Monthly Archives

October 2013

Letters of Note published by Unbound

By | Portfolio | One Comment

Screen Shot 2013-10-25 at 13.49.06I felt a real surge of pride when I was presented with a signed copy of Letters of Note at the Unbound board meeting this week. First off, the book is beautifully constructed. A real joy to hold in the hand. Then the contents are amazing too, an incredible set of letters curated by Shaun Usher. Some are funny, many are moving, and all are very interesting. My favourite is a letter from John F Kennedy carved into a coconut husk which secured his rescue from the Solomon Islands during WW2 whilst my kids liked the letter Roald Dahl sent to thank one of his fans for capturing her dream and sending it to him in a bottle. He promised to “blow it through the bedroom window of a sleeping child”.

Unbound, one of our portfolio companies, is a crowdfunding platform for authors. The traditional publishing industry is failing all but the most popular authors and it’s great that Unbound is helping books like this to see the light of day and hugely gratifying that they do so in such style.

 

 

Google Ventures are doing some cool stuff

By | Forward Partners | No Comments

Here at Forward Investment Partners we believe that being a good VC is all about adding tangible value to our portfolio companies, and a lot of that value will be operational. Google Ventures are thinking the same thing and I love this video which describes their ‘Design Sprint’, a process/tool which they make available to their portfolio. The Design Sprint is cool because it helps companies connect deeply with customers to create things that people love, because it delivers quick solutions to design problems, and because it embeds a design capability in the team. We have similar processes here, but our videos aren’t as good 🙂 Enjoy.

The power of platforms

By | Apple | No Comments

Screen Shot 2013-10-23 at 13.51.37

I’ve been reading a few articles recently about the power of platforms as business models and how they’ve replaced vertically integrated models in a number of industries. Three numbers from the Apple Event in San Francisco ram home this message:

  • 1 million apps
  • 60 billion downloads
  • $13bn paid out to app developers

The Apple App Store is of course one of the biggest platforms in the world but this story is playing out everywhere. AirBnB, Etsy and Hailo and Unbound could all make huge cheques like the one in the picture above, albeit with smaller numbers next to the $ sign in the box on the right…

3D printing – an amazing future, but not here today

By | 3D | One Comment

When I talk about our strategy of backing companies that build products people love, and say that some of those will be physical products people often remark that 3D printing must be an exciting enabling technology for us. That will be true one day in the not too distant future, but it isn’t true today. 3D printing is improving fast in terms of materials that can be printed and the price is dropping fast, most obviously in consumer printers, some of which are now retailing for sub $500, but other than prototyping there aren’t many large scale commercial applications for 3D printing.

The reason is that the finish and durability of most 3D printed plastics falls short of market requirements and that unit prices are generally too high for anything other than very short runs. That limits the commercial applications of 3D printing to high price complex products that are difficult or impossible to manufacture using traditional methods. Hearing aids are a good example, they can be custom printed to match a patient’s ear and the internal structures can be better optimised to carry sound using 3D printing than any other manufacturing method. Body panels for specialist cars are another good example, their complex shapes can be printed as single pieces whereas alternative manufacturing methods produce multiple items that need to be assembled.

I doubt it will be too long before we back a company that is leveraging 3D printing to build an amazing new product, but before that happens we will most likely see a few companies in this space that we choose not to back. That hasn’t happened yet.

Two pieces of fundraising advice from Reid Hoffman

By | Startup general interest | No Comments

Reid Hoffman has just published the slide deck he used to raise LinkedIn’s Series B in 2004, along with explanatory notes about what he was trying to say with each slide and advice on pitching VCs. Reid is one of the smartest investors around (he now combines his roll of Executive Chairman and founder of LinkedIn with a partnership at top VC firm Greylock) and his advice is always well thought through. The whole deck is well worth reading, but if you don’t have the time, or want a taster first these are my two favourite bits.

Firstly, competition. If you take competition in the broadest sense to include other ways that customers satisfy the need that you are satisfying then I’m a big believer in the statement ‘no competition, no market’, every company, therefore, should talk about their competition. Reid explains why that’s true and how to show you will win.

Entrepreneurs often say they have no competition, assuming that’s an impressive claim. But if you claim that you don’t have competition, you either believe the market is completely inefficient or no one else thinks your space is valuable. Both are folly.

The market is efficient, eventually — if a valuable opportunity emerges, others will discover it. To build credibility with investors, you want to show that you understand the competitive risks and show why you’re going to win.

Express your competitive advantage. Why are you going to break out of the pack? What is your advantage? An understanding of product-market fit? Is it a technology advantage? What’s your differential business strategy? Your differential growth strategy? Your differential product? If you aren’t clear and decisive, investors won’t believe you have an edge that can lead to success.

Secondly, market size. Reid explains here why big market size projections from companies like Gartner often fail to convince investors.

Frequently, young entrepreneurs put in slides that show their business’ total addressable market (TAM) to establish some credibility. Problem is, most investors don’t trust the sources of that information, so entrepreneurs aren’t establishing huge credibility by saying they’ve claimed a market with a huge TAM.

TAM slides quote people who have incentives for artificial inflation, so entrepreneurs risk demonstrating that they have no real sense of how to take dominance of the market. If you do choose to include a TAM slide, don’t linger on it because lingering says that you don’t really understand that the game is played bottom-up, not TAM-down.

 

Building companies that people love

By | Forward Partners | No Comments

Building products brands and ultimately companies that people love has been dear to the heart of Forward for a long time now and we are increasingly thinking of making it central to our brand and investment strategy here at Forward Investment Partners. Here’s why:

  • It’s what we love doing – building things that people love is great fun, selling them stuff they want but don’t love, much less so
  • It’s where the money is at – people in the developed world have all their basic needs satisfied, the opportunity now is to help people improve their quality of life with products and services that bring them real joy

In particular we are looking for entrepreneurs and companies building innovative products that people love, re-imagining online buying with new services that people love and software that people in these companies love to use. There are a number of companies in our portfolio that fit this profile well:

  • Wool and the Gang and Zopa are innovative product companies
  • Hailo and Unbound have re-imagined the way people book taxis and buy books
  • Driftrock provides multi-channel marketing tools to companies like these

The Hubspot Culture Code

By | Startup general interest | One Comment

I just re-read the Hubspot Culture Code presentation embedded below. The content is great with lots of good stuff that many startups could profitably copy for themselves and on top of that it has all the sections that a good culture bible should have:

  • Definition of what a culture is and why it’s important.
  • A list of  values/principles which state the things that are important to Hubspot and define what makes them different. There is no space for items like ‘integrity’ which are important to everybody and hence meaningless.
  • They describe the characteristics of the people they want to hire, again focusing on things which differentiate between people – e.g. they look for people who are ‘remarkable’.
  • They give guidance on how to deal with difficult situations – e.g. should you hire someone to fill a crucial skills gap who doesn’t fit with the culture? (Answer ‘No. Hires like this create culture debt, and the interest on cultural debt is crushingly high.’

 

Advanced robotics will transform retail

By | Ecommerce | 10 Comments

Advanced robotics offers what is perhaps the most exciting near term investment opportunity that I learnt about at Singularity University last week. Let me illustrate with an example. It is now possible to measure someone for a very high quality custom bike frame, and then have robots cut the steel tubes and then weld them to produce a finished product in under an hour. Even better, it can be done in store in front of the customer. You could ride home with a video of your new bike being made with you in it. Saul Griffith from Otherlab gave us this example. He thinks these steel bike frames are equivalent quality to $12,000 carbon frames and that he can sell them for $6,000 and make a very good profit. One of the great things about this model is that there is only one company taking a margin out of the consumer price, whereas the traditional bike value chain has at least the manufacturer, wholesaler and retailer taking a cut.

What I’ve described here is a retail experience with a whole new level of consumer participation. Being involved in the design and watching the robots at work is a great story and hence a great platform on which to build a brand.

Micro-breweries is an industry where manufacturing on the site of retail has spawned a number of highly successful businesses, not least Brewdog down the road from us here in Camden. As with the bike example micro-breweries use advanced machines and custom software to produce a better product. The robotic arms and associated software are more complicated than micro-brewing equipment and only now reaching the cost and quality threshold where on-site manufacturing becomes feasible. Making the bike frames requires two 3-axis robotic arms which cost $200k, including software.

It’s interesting to think which other products might work with this model. Clothes is an obvious one – customers could be measured on site, choose elements of their design and then wait whilst robot sewing machines made their garment.

Solar power heading towards cost parity with fossil fuels

By | Startup general interest | 2 Comments

Screen Shot 2013-10-14 at 14.58.53

The declining cost of solar power is one of the biggest reasons that the folks at Singularity University are optimistic about the future. You can see from the chart above that the cost of generating 1W has fallen below a dollar for the first time and is now or will soon be at grid parity (grid parity is the average cost of all inputs to the grid). Having reached grid parity the use of solar should soar and cost should fall further as more money is invested in the technology.

Every year the earth receives around 274 million gigawatt years of energy from the sun which is around 20,000 times the amount of energy we currently used – ergo we should be able to easily service all our energy requirements with solar. In fact energy could become so plentiful that the price starts falling towards $0. That would then enable many other wonderful things, including desalination plants which aren’t currently feasible due to high energy costs. Cheap energy and plentiful fresh water. Sounds good.

It’s not all straight forward of course. A lot of blood, sweat and tears goes into the research and product development which drives exponential curves like the one in the chart above, and the cost reduction curve for solar cells may come to a halt, although it’s hard to see how that would be anything other than temporary. The bigger problem is storage. The sun only shines at certain times of the day, and we need energy all day, including at night. That means we need significant advances in battery technology if solar is going to become our dominant energy source.

Nuclear and biofuels also hold out the potential to deliver plentiful cheap energy, so solar isn’t he only story in town. It’s just the most exciting.

The UK loves to shop online

By | Ecommerce | No Comments

Kissmetrics have just issued a Mega Guide to eCommerce with the following chart.

Screen Shot 2013-10-14 at 14.10.59As a UK based investor we are keen on areas where we have an advantage over other startup ecosystems, and this chart shows that we punch way above our weight in ecommerce. On a per capita basis the 2013 projections work out as $1.2k per head in the US vs $2.2k per head in the UK. That’s quite a difference.

The Kissmetrics guide is packed full of tips on how to maximise sales in an ecommerce business, some obvious, some less so. If you are operating a company in this market you should go read it.