Monthly Archives

August 2013

Amazon agrees to play fair with EU marketplace vendors

By | Amazon | One Comment

In response to probes from the Office of Fair Trading in the UK and the Federal Cartel Office in Germany Amazon has dropped its price parity policy in Europe which stipulated that Amazon Marketplace vendors couldn’t offer the same goods on different websites at lower prices.

That’s great to see. To my mind Amazon was using its scale to bully smaller retailers to protect it’s revenues and margin. Amazon does a job as a middleman and deserves to get paid for that, but their rake should be subject to competition. Simple as that. I just checked in on their pricing page, and they take 10-15% for most product categories, but the highest is 40%, which is surely too high. Going forward it will be worth checking for better prices elsewhere, particularly if you are buying Kindle accessories, jewellery or watches.

Overall I’m a big fan of Amazon, and the Marketplace offers great distribution to its vendors, but there are elements of the company that need to be held in check. It’s great to see our competition policy being effective in this instance and that our institutions are working. I think that’s largely down to the increased powers they’ve been getting in recent years, including the power to fine companies up to 30% of global turnover.

Amazon’s pricing parity policy still stands in the US. It will be interesting to see how long that lasts.

Twitter ad revenue near $1bn in 2014

By | Advertising, Twitter | 4 Comments

I’m rather late to this, but this morning I was pointed towards an eMarketer projection of Twitter revenues from March this year which has them hitting $950m in 2014, up from $583m this year.

Screen Shot 2013-08-29 at 13.39.10

That’s some growth given the scale they are at and explains why people are talking more and more often about Twitter’s IPO. eMarketer puts the growth down to Google and Facebook focusing on mobile, Twitter’s ads API, and the fact that its ads are truly native (i.e. a genuine part of the native user experience).

Two other interesting facts:

  • Twitter has 550m active users, so their ARPU is about $1. The takeaway: it takes a lot of users to build a substantial ad based business. I can’t find any information on profits so it’s hard to know what this means for their valuation. Clearly they will need very high net margins to reach the mooted $10bn IPO value.
  • Only 17% of their revenues come from outside of the US. The takeaway: there’s an opportunity to help European advertisers spend more money on Twitter.

Truth is the essential foundation for producing good outcomes

By | Startup general interest | 2 Comments

Following strong recommendations from two portfolio company founders (thanks Josh and Evgeny) I have just finished reading Ray Dalio’s principles, which is best thought of as a guide to running a business. Ray has distilled his principles over forty years running Bridgewater, a successful fund management business, and they encompass company culture and operational tactics.

Overall it’s a great read, and one that took me a long time because I kept pausing to consider how his thoughts might help our portfolio companies, our operations here in Forward Labs, and even my personal life. Two of the things Ray says are interesting for all startup CEOs to consider.

Firstly, getting to the truth. Ray makes a huge deal of the importance of getting to the truth. As he says:

—more precisely, an accurate understanding of reality—
is the essential foundation for producing good outcomes.

This concept is an interesting one for startups where entrepreneurs deliberately create ‘reality distortion fields’ in order to bind people to their cause, and seek to keep morale high by discouraging negative thinking, particularly when the going gets tough. The challenge is not letting a positive attitude distort assessment of the facts and lead to bad decision making. This challenge is made tougher by ‘confirmation bias’ the natural human tendency to seek out evidence that confirms what we believe and dismiss evidence that contradicts it. A positive attitude combined with confirmation bias has led too many startups to misread the tea leaves and allow hope to triumph over experience. Getting to the truth is something that non-executive other people not caught up in the day to day startup bustle can help with.

Secondly, Ray advocates operating business with a clear five step process:

  1. Set goals
  2. Identify problems
  3. Diagnose the problems
  4. Create a plan
  5. Implement the plan

His insight is that separating these steps leads to clearer thinking and better plans and execution. I’ve found that this discipline has already helped with addressing lots of smaller problems.

The benefits of meditation

By | Personal health | 5 Comments

A study by the Texas Tech University has found that five hours of mediation training over two weeks leads to increased activity in the areas of the brain associated with self control:

The researchers also conducted brain scans of participants before and after the training regiments, finding that at resting state, participants in the meditation group had increased activity in the anterior cingulate and prefrontal cortex brain areas. These regions are part of the brain network related to self-control capacity.

Powerful stuff. I now meditate for 1-2 hours each week and, amongst other benefits, I would say that my self control has improved, at least as measured by quickness to anger.

Perhaps more remarkably the study also found that smokers who had the meditation training reduced their cigarette consumption by 60%, often without realising it. Desire to give up smoking had no impact on the result.

There was a control group who were given relaxation training for the same amount of time and didn’t experience the same results, so it looks like the study was well put together.


I’ve just seen a post on Lifehacker which provides a fuller list of the benefits of meditation:

  • Better focus
  • Less anxiety
  • More creativity
  • More compassion
  • Better memory
  • Less stress
  • More grey matter
  • Slower ageing (see picture below)

Many of these claims are backed up by studies and/or scientific explanations. Meditation is a very powerful tool for self improvement. I expect its practice to become increasingly widespread.

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Facebook is winning the identity war

By | Facebook, Identity | No Comments

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I know a lot of people won’t be happy to hear this, but new data out from Facebook suggest they are becoming the dominant provider of online identity. The numbers are a little hard to interpret but my read is that 850m first time registrations to services are made using Facebook Connect each month, and 81 of the top 100 iOS apps and 62 of the top Android apps offer Facebook login. That’s an awful lot of activity. I imagine the next most used identity service is Twitter and from my own experience I would expect that their service sees an order of magnitude less usage.

What we are seeing here is users choosing Facebook Connect for its speed and convenience despite concerns about privacy and app companies cluttering their feed with spammy posts. This is a movie we’ve seen before, and we’ll see it again.

Facebook knows this too and is working on both sides of the equation to make Connect even more attractive. It is getting faster (31% faster on mobile, 16% faster on web) and they are making it more difficult for apps to get permission to post on behalf of their users.

The takeaway is that if you are a consumer facing company you really should be offering Facebook sign up and login.

Leading the next revolution in online retail

By | Forward Partners | 5 Comments

We have been thinking a lot about our sector focus recently and are coming to the conclusion that there is a huge opportunity for us to lead the next revolution in online retail. Currently 5-10% of sales happen online, depending on which country you live in, up from around 0% at the turn of the century. It’s a safe bet that the percentage of sales conducted online will continue to grow fast. Part of that will come from increased growth in existing businesses and models, but a good chunk will come from new disruptive innovations.

The most important of those disruptions will be a marked increase in direct to consumer sales. We have seen the beginning of this over the last few years with the advent of drop-shipping and innovative product companies that sell direct, but there will be much, much more to come.

We will be funding and helping create the companies that are driving this disruption.

They will be:

There are a number of factors beyond increased broadband penetration which make now a great time for these sorts of companies:

  • The decreasing costs of short run manufacturing
  • The rise of crowdfunding for product pre-purchases
  • The ability to use big data to personalise and innovate generally in products and services
  • The ability to use cheap connectivity to create innovative new products and services
  • The ability to create amazing buying experiences on mobile and tablets

The UK is a good place to build companies in this space – online accounts for a higher percentage of online sales here than elsewhere (10% of UK sales were online in 2012 compared with 5% in the US – see here) and a greater percentage of our online population buys things over the internet (87% of the UK internet population bought something online in 2013 compared with 73% in the US – see here).

We’ve been doing some of this already, with investments in companies like HailoUnbound and others, but the idea is to many more.

I’d love to know what you all think about this. Our aim is to build and fund around 40 great companies in the UK in this space over the next 3-5 years.


Tiny lab-grown heart beats on its own

By | Healthcare | 8 Comments

Screen Shot 2013-08-21 at 14.57.09Scientists in the University of Pittsburgh have grown a tiny heart that beats on its own.

The researchers took a mouse heart from which everything had been removed but the basic structure and laid onto it cardiovascular cells developed from human induced stem cells. The human cells specialized into endothelial (or lining) cells, smooth muscle cells and muscle contractile cells. The resulting heart beat on its own and responded to medications.

The beat was irregular and the heart was small so there is still a long way to go before lab grown hearts can replace human transplants, but the day when we will be able to is clearly getting closer. Heart disease is the world’s biggest killer and it is technologies like this will enable radical life extension, most likely in our lifetimes.

Interestingly, most people say they don’t want to live much longer. Assuming no degradation in quality of life I am all up for living much longer. There is so much to do.


Smart watches and wearable computing

By | Personal health, Startup general interest | 5 Comments

Samsung are rumoured to be announcing their Galaxy Gear smartwatch on September 4th and Apple is widely expected to release an iWatch within the next year.

So smart watches are hot.

But will they fly as mainstream devices?

To my mind that’s an open question.

The Galaxy Gear sounds great. It’s likely to be a second screen for your phone that also has the features you get in a Fitbit or Jawbone Up. That’s quite cool, and reading through the specs in the GigaOm article I liked to above had me thinking ‘I want one of those’. A Fitbit with a proper screen and tighter integration with my phone would be great, and Samsung have added some nice touches to the second screen experience, e.g. if you are reading an email on your watch and take our your phone the same email will come up.

But I’m an early adopter with three Fitbits and a Jawbone Up, and I’m not sure how valuable these features are to the mainstream consumer. As Jack Gold wrote on VentureBeat this morning, there’s a good chance that:

there will be some niche users that want to buy one so they don’t have to take their phones out of their pockets or purses frequently. But for most users, having yet another device — and potentially an expensive one at that — while still carrying a smartphone around will be too much.

Successful technology that is truly helpful and transparent is what most consumers want. But a smartwatch as a remote screen coupled to a smart phone is not in that camp. The additional utility to make users spend their money is just not there.

At the end of the day taking a phone or of your pocket isn’t a big hardship.

For me the more interesting vision for connected devices has the phone as a personal server connecting a bunch of other devices. These devices will have novel functions rather than duplicate those in the phone, the most obvious of which is sensors that inform us about our bodies. I watched a BBC Horizon programme last night which showed some amazing stuff. There was an implantable glucose monitor which sends stats to the phone every minute (I really want one of those, imagine seeing the impact of what you eat in real time) and a suite of tools for athletes that predicts illness and injury before the patient feels anything.

It’s very early days though, largely because the technology is only just getting good enough. It will get there though and in a small number of years we will see wearable computing cruising the chasm. That makes now an interesting time to start companies in this space.


LinkedIn and Facebook – two very different approaches to going public

By | Exits, Facebook | One Comment

I just read How LinkedIn became a Wall Street juggernaut on Techcrunch. The article lists four things, three of which relate to being a great company (multiple growth vectors, a product that gets better as it gets bigger, deep competitive advantage). The fourth describes how their approach to the market, which was to under promise and over deliver. As you can see from the chart below the latest projections for 2013 revenues are 2x what they promised in their 2011 IPO, and EBITDA is forecast at over 2x.

Screen Shot 2013-08-19 at 13.32.32On the back of outstripping expectations LinkedIn has had an easy ride from Wall Street and the media and the share price has risen from $93 at the IPO to $227 today.

Facebook took a very different approach. Rather than focusing on success post IPO they decided to maximise the share price on IPO. That meant ramping promises to the maximum credible level and thereby increasing the chances of disappointment and missing forecasts afterwards. This is, of course, exactly what happened, and after some truly exceptional results over the last six months the share price is only now getting back to the $38 they went out at in May 2012. In the meantime the company has been the subject of intense scrutiny and criticism.

So which is the better approach?

From a purely objective standpoint they are both valid strategies. The Facebook strategy is riskier and requires a thick skin, but if you have confidence in your business then pushing the share price as high as possible to maximise the value of existing shareholders’ stakes can be the right answer, particularly if you are able to limit people’s ability to take action against you by retaining control of the company via the share voting structure. My preference, though, is for the LinkedIn approach, largely because it is more honest.


Tech startups create the most jobs

By | Startup general interest | No Comments

One of the things I like about working in the startup ecosystem is that as a group we make a significant contribution to the economy. The most obvious manifestation of that is in job creation so I was please to see the two charts below on PandoDaily this morning which show that tech companies do indeed create jobs. It’s interesting to see that on average the job creation slows down significantly when companies get past their fifth birthday.

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