The positive relationship between Michael Loeb and Rich Vogel has paid off handsomely for decades, from their sale of magazine subscription services company Synapse Group to Time Inc. in a deal that valued the company at more than $500M, to their current work at Loeb.nyc, where they oversee 18 direct investments with a hands-on approach that leverages their extensive business experience.
This team has always been ahead of the curve, knowing how magazines would be sold before the publications did, and pivoting at the perfect time. Now, they’re blazing a trail with Loeb Enterprises and Loeb.nyc, investing in innovative companies across the spectrum with a one-stop approach that sets them apart. They wouldn’t have it any other way.
Loeb and Vogel, the 2020 Sports, Media, and Entertainment Visionaries of the Year, recently spoke with CSQ (virtually, of course) about their convergent paths to success. “There are many themes that are common between us,” Vogel says. “One of them is getting fired.”
Bloodlines and Bylines
Loeb was born into the media industry. His father, Marshall, worked as an editor at several Time Inc. publications, finishing his career as managing editor of Fortune. The younger Loeb didn’t show much academic aptitude early on, describing his performance at a variety of Queens public schools as “solidly mediocre.”
His father moved the family to Scarsdale, N.Y., where “the jig was up” when Loeb’s excellent standardized test scores did not line up with his poor grades. He stepped it up and graduated from Amherst College before following his birthright and taking a job at Time Inc. Fatefully, it was on the business side, not editorial.
Vogel grew up in Connecticut and landed his first job on Wall Street, where he eventually decided to make his career. The problem was that he was hired in 1987. By the end of the year, he was laid off.
“It took a lot of time to figure out what I thought I wanted to do,” Vogel says. “And then I was wrong anyway.” He found himself unemployed in New York City, but a job reference soon changed his life. “It’s all serendipity,” Vogel says. “Wall Street was a tough place to get a job at that time and I happened to know somebody that worked at Time Inc. who had some temp work.”
The work paid $20 per hour, which was more than Vogel was making on Wall Street. But more importantly, that’s where Vogel met the “second-greatest marketer” he ever worked with: Margie Rich, who hired him in the magazine’s circulation department.
That’s also where they both met Loeb, whom they’d be bound to forever. Vogel became Loeb’s longtime business partner and Rich became Loeb’s wife. Loeb became what he describes as the “launch boy” of Time Inc., where he helped start up Sports Illustrated for Kids, Sports Illustrated Video, and other wildly successful products in the go-go 1980s.
“In the land of the blind, the one-eyed man is king,” Loeb says about that period. His big reward was being asked to help launch Entertainment Weekly in 1990. “That was the job that got me fired,” Loeb says.
Loeb and his editor disagreed about the vision for the magazine. The latter advocated for more of a focus on “folks in poetry,” which Loeb thought would be a poor fit for the cadence of a weekly magazine. Both were given the hook. But it turned out to be the best thing that ever happened to Loeb.
“I didn’t mean to get revenge, but I ended up starting the company outside of Time Inc. that I was trying to start inside of Time Inc., which was Synapse Group,” Loeb says. “It sounds quaint now as its mission, but we were going to allow people to pay for their magazine and newspaper subscriptions with a credit card.”
His then and future business partner would soon join the mission.
Charge the Game
Given the sadly diminished state of many of them today, people forget the significance of national newsmagazines during the media heyday of the 1980s and ’90s. Titles like Time and Sports Illustrated printed money, sending well-paid reporters on first-class flights to cover news around the world.
Loeb and Vogel’s idea, Synapse Group, built a business helping these publications add millions of paying subscribers through relatively new avenues like recurring credit card payments and frequent-flier programs.
As Loeb describes it, Synapse Group’s real innovation was a “cradle-to-grave” product. The company wouldn’t just provide payment processing, it also sold magazine subscriptions and maintained them.
“It was more than just a software-as-a-service-based business,” Loeb says. “While we had the platform, we deployed the platform for our own account and became a rather large business selling thousands of titles. When we decided the time was right to make a transaction, which was about eight or nine years in, we were going to bring the company public, and wouldn’t you know it—Time Inc. made the phone call asking if we wanted to bury the hatchet.
“The truth is, we had done that a long time ago,” he says. “We were their biggest supplier of subscriptions, and they were our biggest client.”
Synapse and Time Inc. decided on a private deal that included an unusual provision: a lengthy earn-out. That ended up working out for both parties. Even better for Loeb and Vogel, Synapse was bootstrapped from its early days, leading to a huge windfall for them. The only significant outside capital in the company was from investment firm General Atlantic, which happened as a consequence of the founding of an internet travel pioneer.
As Loeb explains it, his co-founder in Synapse was Jay Walker, who would eventually come up with the idea for Priceline.com. But with the dot-com crash, it was nearly impossible to raise capital for a money-losing tech company. Instead, Walker sold shares in profitable Synapse to enable his investment in Priceline.
In any event, Synapse sold a majority stake to Time Inc.’s parent company, Time Warner, in 2001 in a deal that valued the company at more than $500M. Loeb and Vogel, and many of their longtime employees, immediately felt that impact.
“When Synapse was sold to Time Inc., 26 people became millionaires overnight,” Loeb says. “That’s the type of thing that puts a smile on our face.”
Loeb and Vogel remained at Time Warner until the media conglomerate completed the purchase of the rest of Synapse in 2006. “After that, all we knew is that we wanted to continue working together,” Vogel says. “We did not have an idea for our next business. We did not know what space we wanted to play in. Frankly, all we knew was that the chemistry worked, and to this day we’re better together than we are separate.”
He describes this period as “wandering in the desert.” First, Loeb and Vogel tried what a lot of newly rich people do and dabbled in passive investing. They quickly realized they were better off operating businesses. The only problem: They had no good ideas.
“We just started attacking stuff and spaces and throwing spaghetti at the wall until something worked pretty significantly,” Vogel says. That particular sticky noodle turned out to be Loeb Enterprises, the investment company they founded in 2006. Loeb Enterprises was rebranded as Loeb.nyc in 2019.
Vogel and Loeb now invest in a variety of businesses through this vehicle, which they describe as a “venture collective” that helps startups grow by supplying capital, expertise, and infrastructure.
“You can think of our model as a Tootsie Pop,” Loeb says. “The chocolatey center is our companies. They are a combination of our ideas and external ideas. Sometimes they are early-in-the-curve companies that we grab the steering wheel and run with. The hard candy on the outside is our shared services group.”
Loeb describes the shared services group as a Swiss Army knife of the skills companies need to build and scale. That consists of everything from back-office accounting to tech support and marketing. Loeb.nyc has capabilities like an in-house agency for physical collateral and even an M&A department for later-stage deal making.
Loeb.nyc’s main selling point—not terribly surprising from two guys who made it in the media world—is marketing. For example, the firm has its own call center in Virginia. For health care companies, Loeb.nyc assembled a force of 3,000 people who visited 400,000 doctor’s offices to distribute materials.
There’s also a TV production studio in-house, and all the internet marketing tools any company would need, from SEO and social media expertise to programmatic ad sales and influencer relationships. Best of all, these services are free to the companies, included in the price of a Loeb.nyc investment.
This is a much more involved and expensive approach than most venture investors use, which consists of little more than a check and presence at board meetings. That’s because Loeb.nyc is playing a different game with different fundamental math. In simplest terms, if a little extra money up front can materially improve a batting average in the long haul, it’s worth it every time.
“We’re trying to lean into a fundamental tenet,” Loeb says. “Venture capital says 2 in 10 deals work or 1 in 10 work, which really warps decision making. If it’s really a 1 in 10 or 2 in 10, a three times or five times return does nothing for you.”
That’s a flawed incentive structure, he says, that leads companies to take on debt they don’t need to meet targets that don’t make sense. “They say, ‘Load it up with more rocket fuel and make it drive faster,’” Loeb says. “You say, ‘There’s a good chance if we try to go faster the wheels will come off and we’ll crash.’ They don’t care because three times doesn’t do a thing for them.”
Every deal is unique, and every company requires its own levels of support, but the Loeb.nyc approach as a whole is distinct. “The risk-reward curve is very different in our world,” Vogel says. “We’re not a fund. Goals and objectives and things change when you’re dealing with other people’s money. We’re different. It’s our money—until a portfolio company raises outside capital—and that gives us great flexibility in time lines and pivots and fast decision making.”
It also lets the firm allow slow-growing companies to mature on their own time, and acts as a good balance against short-term thinking.
“We have created this ecosystem that leans into success,” Loeb says. “We don’t hand a 27-year-old $5M. I wouldn’t give a child matches either. We pay bills, and every month is another review: Does it continue to make sense?”
While they don’t need to hit a 10 bagger every time, they’re in this line of work for multiple growth, not the single-digit percentage increases of big companies.
“One of the things Michael and I were frustrated about while working at big companies is that you’re playing for what, 4% growth a year?” Vogel says. “The g-forces of that acceleration is why we get up in the morning and have fun in early-stage, active investing.
“It’s not for the faint of heart,” he adds. “But we love it, because we’re able to have so much impact in such a short time line.”
The Evolution of Theory
Sometimes, a product is so imaginative and clever it is hard to fathom how someone could have come up with it. That’s not what Loeb.nyc is looking to invest in.
“We like the things that when people reflect on it say, ‘Oh my God, that’s obvious!’” Loeb says.
One of their portfolio companies, Butler Hospitality, is a great example. It provides hotel kitchen “hubs” that allows smaller or independent hotels to use economies of scale to offer a higher-quality room service and catering product to guests.
Loeb and Vogel differ from most investors in another notable way: They are “theory based.” Many investors give up on a great idea as soon as it starts losing money. Loeb and Vogel choose to try to run it back with a different game plan—as long as the idea was good.
“If the execution doesn’t work against the theory, we ask, ‘Is that theory still sound?’” Loeb says. “If so, we test another execution.” That’s what they did with portfolio company Fetch Rewards, which helps grocery shoppers save money on packaged goods and take better advantage of loyalty programs—and helps brands understand the shopping behavior of their customers.
The underlying theory behind the business was that manufacturers of consumer-packaged goods could find value in knowing who their customers were. Before, the extent of their customer insight was how empty the shelf was. That did not account for whether the shelf was emptied by a string of regular consumers who are likely to come back next week, or if it was a one-time impulse purchase from out-of-town families.
With the guidance of the Loeb.nyc team and others, Fetch Rewards has pivoted multiple times to find the right approach—and is now thriving. “Not to cast aspersions against VCs, but they’re not necessarily built for that,” Loeb says.
Vogel and Loeb are also drawn to companies looking to address problems faced by lower-income Americans—more directly, companies that help put money back in their pockets.
Vogel and Loeb are particularly proud of former portfolio pharmacy discount-card company ScriptRelief (since acquired and now operating under a different name), which offered discounts of more than 50% off the retail price for prescriptions for people who were uninsured. Loeb credits the company for saving people billions of dollars.
Another portfolio company, Steady, is described by Loeb as “your advocate in the gig economy.” Steady maximizes gig workers’ income by suggesting times when it makes the most sense to drive their Uber or Lyft—and when to ignore prompts from the ridesharing companies and take a different gig instead. The results speak for themselves, with the company increasing users’ incomes by $350 per month, Loeb says.
“Who’s the advocate for the person who plays in those spaces?” he says. “Who makes sure they are optimizing their income? That’s something that is really, really gratifying.”
Steady also used its data to proactively give cash to drivers struggling with a paucity of rides in the early days of the COVID-19 pandemic. “When they saw a down vector with COVID, they were able to award $3M to people just to keep them afloat,” Loeb says. “You can do well by doing good, and that’s an example of that.”
Why the Team Works
All happy families may be alike, but there’s no one model for a good business partnership. It is easy to see the natural chemistry of Loeb and Vogel, even as disembodied Zoom callers in different physical locations.
Vogel refers to Loeb as a “creative savant” and credits his top-tier analytical skills, while saying his own strengths lie in his instincts and intangibles that are more difficult to articulate. “There’s nobody I think I could be more productive with than Michael Loeb,” Vogel says.
Loeb has no problem finding words to praise his business partner. “What you need is a great partner and great editor, which is built on trust and faith,” he says. “I can get hyped up about a bright, shiny object, and Rich will dissect it and ask, ‘Have you thought about that?’ A lot of times, the answer is no.”
“Michael comes up with 75 ideas an hour,” Vogel says. “I’m the guy who has to marry those ideas with finite resources—both capital resources and human resources—and try to narrow those to the things we both believe have the best shot at success. It’s a balance.”
Loeb credits Vogel with always scouring the horizon for potential minefields, many of which didn’t exist when they first got together. “Is a new opportunity one of those things where you can go three or four innings and then Amazon is going to go in and squash you?” Loeb says. “Doing all that brain work about the practicality of it all and the ticking and tying of it all is a skill that he has in great quantity. If I really, really work hard and wince and get a migraine, I can barely muscle it over the finish line.”
Complementary skills and personalities are critical, but a two-headed force only works when there’s one heart. “More important than anything are the shared core values,” Vogel says.
He recalls an early glimpse at Loeb’s core values during a conversation when things were going well at Synapse and a lucrative exit was looming. He wanted Loeb’s thoughts about giving back and got an emotional speech about how many kids were put through school and houses were bought by families from wealth created—and shared—by Synapse.
“I remember how passionately Michael spoke about that,” Vogel says. “When you talk about what your legacy is, it is certainly the jobs, the children, the life. It’s a beautiful thing. There’s not a day that goes by when we’re not thinking about this. It’s really the most rewarding part of all of this.”
Loeb and Vogel have navigated through uncertain times in the economy before, but the pandemic and its fallout are clearly different and will have a long-lasting impact on the economy. Of course, this only energizes them.
“The future has never been more confused, cloudy, or opportune,” Loeb says. “There are going to be businesses made right now in this moment when the deck chairs have been reshuffled that will be some of the great companies of five or 10 years from now. The seeds for that are being planted right now.”
Loeb believes the pandemic has caused a 10-year acceleration of existing trends, with the “retail apocalypse” and the supremacy of the digital space the most notable effects. But when the economy goes through the roil of a spin cycle like this, dynamic new companies often float to the top.
Marshall Loeb helped America understand business by writing stories like this. It’s only right for Loeb.nyc to be a part of them.
“Truly disruptive companies come along infrequently,” Vogel says. “Finding them is the most satisfying journey we can be on. I don’t see us stopping. This is where we’re supposed to be.”