreneur; study abroad, buy first apartment, build a company, get funded, sell company, raise a family, to do only things that have a meaning – whatever I set out to do I’ve achieved-  with the exception of achieving some ideal weight.

If goals are so great, then what is wrong with goals?

After each goal I achieved, I fell into a hole until I would find a new goal that I could go and achieve. Worse: During all that time, few people would have called me content. In order to be good at achieving goals I probably needed to not be happy with the status quo. In my experience that you can generalize this:

Most overachievers pay a high price for their achievements – they are never happy for a long term.

Over time I did improve. In the past couple of years I changed. I started to define a great day as a day when I spend time with my wife, my kids and do some great exercise. A good day is also defined by having meaningful intellectual exchange with people I respect. So a good day really doesn’t have anything to do with achieving more, or having more.

What does this have to do with Scott Adams’ book? Adams provides many more examples and a framework of goals versus systems:

“Goal-oriented people exist in a state of continuous presuccess failure at best, and permanent failure at worst if things never work out. Systems people succeed every time they apply their systems, in a sense that they did what they intended to do. The goals people are fighting the feeling of discouragement at each turn. The systems people are feeling good at every time they apply their system.”

In personal life, going back to dieting: losing 20 pounds is a goal that is usually always doomed, while focusing to change your habits for a different diet is a system that will last.

As a serial entrepreneur, I have evolved my system of identifying a market niche which fullfils a genuine user need, using an intact reputation to get the best possible people on board, acquire capital without over promising and executing fast. But I don’t have a goal of “x million in y years”. And I am certainly more happy for it.

In investing, I trained for years to identify companies that have evolved a great system. A company an idiot can run, to paraphrase Warren Buffet. Buffet has built one of the best systems himself with building a company that automatically increases earnings over time. Regus plc has built a system to constantly increase their office space without taking on the risk involved. In Germany, Rocket Internet is a system that can churn out companies at a bigger scale than anyone else.

Speaking of Buffet: As I attended Berkshire’s annual shareholder meeting for the 5^th time this year, I realised something in the way Warren Buffet spoke about a recent acquisition in Germany and potential future acquisitions.

I had foolishly assumed that there was some kind of big plan for what he does. But: There is no big plan: They made decisions to acquire companies within less than a day. Buffet just happens to have a system of capital allocation and a certain pattern for companies that fit into BRK. And he communicates which companies might fit, wanting to become the preferred buyer for certain sellers. – A system without goals.

Scott Adams:
“If you do something every day, it’s a system.
If you’re waiting to achieve it someday in the future, it’s a goal.”

To close with one of my favourite Zen quotes:

“Before enlightenment: Chop wood, carry water.
After enlightenment: Chop Wood, carry water.”