Monthly Archives

January 2014

Mobile now accounts for 53% of Facebook’s ad revenues

By | Facebook | No Comments

Screen Shot 2014-01-30 at 11.52.24

Two years ago Facebook had $0 from mobile and everyone was wondering if they would survive the transition away from the desktop. As you can see from the chart above 53% of their ad revenues now come from mobile. That’s an amazing story of business transformation, and their share price is now around the $60 mark valuing the company at c$150bn, up from $104bn at IPO in May 2012.

Zuck and co still have their challenges, of course, with new social platforms springing up all the time and teenagers spending less time on, but that doesn’t detract from the impressiveness of these results. It does mean that they will have to put in a similarly impressive performance to keep moving forward, but that’s how things are with the rapid pace of change in the world these days.

It will be interesting to see how they get on. In the earnings call yesterday they outlined a multi-property strategy which answers many of the biggest questions around Whether they can execute well on that strategy remains to be seen, but from where I’m sitting their track record so far is very strong.


A one minute guide to 21st century strategy and management

By | Strategy | No Comments

Stephen Denning is one of my favourite thinkers on strategy. His big idea is that the 20th century strategy of maximising shareholder value doesn’t work anymore (and only worked for a short period for some companies because it was better than the morass it replaced) and that we should all now be focused on delighting our customers. There’s a lot that flows from that, including a focus on the longer term and shifting from managing by control to managing by enablement. This one minute video gives a quick taster.

You can read more of Denning’s thinking here, and by following him on Twitter.


Willpower and making the most of mornings

By | Personal health | 3 Comments

I was reading this morning ab0ut what the most successful people do before breakfast (a post largely based on a book by Laura Vanderkam), and there are two big takeaways:

  • Firstly willpower is a muscle. It becomes fatigued from over-use, but when you exercise it regularly your willpower gets stronger. Better still, if you exercise it regularly enough tasks that used to require a lot of willpower become easier, even habits (this is why behaviour change coaches put so much stress on committing to do something regularly for a short period of time). You can make an analogy with bodybuilders – it takes a big effort to build up muscle mass but then less effort to maintain it.
  • Secondly in the mornings your reserves of willpower are stronger, making before breakfast a great time to do things that are important but not urgent. These things require will power because there’s less immediate payback, and they are often investments in the future. Vanderkam writes that successful people use their mornings to nurture their careers, nurturing relationships with friends and family, and nurturing themselves through exercise and creative/spiritual practices.

Reading that I feel pretty good about my morning routine. I wake up before everyone else in the house to nurture my career by reading the news and nurture my body by exercising for half an hour, and then we all sit down for a family breakfast. If I wake up a little early I throw in fifteen minutes of meditation. Interestingly, I’m not really a morning person and when I began exercising first thing I found it very hard. Now I step out of bed and into my running gear without thinking twice.

Amazing flying robots

By | Startup general interest, Uncategorized | 3 Comments

Artificial intelligence and robotics will be massive drivers of change and opportunity over the next few years and I love looking at what leading edge robots can do. Partly it gives a sense of what will soon be in the mainstream changing our lives and partly it’s an awe inspiring reminder of how fast these technologies are developing.

First up is a video of a quadcopter which can grip a branch like a bird. At 26s it’s nice and short.

I was reminded of this second video when I saw the first. It shows two quad copters throwing and catching a pole. Look at the way the catching copter makes fine adjustments to keep the pole balanced. It’s amazing.

VC industry data shows growth but no bubble

By | Venture Capital | 3 Comments

Recently I’ve been hearing a lot that there is a new bubble in Silicon Valley. People are worried that it will burst and we will feel the effects over here. They generally cite one off events like Snapchat turning down a $3bn acquisition or Google’s $3.2bn acquisition of Nest as evidence.

This sort of debate seems to come round every year or two and my view today is that there are localised incidents of frothy behaviour but nothing widespread enough that we should call it a bubble.

The data CBInsights just published on the volume of venture investment bears this out. Transaction values and volumes are rising, but not at bubble rates.

VC investment trend q12011-q42013Comparing this with the chart below from the 1999 bubble and two things stand out. Firstly growth in investment is far slower now than it was then, and secondly at $8bn per quarter total investments now are less than half the Q1 2000 peak.

Screen Shot 2014-01-27 at 13.16.31Also of interest from the CBInsights data is that funding in New York grew a whopping 49% in 2013 to $2.9bn. I haven’t seen 2013 data for the UK yet, but in the middle of Q4 corporate finance boutique Ascendant were projecting we would see c$1.3bn over the year. New York has leapt some way ahead of us.

Industry breakdown of jobs subject to computerisation

By | Startup general interest | 2 Comments

I’ve blogged before that 45% of jobs are at risk from automation, and this morning our Senior Designer Peter Main tweeted a breakdown of which industries are most at risk:

Screen Shot 2014-01-24 at 11.47.27

It is easy to think about automation in apocalyptic terms – e.g. all telemarketers will be replaced by computers in the next twenty years, but the way it works in practice is that computers make existing workers more efficient and only a percentage of jobs are automated. In service industries this manifests itself in a massive increase in the number of clients one employee can serve.

The underlying technology drivers are artificial intelligence and robotics, with artificial intelligence having by far the greater impact in the short term. We have two companies in our portfolio that are using artificial intelligence to provide services that were previously only available as one-to-one services from people, and in both cases they are making their services available to a much wider group of people than could access them before, and at a much lower cost (I can’t share names as neither is announced), and I expect us to make more investments in this vein. In other words, I think automation is a big opportunity for startups.

I’m sensitive to the human cost of automation but it’s important to remember that it comes with many benefits in terms of reduced cost and wider access to cool services, and hence is a driver of economic growth. Hence I see automation as part of the creative destruction process which sits at the heart of capitalism. The big question is whether new jobs will be created rapidly enough to keep society in balance, and whether workers can acquire the new skills required to do those jobs effectively. The skills required are likely to be social and creative skills.

The table above is taken from a paper titled The future of employment: How susceptible are jobs to computerisation?. The authors estimate that 47% of jobs are at risk from automation over the next two decades, a number they derived by analysing 702 different industries according to whether their tasks are susceptible to automation. It’s a thorough analysis which takes into account likely further improvements in technology, but if anything I think they underestimate the likely pace of development and hence the number of jobs at risk.

Here’s a few other nuggets from the document that I liked:

  • In 1933 Keynes predicted widespread technological unemployment “due to our discovery of economising the use of labour outrunning the pace at which we can find new uses for labour”
  • In 1589 Queen Elizabeth I refused to grant a patent to William Lee for his stocking frame knitting machine saying “Thou aimest high, Master Lee. Consider thou what the invention could do to my poor subjects. It would assuredly bring them to ruin by depriving them of employment, thus making them beggars.”
  • Much of the improvement in machines’ ability to do non-routine tasks comes from big data, specifically the ability to pattern match against past events in large datasets.
  • Healthcare diagnostics are already being computerised. Oncologists at Memorial Sloan-Kettering Cancer Center are using IBM’s Watson to provide chronic care and cancer treatment diagnostics (Cohn, 2013).
  • Sophisticated algorithms are gradually taking on a number of tasks performed by paralegals, contract and patent lawyers, particularly by scanning thousands of documents to assist in pre-trial research (Markoff, 2011).
  • Improvements in sensing technology is making sensor data one of the most prominent sources of the big data that enables automation.
  • Services like Future Advisor use AI to offer personalised financial advice at lower cost.
  • Estimates by MGI suggest that sophisticated algorithms could substitute for approx 140m knowledge workers worldwide.
  • Perception and manipulation, the main challenges to robotics, are unlikely to be resolved in the next decade or two.
  • Realtime recognition of human emotions remains a challenging problem.

Boring is a springboard to success

By | Startup general interest | No Comments

Dharmesh Shah, founder of Hubspot, just published a list of 12 things he will teach his toddler about work. As well as having an amazing company and being super-smart, Dharmesh is also an all-round nice guy. Number 7 on his list is a piece of great advice that many people forget:

7. See ‘boring’ as a springboard to success.

What appears to be the boring thing to do is almost always the responsible thing to do. What seems like drudgery actually builds the foundation for success. The people who achieve the most do a lot more of the boring stuff.

Routine, rigor, attention to detail, chugging away day after day… those are the path to eventual success. Elite athletes? They’ve put in thousands of hours working on fundamentals. Elite entertainers? They’ve put in thousands of hours of practice.

Successful businesspeople? They’ve put in thousands of hours of effort and hard, often tedious work.

Do the tedious, mundane, “ordinary” stuff better than anyone else – that’s what will make you great.

In the investment world that means things like being thorough with due diligence even when you think you know an investment is good, replying to entrepreneurs quickly, and being good with portfolio company admin. For entrepreneurs it means things like speaking with customers before you start building, putting good analytics in place, taking thorough references before hiring, and having disciplined sales management.

None of these things are exciting, and all of them take time away from pushing forward as fast as you can, but without them at some point progress will come to a halt. ‘Slow down to speed up’ is a phrase coined by Tim Brown of Ideo that I use a lot and which explains why boring is a springboard to success. Slowing down in the short term gives you faster average speed over the long term. Always remember, it’s a marathon, not a sprint.

Premature scaling at Series B

By | Startup general interest, Venture Capital | No Comments

PandoDaily has an article up entitled The Series B trap, that’s about the dangers of premature scaling. It perhaps happens most at Series B, but can certainly happen earlier. In my experience this is one of the hardest points for many entrepreneurs to grasp. Everyone gets the idea in theory, but many fall into the trap of thinking that they are different and it won’t happen to them. It all comes down to probabilities in the end – anyone can get lucky – the trick is getting a handle on how lucky your plan requires you to be…

The article describes how it goes wrong in two ways, firstly:

  1. Your company is growing and scaling well, often on little invested capital. You decide you’re ready to scale and raise millions, so you pitch big venture funds on a big growth story.
  2. Investors pay a high valuation to get into a good deal, betting on continued fast growth.
  3. To meet growth and revenue targets, you hire and spend like never before. You rush a few key hires, overbuild the team, ramp marketing spend. A few quarters in, you realize that product/market fit is not quite there, or you’re not as far up the sales learning curve as you thought, or your LTV/CAC is suddenly in the toilet.
  4. But it’s too late to change course. After several consecutive quarters of high burn, missed targets and lowered expectations, you’ve wasted a year and $10M. Investors who paid up for your financing are not happy.
  5. You fall into the spiral of death: head of sales gets replaced (at least once), CEO gets replaced (at least once), a down-round financing happens (if lucky).

and secondly:

With more money in the bank than they are used to and investor expectations to meet, companies start spending soon after the capital influx, driving down LTV/CAC, bringing in non-core customers (churn!), hiring B players to fill the roster and generally doing everything they avoided when they were running lean and smart. As we’ve written before, sometimes it just takes time to find product/market fit, or climb the sales learning curve. As many entrepreneurs have painfully discovered, pouring gasoline on the kindling isn’t usually the best way to make a fire.

It’s counter-intuitive, but too much money can kill a company.

Google has only made four $1bn+ acquisitions

By | Exits | One Comment

Following Google’s acquisition of Nest last week Venturebeat published the following list of Google’s top ten acquisitions by value:

  1. Motorola Mobility – $12.5 billion, 2012
  2. Nest Labs – $3.2 billion, 2014
  3. DoubleClick – $3.1 billion, 2007
  4. YouTube – $1.7 billion, 2006
  5. Waze – $966 million, 2013
  6. AdMob – $750 million, 2009
  7. ITA Software – $700 million, 2011
  8. Postini – $625 million, 2007
  9. Wildfire – $450 million, 2012
  10. Admeld – $400 million, 2011

The striking thing about this list is that there aren’t more higher value deals. Google stands out as perhaps the most prolific acquirer of internet businesses in recent years, yet they have only made four deals over $1bn (or five if you include Waze) and two of those (Motorola Mobility and DoubleClick) were mature businesses rather than startups.

This re-enforces the old truism that the most reliable path to a massive exit is to head for an IPO, even with all the difficulties that come with that route.

Additionally it makes clear that getting above $400m in a trade sale is a bit of a crap shoot.

Characteristics of great entrepreneurs

By | Uncategorized | No Comments

YC partner Sam Altman, who someone recently described to me as ‘more intelligent than Paul Graham, but without the personality quirks’ has published a list of what he describes as characteristics of successful companies. It’s a great list, but for my money it’s more about the entrepreneur than the business – e.g. it doesn’t talk about market size at all.

Either way it’s a great list. Entrepreneurs should use it to identify areas for self improvement and investors should use it in their evaluations. Here’s the raw list. Sam provides an explanation of each point in his post.

  • They are obsessed with the quality of the product/experience
  • They are obsessed with bringing talent into their business
  • They can explain the vision in a few clear words
  • They generate revenues early
  • They are tough and calm
  • They keep expenses low
  • They start by making something a small number of people really love
  • They grow organically (eschewing big partnership deals)
  • They are focused on growth (and know their numbers – week by week, month on month, actuals, growth rates, etc.)
  • They balance a focus on growth with strategic thinking about the future
  • They do things that don’t scale
  • They have a ‘whatever it takes’ attitude
  • They prioritise well
  • They are nice people
  • They don’t get excited about pretending to run a startup
  • They get stuff done
  • They move fast

It’s a long list, and as Sam points out, not every successful entrepreneur will have all of them, and simply having them is no guarantee of success either. However, as I write this I’m thinking that in any given case understanding why one or more of them are absent would be a very worthwhile exercise.