Nic Brisbourne's view from London on technology and startups

The UK is still hot for ecommerce

By | Ecommerce | No Comments

Us Brits are famously a nation of shoppers, and that’s translated into being a nation of online shoppers. For a while we’ve spent more online per head than other developed economies and created more than our fair share of ecommerce winners as a result.

New data out from eCommerce Europe shows the picture hasn’t changed and that there’s still a lot of growth to come:

  • in 2013 the UK spent $142bn on eCommerce, third in the world on a gross spend basis behind the USA and China which have much larger populations. Germany, the next European country on the list, was two places behind the UK with $84bn spend. Germany has a population of 81m and the UK has 64m people.
  • Global eCommerce is forecast to grow at 23% 2013-2014 and 18% 2014-2015. Within that the UK eCommerce is forecast to grow at 17% 2013-2014.
  • There are 7.4bn people in the world of which 4.2bn are online and only 1.0bn are e-shoppers. The equivalent figures for Europe are population: 881m, online: 564m, e-shoppers: 331m.

Lots of eCommerce markets have now been ‘done’ from a venture perspective, but there’s still lots of opportunity ahead of us.

Small funds are in a better place to invest in new markets

By | Venture Capital | 4 Comments

In a post yesterday VC Rob Go correctly identified that one of the most common reasons investors pass on investments is some version of “it’s not big enough”. He’s dead right. Most good VCs have a strong discipline of only making investments that can return their fund and that rules out a lot of potential investments.

If a VC has a $200m fund, a 20% stake in a $1bn exit will net them $200m and hence be a fund returner. $200m funds, therefore, should only invest in companies they believe are in markets large enough to sustain companies with an enterprise value of $1bn (assuming they will average 20% stakes at exit).

With the same assumptions $50m funds can invest in markets they have confidence can sustain $250m exits.

When new markets first emerge they are highly speculative with little to no evidence for investors to go on. Then over time evidence accumulates. First there’s enough to be sure there’s a tiny market, then a small, one and so on, until, assuming the best, several $100m+ revenue companies have emerged and all analysts everywhere agree the market is huge.

Small funds are able to take bets earlier in this process and are hence best placed to invest in emerging markets.


That’s why at Forward Partners we have kept our fund size small ($50m). We invest at concept stage when there’s often very little to go on with regard to market size and, just like Rob says, insufficient confidence in the scale of the opportunity is one of the most common reasons we pass. If our fund was any bigger we’d have to pass on even more deals.

When assessing opportunity size we actually look for two things. Firstly that there’s reasonable grounds to believe the opportunity is large enough to return our fund, and secondly there’s a chance that the opportunity will turn out to be much larger. Then we hope that as the evidence accumulates it will become clear that the company has the potential not just to return our fund, but to return a multiple of our fund.

Building the right founding team

By | Startup general interest | No Comments

This post will be one of the articles on when we have the formal launch on September 9th. There’s currently a placeholder site which explains what The Path Forward is (a guide for ecommerce and marketplace entrepreneurs in their first year). When it goes live we will add a bunch of practical guides like the one below and some case studies. We will continue to add articles and we hope that others will too and that The Path will become a community owned project.


Key takeaways

– The essential capabilities in the first months are product design and development
– The company also needs the hustle to get stuff done and find the first few customers
– In the first months it’s best to optimise for the best skills, even if they aren’t in-house
– Don’t compromise on quality for co-founders and other permanent decisions

Building the right founding team

The founding team sets the mould for future employees of a company and the oft repeated cliche that A players hire A players while B players hire C players is very true. So getting those first few team members right is key. And that includes the choice of co-founder.

Yet founders want to move fast and there is an inevitable tension between speed and quality. The challenge is that any compromise made in the choice of co-founders or other early staff will be with the business for a long time, and possibly forever.

In the first couple of months a company should be doing research to prove the need for their idea and find a point of real emotional connection with customers. Then they should capture that need in a compelling value proposition and test it with a prototype.

Completing these tasks requires capabilities in product design and development, as well as the hustle to organise research and find initial customers. One way of doing this is to have a hipster, a hacker, and a hustler on the founding team (Dave McLure has described this combination as the minimum viable team, although it’s possible that two people could cover all three bases between them).

Another way is to bring the capabilities into the business on a more short term basis. Most commonly that’s done through freelance arrangements and sweat equity deals. Outsourcing to agencies is hard to make work at this stage because everything about the business and product is still fuzzy and changing all the time. The key is that whoever is building the product fully understands and buys into the company vision.

What’s most important during this formative period is to quickly validate the idea, not build out a team for the sake of it or because investors say they want to see it. It will become easier to pull great people into the business once the idea is validated, and that includes co-founders.

The first couple of months for a startup are a bit like the big bang at the beginning of time. Lots of key decisions with far reaching consequences get made in a short period of time and the final thing that’s important at this stage is that someone is supporting and challenging the CEO. She should test and probe thinking, operate as a sounding board, help with the emotional challenges of startup life, and provide pressure to perform if/when motivation falters. She could be a co-founder, angel investor, or an outside board member.

Optimising for ‘flow’ to increase happiness and productivity

By | Startup general interest | 2 Comments

Flow is a mental state where we are happy and productive, a term first coined by psychologist Mihaly Csikszentmihalyi in 1990. Stephen Kotler offered this definition in a recent slideshare deck:

Flow is an optimal state of consciousness, a peak state where we both feel our best and perform our best

If you can visualise your favourite athlete when they were at the top of their game, when the world seemed to be moving slowly for them and they could do no wrong then you are seeing someone in flow state. Developers often achieve flow state too, head down, headphones on, cranking out great code. Or picture a dancer, lost in the music. Or a magical conversation with your other half.

Lots of examples, and the point is that all us can experience flow. It’s important because doing so makes us happier and more productive. One way to a happier life, therefore, is to maximise flow. And one way to build a stronger culture is to optimise for flow in the workplace.

Kotler has identified 17 triggers for flow:

  • intensely focused attention
  • clear goals
  • immediate feedback
  • challenge that stretches us, but not too much
  • high consequences
  • rich environment
  • deep embodiment
  • serious consequences
  • shared goals
  • good communication
  • familiarity
  • equal participation and skill level
  • risk
  • sense of control
  • close listening
  • postive/constructive environment (yes, and…)
  • creativity

Notice that most of the items on this list are features of good company cultures and/or things we try to cultivate in our businesses. Flipping this on its head, the interesting idea for me is whether optimising flow might be a way to think about the goal for a company culture.

Most startups start thinking about their company culture when they get big enough that the founder stops having close contact with everyone in the business. The goal is to make sure the special sauce the founder has discovered doesn’t get lost as the company grows. The business reasons for doing that are usually to maintain productivity and creativity, and to help attract and retain talent.

What I like about Kotler’s 17 triggers for flow is that they provide the link between culture and productivity.

This is an emerging area I will watch with interest.

Correction: CB Insights’ “private company health score”

By | Startup general interest | One Comment

CB Insights have released a product called Mosaic which gives private companies a score which predicts their likely future success. The score is derived from lots of data they pull from structured and unstructured sources on the web and then process through a heavy statistical analysis. They pulled data from as many sources as possible looked to see which pieces of it have correlated with startup success in the past and assumed that companies scoring highly on those elements will succeed in the future.

The score has three components, momentum, market, and money. That seems reasonable, although doesn’t give as much prominence to team and product as most VCs do when they talk about startups. I guess CB Insights would counter that team and product drive the momentum score.

There’s much more detail on their site here.

I’m interested for three reasons:

  1. Forward Partners might be able to use Mosaic score as part of our assessment of companies
  2. VCs might start using the Mosaic score as part of their evaluation when they look at our companies
  3. Forward Partners might be able to use the market component of the score to identify new market opportunities as they open up and use that for proactive deal sourcing

Having got that straight in my mind it’s clear we should sign up for a free trial and see what we can do.

The analysis looks thorough and I’m hopeful something will come out of it. Right now I can think of two reasons it might not work for us. Most importantly, I think the analysis is based on correlation not causation, and the score will stop being useful if companies deliberately manipulate some of the inputs (i.e. game the system). For example, the momentum score is partly based on the number of job openings at a company, which is easily manipulated. The second question I have is whether it will work well for the very young companies that we invest in, many of which are too small to have many momentum signals, are in markets that aren’t established enough to have sufficient volume of activity for CB Insights to track, and are too fledgling to have any financial strength.

Update: Earlier versions of this post erroneously referred to Mattermark instead of CB Insights.

Negotiating styles

By | Startup general interest | No Comments

My friend Jason Tavaria posted this link to charts about national negotiating styles to an email group I’m a member of (apologies to other members of the ICE Group reading this for the repetition).

This is how we English negotiate:


I certainly recognise that in myself and my compatriots. Perhaps more interestingly it also helps make sense of where I’m different. I’m very direct by nature and have a strong preference for clarity and speed which leads me to try and push negotiations through the two middle stages as fast as possible. I want to go straight from “reasonable proposal” to “re-packaging” by staying calm and using humour as my tool and can lose patience in the middle stages when people I’m negotiating with are using coded speech and stalling.

And here’s how people in the US negotiate:


The “cards on the table” approach fits well with my style, but no matter how many times I go through fighting in the middle of a negotiation always leaves me wondering if the other person is a … not very nice person. That feeling can go away quite quickly, but it’s definitely there. Knowing that feeling is coming from my British dislike for confrontation definitely helps.

In any negotiation (or interaction in general) knowing yourself and knowing the other side helps find the white space and get a result. These charts are a good tool.


Solutions for closing the gap between browsing and buying on mobile

By | Ecommerce | 18 Comments

Yesterday I wrote about the yawning gap between the 60% of retail browsing and the 15% of purchases that occur on mobile. Michael Haynes commented:

one of the biggest pain points in mcommerce currently is how difficult it is to fill out all the forms – especially if checking out on a new website and factoring in that many sites require registration. It becomes a nightmare that most people will just leave and checkout on a desktop

That makes sense to me. The pain in filling out forms is the biggest reason I sometimes move to my laptop to complete purchases, and bear in mind I’m more patient than many other users because I’m professionally curious about mCommerce. When I do abandon a purchase on mobile it’s either because filling out the form takes too long or because it’s buggy on mobile.

Conversely the beauty of apps like Uber and Amazon is that they have my data already and I can check out with one click.

The key to getting people to purchase on their phones, then, is to take care of the site registration and form filling. There are two broad types of solution getting talked about at the moment:

  • AI based assistants based in the mobile OS – Google Now and Siri lead the pack
  • Messaging clients – Facebook and WeChat are out front here, but services like Telegram and Snapchat are also interesting

I think these all have stated ambitions to enable commerce from a chat style interface, but aren’t doing it yet in volume. Ultimately they will store your personal information and credit card data for you and supply it to ecommerce companies when you want to buy something.

The big question is how discovery will work. If I want to buy flowers on Whatsapp what options will I get? Best case for me is I search and get a full list of providers who have integrated with an open API, appropriately ranked. Worst case is I get to choose between a small number of companies that Facebook has chosen to partner with.

Search currently happens in the browser of course. An alternative solution would be for my data to be stored in the browser and made available to automatically fill out forms. That would keep the open-ness of the web, which would be great for discovering new services. Nobody’s talking about this idea though, at least not that I’ve heard.

Mobile has 60% of retail browsing and 15% of purchases

By | Ecommerce | 6 Comments

I swore out loud earlier today when I read this statistic.

60 percent of retail browsing happens on mobile devices, those devices only account for 15 percent of dollars spent

That’s a massive opportunity, right there.

And what’s interesting is that it’s still with us. Mobile first has been here for years now.

We have good mCommerce models now for regular purchases – Uber and Amazon are two great examples – but for more occasional purchases apps don’t make sense and mobile browsing in its current form clearly isn’t working.

One approach, as taken by our portfolio company Stylect, is to combine entertainment/content with commerce to build an app that people visit daily and purchase from occasionally, but I don’t think this will work for every vertical and what this headline statistic tells us is that there’s a big opportunity to innovate and a large prize for the company that gets it right.


Making sense of the bubble talk and the impact on startups

By | Startup general interest, Uncategorized, Venture Capital | No Comments

There’s a lot of contradictory advice out there at the moment. On the one hand you have the ‘entrepreneurs should just do their thing and not pay attention to the markets’ folk and then on the other hand there are plenty of observers saying that a bubble has burst.

Many people I respect are in the former camp. Tomas Tunguz said it clearest with his recent post Why the bubble question doesn’t matter which lists the things good companies do and points out that they are the same in bull markets and bear markets. I’ve read posts from Brad Feld in the past saying he doesn’t pay attention to bubble talk and in a post earlier this week Fred Wilson quoted someone else quoting him saying “Markets come and go. Good businesses don’t.” (although he did also point out that if companies need to raise money then the capital markets can affect them).

I have sympathy with this view. Startups and venture funds run for 5-10+ years, are likely to see a recession at some point in their lives (maybe two) and hence need to be able to survive and prosper in both recessionary and growth environments. Moreover, predicting when crashes and recessions will happen is nigh on impossible so trying to manage according to where we are in the cycle is a fools game.

But at same time market crashes changes things for startups. I saw that in 2000 and then again in 2008. When the macro economic climate is tough less money flows into venture funds and startups, so fewer deals get done, valuations are lower and more companies fail. On top that everyone is nervous and deals take longer to complete. Making things worse still, consumers and enterprises have less money to spend and startups find it harder to grow revenues.

It takes time for the impact of crashes to be fully felt in the startup market though. I remember this most clearly from 2000 when I was in a fund that was investing heavily pre and post crash and the VC adjustment took 8-9 months. I think the reaction is slow because VC funds aren’t directly linked to the stock market, VC deal cycles are long, because LPs don’t want VCs to try and time markets and because VCs have staffed up to deliver multi-year investment plans. After a while though VCs find themselves spending more time with portfolio companies struggling with the new environment and the amount of new money in the market drops, and these forces combine to stretch out deal times, reduce the number of deals done and reduce valuations.

Mark Suster set out a number of the dynamics at play in his post Making Sense of the Stock Market Drops in Relation to Venture Financing

Pulling it all together I think the difference between the camps is that the ‘pay no attention to the markets’ folk are talking about best practice startup management in general whilst Suster and others are talking about the impact of crashes in the here and now.


I have no idea if the stock markets will continue to go down or recover but it’s pretty clear to me (and probably to you too by now) that if things don’t get better we will get the negative impacts described above, and if they do recover late stage VC markets will continue to get frothier and that will eventually trickle down to Series A and seed.


I think the best outcome is that the bear market continues long enough to take the heat out of late stage venture but isn’t severe enough to create a rout.

Until we find out founders should follow the old adage ‘hope for the best, but plan for the worst’, prepare themselves for longer fundraising cycles, and think seriously about taking any offers of cash that are on the table, even if the valuation is lower than hoped for. (And, in case you’re wondering we don’t have any low valuation termsheets out there at the moment. Our valuations have remarkably consistent over the two year life of Forward Partners.)

Is the path of technological evolution inevitable?

By | Startup general interest | No Comments

I read an article this week which essentially said the current ‘is it good/is it bad’ debate amongst politicians on the future of the sharing/on-demand economy is as futile as 19th century politicians holding a yes-no vote on industrialisation. They were making the point that the sharing economy cat is already out of the bag and the debate should be focused on how to shape it to bring the most benefit to society, not whether we should somehow try and stop it.

This goes right to the heart of whether technological developments are inevitable. Many commentators, myself included, believe that certain things are going to happen – kids will use more social media, more and more devices will be connected to the internet, ecommerce penetration will grow substantially from where we are today etc. etc. Many others are uncomfortable with this view, believing that we have invented technology and should be able to control it.

I’m currently reading Kevin Kelly’s What Technology Wants which sets out a framework for thinking about this question.

The TLDR is that the broad direction of technological development is pre-ordained, but we have control over the precise nature of how it unfolds.

He makes a helpful analogy with our lives as humans. When each of us is born we are given certain constraints within which we have no choice but to operate. Our genes determine that we have to eat, drink and sleep, have a strong predilection to reproduce, and will have a fairly predictable lifespan. After that the context in which we grow up has a great influence – whether we are we born in an age of physcial or mental labour has a massive impact on our lives, as does the extent of parental pressure to work hard, or follow a particular path, or the strength of the economy and range of employment options when we enter the workforce. Finally the decisions we make also play a big part. Some individuals find the energy to dig deep and overcome genetic limitations, others don’t. Some individuals go with the flow of society, whilst others rebel.

These decisions that we make are doubtless very important. They determine who we are and how we are perceived, and they are what is remembered about us as individuals. But they can only go a small way to transcending our genetics and context. No matter how hard she worked no 5th century woman could fly to Australia. Equally it would be very hard for an aspiring 21st century politician to make a big impact without embracing television and the internet.

Similarly, the direction of technological evolution has three determinants:

  • Structural – there is an inevitable trajectory towards greater organisation of information – first the printing press, then the telephone, then television, then computers, then the internet, then social networks, and so it will continue. Once each of these was invented it was only a matter of time before the next one came along. At a more detailed level there are paths of development which have their own inexorable logic – e.g. two wheeled cart, to horse drawn cart, to motorised vehicle, to self-driving car.
  • Historical – the historical context influences the pace, direction and application of technological development. We wouldn’t have had jet aeroplanes or atomic bombs in the 1940s if it wasn’t for the Second World War.
  • Intentional – at any given moment the citizens of society focus the use of technology in one direction or another, determining for example, whether it is applied for good or evil or whether social justice and harmony is prioritised over wealth creation (the sharing economy debate).

If this framework is correct then as individuals and as policymakers we should accept that technology will continue to develop, that there will be good and bad in that, and that the best thing we can do is try to shape it and bend it to maximise the good and minimise the bad. On the positive side there is a great deal of good to be had, as seen by massive reductions in global poverty and child mortality in recent decades, but on the negative side that does mean the bad can’t be eliminated and whilst we can minimise unpleasant new developments like cyber bullying and even grooming, we can’t eliminate them.

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