Emerging Markets Fund Q&A: 12traits CEO Joe Schaeppi
April 9, 2021 | Scott Murphy
We’re pleased to introduce you to one of Alumni Ventures’ initial investments in our Emerging Markets Fund portfolio, which will include ~20-30 diversified investments in companies based outside traditional venture hubs (Boston, NYC, Silicon Valley) and around the globe. We recently invested in 12traits and interviewed Co-Founder and CEO Joe Schaeppi.
12traits, based in Berlin and Minneapolis, uses AI and deep psychological assessment to uncover customer insights and then make them actionable. The company is initially focused on the gaming industry, giving publishers a way to better understand, engage, and monetize their customers. 12traits collects neuropsychological surveys from game users and runs it through an AI engine. They are able to reveal what truly makes a customer tick, trapping 400 psychological data points relating to desires, motivations, values, and personality traits.
What problem or opportunity is 12traits addressing?
Joe: I was designing user experiences at Fortune 500 companies, and I realized there was very little effort or investment made to understand the actual human being using our products. There was a complete lack of empathy and design, and the systems and technology we were building were not being built in a sustainable or responsible way.
So I started building assessments that could actually measure the different traits about people that can help us understand what we would need to know about a person if we’re going to create something for them. We’ve all bought something for someone close to us, and we’re excited to give it to them because we know them so well and we want to see how they’re going to react. There’s just no way you can create that sort of experience for a customer if all you understand about them is that they’re a 35-year-old male that likes Call of Duty. So the same things that we all come to know about our friends and family, we help automate that journey for companies so they can provide customers with healthier, better, more sustainable, and engaging experiences.
What markets are you addressing?
Our broader market is experience management. People are spending more money on experiences now than they are on products and services, and to create a really great experience, you have to understand who the user is. We also knew that the gaming industry is now larger than the music, television, and movie industries combined. With games and the experience economy continuing to grow, you basically have two synergistic forces.
Our third vertical is mental health. By 2030, WHO projects mental health will cost governments globally around $15 trillion. So with 3 billion people in the world that use technology playing games every day, we view that as a great opportunity to understand mental health through the lens of user experience, especially in gaming. Our thesis as a company is to help create digital experiences that are healthier for people, more sustainable, and less invasive by allowing technology to anonymously get to understand audiences better and be more empathetic to their needs.
Why did you launch 12traits outside of traditional venture hubs?
I grew up in Minnesota, my Co-Founder Bastian Bergmann is from Germany, and we both went to school in Minnesota together. We knew that when you build a startup, you have a lot working against you, so we wanted to go where we were most likely to succeed.
We started putting job postings up all over Europe and the United States, and we had more talent pouring in through Berlin than anywhere else. Bastian’s former company was in Berlin, so we already had a network there. We decided that we were going to anchor in Berlin, while still being a U.S. company.
I came back to Minnesota because of the pandemic, and when I think about our company values — which center around sustainability, health, well-being — I see how they are instilled in the culture here. There’s also a long history of mental health research in Minnesota.
What are the challenges and opportunities of being based in an emerging market?
With COVID, many larger companies, especially in tech, said, “Work from wherever you want until this all settles down.” Our whole company was built off of this setup.
We had VCs in New York that said, “If you were based in New York or San Francisco, we would fund you right now.” But we knew that those ecosystems were not in line with our value systems, and they were less likely to set us up for success in the long run.
And from a talent perspective, you’re competing against a lot of other big players, and salaries are grossly inflated in all of these places. We’re never going to be able to out-offer a Facebook or a Google or an Amazon. So we said, “We’ll hire wherever, we’ll go to where the talent is.” And we preferred the talent that we saw coming through Berlin compared to what we saw from San Francisco and New York.
Berlin is also a very economical place to live. Bastian and I bootstrapped this company with our own resources, and our money has gone way farther there.
Why did you decide to work with Alumni Ventures? What makes our firm stand out as a VC partner?
I first connected with John Linden from Mythical Games, which is an Alumni Ventures portfolio company. We developed a great partnership and brought him on as an advisor. He recommended I reach out to Alumni Ventures and said, “They’re one of the best value-add groups I’ve seen on a cap table. It’s refreshing compared to a lot of traditional VCs.” There’s no better reference you can get than one from another founder. John has worked with a lot of different types of VCs, and when someone you trust makes such a strong recommendation, it really resonated with me.
One of the things that was important to 12traits was getting in contact with HubSpot for example. They pioneered inbound marketing and built out that market space. We approached Alumni Ventures and said, “We’d love to talk to somebody at HubSpot who can help with pricing and strategy.” A day later, Alumni Ventures worked on three introductions for us. There are top VC names out there that wouldn’t do something like that. So I think the value-add is quite obvious.
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