Monthly Archives

February 2012

Mobile malware is exploding, especially on Android

By | Mobile | 9 Comments

Most of the posts I write are optimistic and upbeat. Not this one. I have just come from an excellent breakfast hosted by Qualcomm where we had half a dozen talks about the future for mobile. We heard about the potential for NFC, augmented reality, mobile commerce, and mobile operating systems, but the presentation that really caught my eye was about the growth in mobile malware.

We heard that the number of new mobile malware threats identified in December 2011 was equal to the total number of threats ever identified through the end of 2010. A quick web search found many other people saying the same thing, including ZDNet who recently produced the chart below.

In short, mobile malware threats are growing almost unbelievably fast. They are not yet a fact of life for many, and I can’t recall anyone I know suffering from an infected phone, but at these growth rates it won’t be long before we have all experienced an attack.

Unless your phone is an iPhone that is. Kaspersky has only ever found two iOS threats and they were in 2011, and they targeted jailbroken phones.

Android users are far and away the most vulnerable, due to the open-ness of the system and the large numbers of devices that cyber criminals can target. If you are going to build a virus you might as well build it on the platform that offers the most potential victims.

The reason I’m posting this is that when something grows as fast as this I take notice. Rapid change creates opportunity. I’m not sure how this one will play out, but as a consumer I want to protect myself, and as an investor I want to understand who will profit from it.

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Google’s recent troubles give an insight into how much and why privacy matters

By | Privacy | 10 Comments

Danny Sulliivan put up a good post yesterday: On Google & Being “Evil”. His main point was that Google is now a very big company and that inevitably means they will make mistakes, including ones which impact their users’ privacy, but they are not any more evil (or good) than any other large company. I agree with that, they are becoming no different to other large vertically integrated service providers like Facebook and Apple. As Danny points out, there is one important historical difference though, and that is Google’s “Do no evil positioning”, which gives the worlds largest search engine much further to fall than its competitors.

Danny’s main point is interesting, but it is his description of Google’s recent problems and the government and public response to them which I am going to focus on today.

Let’s start with a recap on what Google has done.

Most importantly they are changing their privacy policies. If you use any Google services you will have seen a pop-up informing you of this fact, and if you are anything like me you will have seen so many pop-ups that you have started to get annoyed by them. Also, if you are anything like me (and 90% of the rest of the population) you won’t have read them, but you will have caught sight of various headlines suggesting that you should be worried about what these changes mean.

Beyond the privacy changes Google has made a few gaffs recently. Danny lists three:

The response to this has been markedly different in different parts of society. On the one hand politicians, journalists and the intelligentsia are outraged, whilst on the other hand the public doesn’t seem to care. The picture at the end of this post shows the top results on a Google News search for “Google privacy policy changes”. The negativity is clear for all to see. Yet Danny Sullivan reports that for the mass public:

there’s no mass movement to abandon Google. Take a tour of its help forums, as I’ve explained before. [Privacy] It’s not a huge topic.

I’ve been having an increasing number of conversations in recent weeks with folk (largely educated, wealthy, middle aged folk) who think that a privacy backlash is coming, but I just don’t see it. Further, when I press these folks on what the precise issue is, or what might precipitate a sudden elevation of this issue in the mind of Joe Public they have no answers.

However, politicians are now legislating for privacy and companies have to deal with that. The important thing to note though is that it is a regulatory issue, not a product issue. Hence internet companies need to deal with privacy issues in the same way as financial services companies have dealt with regulators for years. They need to lobby to make sure they don’t get blind-sided, and many will try to use regulation for competitive advantage.

I was at a dinner for our portfolio company StrikeAd last night. They operate in the mobile advertising industry where everybody is very concerned about the privacy implications of targeting and tracking users. As a result voluntary codes of conduct are being drawn up, they are being endorsed by standards bodies, and those bodies are then certifying vendors as compliant, and listing service providers as qualified to provide certification. If you want to play in certain segments of the market, for example ad verification, then you need to play the game and make sure you are on the list of vendors qualified to provide certification. In other words, for companies in this market lobbying and being part of the regulatory process is as important as it is for banks and telcos.

Privacy is important, and users need to be protected, but as you can see from the story in the paragraph above a lot is being done already to prevent abuse of personal data. I think we will see more regulation in this area and companies will devote increasing resources to making sure personal data is protected and only used in the right ways, but I see no evidence that the greater public cares enough that we will see anything more than that.


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Just arrived at Mobile World Congress

By | Uncategorized | 2 Comments


I’ve just arrived at Mobile World Congress here in Barcelona. I’m excited to be at this extravaganza of all things mobile for the next four days and will be meeting new companies, walking the floors and spending time with some of our portfolio companies who are here. With luck it will be a week of interesting meetings, cool gadgets, and good dinners. Hopefully combined with progress in a deal or two that we are working on.

This is the week in the year when all the tech world seems to be focused on mobile and it is fun to be part of the buzz, starting this evening with a dinner hosted by our portfolio company StrikeAd.

At the end of the week I will pull together some thoughts on the memes and trends here, what’s hot and what’s not, if you will. If you have any suggestions of things or companies I should go and see while I’m here I’m all ears, please make them in the comments.

And did I mention that Barcelona is a beautiful city 🙂

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On founders and professional CEOs and the difference between innovators and executors

By | Innovation, Startup general interest | 7 Comments

I mentioned a couple of weeks back that I am reading Clayten Christensen’s new book, Innovators DNA: Mastering the Five Skills of Disruptive Innovators. I’m still really enjoying it, and I now have a second major takeaway. As I wrote last time, the first take away was that to a large extent innovation is a learnt skill that can be self taught.

The new insight is that the skills of a good innovator – associative thinking, questioning, observing, experimenting and networking are very different to the skills of executives who are more execution focused – analysis, planning, detail-oriented implementation and self-discipline. These skills are not mutually exclusive, but they are very different.

This is interesting in the context of the development of a startup. In a company’s early days nigh on 100% of value creation comes from innovation and the execution is trivial. However, as the business grows operations become more complex and good execution becomes an increasingly important contributor to value creation. It is often written that founders ‘struggle to scale’ with a business, and this change in the skills required to lead a business explains why.

Anyone who has observed a lot of startups grow will have witnessed brilliant founders who were talented at the chaotic process of innovation struggle as the business scaled to 50 or 100 people. Along with charisma and the ability to sell, the most important skill in founding the business was innovation, and that comes from a lot of unfocused networking and experimentation – behaviours which are poor bedfellows with the detail oriented implementation and self discipline required to really scale a business.

When a founder CEO starts to struggle many boards respond by bringing in a ‘professional CEO’ who is skilled at execution. When it works these characters will get the the sales team functioning well, make sure the customers are happy, improve marketing, and iron out kinks in the product. These activities generally lead to an improvement in sales and profitability and increase the value of the business. That is why professional CEOs are hired.

The difficulty with the simple model described above is that there isn’t a sudden moment when the innovation is done and only execution is required. The most important innovation happens when the founder has the idea for the business, or maybe has the idea for a pivot that works, but the innovation doesn’t stop there. Rather, execution becomes slowly more important, and innovation relatively less so, but innovation remains vital to keeping the business moving forward.

To illustrate, at our former portfolio company Lovefilm the initial innovation was a £10-15 subscription service which gave the customer three DVDs at a time, delivered by post. In order to grow beyond their first early adopter customers the company had to innovate with different price points and numbers of DVDs and marketing programmes with free offers. Looking back the things they did seem pretty obvious, but at the time the ideas came from talking to people (networking), looking at other industries and geographies (observation) and experimentation – i.e. the skills of innovators. Then, later on, once they had a range of price points and improving those was more about execution than innovation they had to innovate again to become a digital business.

The takeaway here is that hiring an execution focused CEO won’t work out if it is done when innovation is still the most important part of the mix, a mistake that I have seen made many times, including in companies where I was a Director. I don’t think many boards think clearly about the difference between the skills required to innovate and those to execute, and about the right balance for their business given its stage of development. The beauty of this book is that it will get people thinking along these lines and give them a framework to analyse what they should be looking for.

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50 Questions: What financial information does a VC want to see?

By | 50 Questions, Venture Capital | 2 Comments

Forty first in a series of weekly posts by myself and Nicholas Lovell of Gamesbrief which answer the fifty questions you should ask before raising venture capital.  We expect the series to run for a year after which we will collate the posts into a book.  You can find the rationale behind the series here, and the list of questions here.  We welcome your comments on any and every aspect of what we are doing.


We get a lot of emails from companies who send us business plans or executive summaries which don’t include any financial information. That’s a big mistake. If we can see that the basic financial shape of the business is consistent with our usual investment profile we feel more confident that a deal is possible and are more likely to take a meeting. If there is no financial information then there is usually a nagging feeling that it has been omitted precisely because the entrepreneur knows that it isn’t a good fit with what we would like to see, and it is tempting to assume the worst (remember that we look at a lot of plans and can’t spend too much time on each one). I think some entrepreneurs hope that if they can just get a meeting they will be able to sell their way past the fact that their financials don’t fit and secure an investment. I would say that is the wrong way to approach building a relationship with an investor, is unlikely to work, and will most likely result in a series of frustrating meetings.

We like to feel that the companies which approach us are looking for a trusted partner. The best way to give us that feeling is to show that you understand us and our processes by giving us the information that will help us the most, including summary financials.

Financial information helps us evaluate whether a business fits with our strategy in two ways. Firstly, historical financial information shows the shape of the business much more clearly than any other metric. The most important figures there are revenues, gross profits (unless gross margins are over 90%), total expenses and the revenue growth rate. Secondly, financial projections help us understand how much the business might be worth in the future and whether it will need a further round of funding.

It isn’t necessary to provide much detail though. Initial communications with potential investors should concisely convey the essence of why a business is exciting and likely to be worth a lot of money. The most important aspect of that is the truly addressable market and the company’s position within it and the financials should be limited to what the numbers required to convey the information above and anything else which is important to the company’s story.

So different companies will want to include different line items in their financials, but the example below is a good model to work from.


From this the investor can see that the business has generated some early revenues, is growing fast and expects to need around about £1m to get to profitability. That helps analyse the fit with his or her fund requirements with regard to stage of investment and investment size.

Note that there is no information about how much cash is in the business. Whilst most VCs would like to know that information for negotiation purposes it isn’t necessary for their deliberations at this stage.

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Two signs of things to come – body hacking and targeted advertising

By | Advertising, Innovation | One Comment

I am going through a period of blue sky thinking as I look for new areas in which to focus our investment efforts, and the great thing about that is I get to look at and play with a lot of cool stuff.

I’m also short on time today because my week so far has been two full days strategising on Monday and Tuesday with my partners at DFJ Esprit, and two board meetings today, followed by a discussion class at London Business School this evening, and I need to finish today’s blog post before my next board starts in fifteen minutes.

So I’m going to share two cool things I read about this morning.

First, check out this video. We now have a man alive who doesn’t have a pulse. By many definitions that makes him dead. He lives without a pulse because his heart has been replaced with two pumps that operate with permanent flow rather than a beat. This is an amazing body hack a) because it replaces one of our weakest links, the heart, and b) because it does so with an alternative process, flow rather than beat. There is a lot of potential and benefit to this, not least because regular flow puts a lot less stress on the rest of the body than the surge and stop that comes with a beat.

Heart Stop Beating | Jeremiah Zagar from Focus Forward Films on Vimeo.

Second – read this Techcrunch report on a London based bus shelter advertising campaign that identifies passers by as either men or women and targets the ad accordingly. Techcrunch sums up the potential for this well:

But think about the possibilities if you aren’t using some sensitive information as your content arbiter. What if you load up a hundred videos of people in different outfits, and then match that to whatever the person viewing the ad is wearing? “Nice red blazer. But we like this one better. Only $25 at H&M.” Or perhaps an advertisement aimed at people with children or holding babies.

I’m sure many of you are thinking that this is creepy, and if I’m right then advertisers will have to be careful, but I’m excited about the potential for this type of technology because it makes advertising more effective which in essence creates money out of nothing.

The FT doesn’t see much future for newspapers

By | News | 2 Comments

It was interesting to read the quote below in the Financial Times’ Lex Column’s commentary on News International’s plans to launch a new paper The Sun on Sunday:

The venture fills a hole in News Corp’s publishing business that only Mr Murdoch, an old man in a hurry, can see.

When even the FT doesn’t see the point in launching a new paper, especially one it concedes ‘may even be profitable’ then we are getting close to the point when there will be widespread consensus that there is no future for paper based news products.

The next step will be that newspaper companies become undervalued and canny private equity investors will step in, hoping to make a killing buying them on the cheap. Whether they succeed will depend on whether their models predict a fast enough decline in circulations. It is easy to underestimate the speed with which early adopters and even the bulk of the mainstream switch to new products and formats, but it is equally easy to underestimate how long it will take for the laggards to switch.

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Video: mass production of millimetre scale flying robots

By | Innovation | 2 Comments

The robots are coming. I made that point in a tweet last week about Google’s driverless cars, and if you watch the video below you will see that insect sized robots are on the way too.

These insect sized bots can be manufactured as a single sheet which then folds up into a 3D shape like a children’s pop up book. This pop up technology is very clever and enables cheap mass production of these robots. If you don’t want to watch the whole video the key moments to see how the pop-up works are at 1min 50s and 3min 15s.

Unfortunately we don’t ever see the robot flying, which leaves me a little sceptical, but if you look at the Youtube channel for the Harvard Microbiotics Lab (who have developed this technology) then you will find videos of similar sized robots walking.

The big picture here is that within ten years there could be literally millions of these types of bots fitted with sensors and radios. That is pretty revolutionary. The only application obvious to me is military, but if they are cheap enough I’m sure people will invent plenty of others.

Thanks to Phil Jones for the pointer.

Amazon’s Kindle Fire has taken a big chunk of the tablet market

By | Amazon, Google | No Comments

As you can see from the table above Apple’s share of the tablet market slipped from 64% in Q3 to 57% in Q4, losing share mostly to Amazon’s Kindle Fire, and to a lesser extent to Barnes and Noble’s Nook. That said, the overall market is so hot (growing 94% quarter on quarter) that iPad shipments still grew 39%.

There are a lot of different ways to read this data, and it will be a couple more quarters before we know how the market is shaping up, but my gut is that the tablet market is beginning to play out like the smart phone market and low cost Android based devices will continue to grow their market share for some time to come.

The pro-Apple reading of this information (a view held by iSuppli who conducted the research) is that Apple fans shifted their budgets to iPhone4S’s in Q4 and that now the new iPhone is old news they will come back to buying tablets, particularly when the iPad3 comes out. There is truth in that, but I think the more powerful trend here is lower cost devices growing the size of the market. A search for cheap Android tablets reveals that there are many devices available that aren’t making much of a dent in the market yet, but I think they will do as they improve.

Another important pro-Apple angle is that the Kindle Fire and Nook are more reading devices than all-purpose tablets and hence shouldn’t really be lumped together in the same market like this.

The final interesting angle here is that the Kindle Fire and Nook run forked versions of Android and arguably should be thought of as third and fourth OSs. If they stay proprietary and become significantly different to other Android tabs for developers then the iPad’s status as the app platform of choice will be less under threat, and its overall market position will be more secure.

We will learn a lot more about how people use their Nooks and Kindle Fires in the coming months and hence whether the tablet market will come to look like the smartphone market or like the iPod market. I hope it is the smartphone market.

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By | Startup general interest, The Kernel, Venture Capital | One Comment

My latest column for The Kernel. It was published on Monday.


Can, and should, advisers play a greater role in start-ups looking to raise funds, asks Nic Brisbourne?

What role do advisors play for start-ups? Advisors are typically small partnerships, or individuals, who help startups raise money from venture capitalists. They usually charge some form of retainer, and then a success fee of a percentage of funds raised and perhaps some options. Retainers normally range from £5,000 to £10,000 a month, the percentage of funds raised between three and five per cent, and options up to 0.5 per cent of the business. Larger fundraisings (£10 million to £15 million) are typically charged at the top of the retainer range and bottom of the success fee range, with smaller fundraisings the other way round. Most advisors won’t take on a fundraising of less than £2 million to £3 million because they can’t make enough money from it.

Advisors are highly geared towards the success fee. Their economics on a £5 million fundraising might be six months retainer at £5,000, totaling £30,000 and then a further £250,000 success fee if they get the deal away. Their business will be successful if they achieve a high hit rate, and the good ones turn away a lot of business. I was talking to one advisor recently whose success rate over the last three years is 100 per cent. That makes him just as picky as the VCs he is raising money from.

But my emotions are mixed when I see I have a deal from an advisor who I know and trust. On the one hand I can be sure that the deal will be at least half decent, particularly if the advisor is well known. On the other hand I know that it is likely that most every VC in London will see the same email and competition for deal will be fierce – or at least that is what we have to assume. We are often told that we are “one of only a small number of funds that have been introduced to the opportunity” but in my experience that is not always the truth. A few years ago we did quite a lot of work looking at a games company, and I had been repeatedly told that we were one of a select few VCs looking at the deal, but when the advisor inadvertently emailed me the spreadsheet he was using to track investor discussions there were over 60 investors on his list.

The challenge for VCs is that it is easy to spend a lot of time going nowhere on advised deals. Good advisors know that the way to reach the highest price is to keep investors guessing about whether they are going to win the deal. As a result there is usually at least one VC who invests a lot of resources and then loses. And when you lose a deal as a VC you are left with very little, and often precisely nothing, to show for your efforts.

I am much more excited, however, to see an email from someone I respect who is helping a company because he is on the board or board of advisors. I generally feel that my chances of success are much higher from this kind of introduction because it will be less widely shopped, and, ceteris paribus, it will get more attention than an advised deal.

Finally, when I get an email from an advisor I don’t know or don’t remember, I don’t feel anything at all. We have a process for looking at deals like this and we check them all out, but my expectations are very low and the chances of an investment happening are similar to if the email had been sent to our general company email address.

None the less, entrepreneurs need to understand when advisors can be useful. If you are going to use an advisor, then for heaven’s sake go for one who is well respected, well known, and has a wide network. Otherwise you might as well email the VCs yourself. If you are unsure check with a couple of VCs before you sign with them (I’m happy to help). Look beyond the VCs the advisor has raised money from in the past, to the live relationships they have today. Ask for names of individuals they will email about your company. Be careful. There are a lot of chancers out there who will take retainers from companies with little chance of raising venture. I even had one fairly well known adviser admit to me that was his business model.

Next, if you have a hot company that is already well known, using an advisor will probably allow you to reach a higher valuation. I think that is the best time to use an advisor, hence the title for this article.

For lesser-known companies, however, the logic for using an advisor is less clear. VCs who see an email from an advisor about a company they do not already know will most likely prioritise the opportunities they have from other sources. There, they have a better chance of closing a deal. So companies that are not super hot and which have alternative ways of putting themselves in front of VCs should consider whether an email from an advisor is the best route in – even if you still use an advisor to manage the fundraising process.

But for lesser known companies without good links to VCs, advisors can be really helpful though: they will help navigate through who does and does not have money and who is likely to be interested. They will generally take some of the misery out of engaging with investors. Additionally, good advisors have probably the widest network of potential investors and are well placed to help companies that might need to boil the ocean to secure funding. But if at all possible, you should start building relationships with VCs long before you need to raise money. You will benefit from early feedback on your company, and have a higher chance of success when you do come asking for cash.

Lastly, advisors are only really suitable for larger or later rounds. For decent advisors the economics do not work for a typical Series A fundraising, and if someone is offering to help you raise less than two or three million, you should really ask yourself why.

Good advisors can also add a lot of value in other ways. They spend a lot of time helping companies to cast their story in investor-friendly terms. This can be hugely valuable for entrepreneurs who have not worked with VCs before. They manage the investment process, which can be hugely valuable to resource-strapped start-ups. They will also advise on the complicated and lesser known aspects of raising venture capital, although that information is increasingly available on the web, not least on my blog.

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