Monthly Archives

February 2014

Venture capital partnership transparency and incentives

By | Venture Capital | One Comment

I’ve just re-read the a 2012 report by the Kauffman Foundation about the contractual relationship between venture capital funds (often called GPs, short for General Partner) and their investors (often called LPs, short for Limited Partners). Kauffman is a major investor in venture capital and they were (and still are) unhappy with the standard arrangements between GPs and LPs, and also with LPs for not pushing harder for change. In fact they were unhappy enough that they titled the report “We have met the enemy …. and he is us”.

The standard contract between GPs and LPs is the so-called “2 and 20” arrangement, where the GP gets an annual management fee equal to 2% of the fund size and a 20% ‘carry’ or share of the profit. The main problem with this arrangement is that the partners in venture capital funds, i.e. the GPs, can make a lot of money from the management fee even when they generate poor returns. This is particularly the case with larger funds and when a GP has multiple funds under management.

The Kauffman Foundation makes two recommendations to address this problem that we are implementing here at Forward Partners. The first of these is to “Eliminate the black box of VC firm economics” – i.e. for LPs to insist on seeing details of carry, compensation, general expenses, and investment by GPs in their own funds, before making investment commitments. The second is to shift from a 2% management fee to paying fees based on a firms budget.

Both of these seem very reasonable to me. If a company we were thinking of investing in didn’t want to share details of its finances we would worry that management might be wholly aligned with our objective of maximising the share price and I’m sure we would feel the same way if we were investing in funds. Similarly, all our portfolio companies work out what they need to spend to achieve their objectives and have that as their budget and it makes sense to me that VC funds should be run in the same way.

Transparency and alignment. Both very important.


The key to Whatsapp’s success? Focus on product

By | Exits, Facebook | No Comments



When I talk about our approach to investing I often say that the next generation of successful companies will be most notable for their amazing products. That contrasts with previous eras where great sales and marketing capabilities and great engineering were often more important than product (think about the great enterprise software success stories of the 1990s…).

Whatsapp, which following last week’s $16bn acquisition by Facebook is now the largest startup M&A deal in history, makes a good case study. This is from a post about the company and exit from their investor Sequoia:

From the moment they opened the doors of WhatsApp, Jan and Brian wanted a different kind of company. While others sought attention, Jan and Brian shunned the spotlight, refusing even to hang a sign outside the WhatsApp offices in Mountain View. As competitors promoted games and rushed to build platforms, Jan and Brian remained devoted to a clean, lightning fast communications service that works flawlessly.

The note pictured above is apparently taped to one of the founder’s desks and it sums up what they Whatsapp is about: great user experience. They process 50bn messages per day with 99.9% uptime and a service so good that 72% of active users come back daily.

And they do that with 32 people. Amazing.

Finally a note on Whatsapp’s valuation – the $16bn price tag ($19bn including employee retention bonuses) is best understood in the context of Facebook’s valuation ($180bn as I write this). If Whatsapp as an independent company, or more likely in the hands of Google, could have become a powerful competitor that took 10% of Facebook’s business then this is money well spent.

What Google looks for when hiring – hint: not good grades

By | Google, Startup general interest | No Comments

I’ve just read about an interview with Laszlo Bock, head of hiring for Google. Here’s what they look for in candidates:

  • Cognitive ability – the ability to learn, to process on the fly, and to pull together disparate information
  • Emergent leadership – the ability to step up and lead when necessary and to step back when it’s best for others to lead
  • Ownership – taking responsibility for solving problems
  • Humility – the ability to step back and accept other people’s solutions and to learn from failure (rather than attribute it to shortcomings of others or lack of resources..)
  • Expertise – the least important of the five

Interesting things that aren’t on the list

  • Good grades
  • IQ
  • Traditional leadership (e.g. Captain of the Chess Club)

These are pretty good lists for anyone to use, and they’re not just intuited, they are data driven. Google being Google scores candidates on multiple dimensions and correlates the scores with performance on the job. Over time they have found that the criteria above are the best predictors of success post hire.

Announcing SnapTrip

By | Announcement, Forward Partners | 4 Comments

Screen Shot 2014-02-24 at 11.46.58

One of the things we like to do at Forward Partners is invest in companies just as they are starting up. That’s what we did with SnapTrip which was literally one man, an idea and a single sheet of Excel when we invested. We loved the man and the idea (the Excel not so much…) and have been excited to help him bring it to life – something which happened with the release of their MVP a couple of weeks back.

The man is Matt Fox and his profile is a great fit for what we’re looking for:

  • He has a great idea  (more details below)
  • He has deep knowledge of his sector
  • He has startup experience having co-founded his previous company PureHolidayHomes
  • He has great personal qualities – he’s passionate, driven, smart, charismatic, humble and tenacious with a clear vision of what he wants to build and the leadership skills required to build it

The idea is to help holiday makers find last minute holidays in self catered cottages. SnapTrip’s opportunity is to own the late availability/discounted end of the market where the competition is limited. This contrasts sharply with the peak bookings end of the market where AirBnB, HouseTrip, HomeAway and a host of smaller players are competing fiercely. (It’s worth noting that most of these companies focus on apartments in metro areas whereas SnapTrip works with rural cottages.)

We’re attracted to this market for two reasons. 1) Nobody is yet focused on helping homeowners to fill out the c40% of their inventory which remains unsold.  2) There is nowhere consumers can go which aggregates all the late availability properties in one place and guarantees the best prices. Neither homeowners or consumers are well served by the piecemeal offerings from existing players whose core business is in the peak periods.

Excitingly, if successful, SnapTrip will grow the market by matching demand for late availability deals with discounted supply. They’ve started with an MVP focused on the Lake District and will soon expand to the rest of the UK and then Europe. This is a big opportunity.

Turning to the business and how we’ve worked together, the first thing to say is that Matt’s customer development work was encouraging. He had tens of conversations with consumers, homeowners and agencies which validated his core assumptions about unsold inventory, willingness to discount, willingness to book late and appetite for discounts and gave him a detailed picture of exactly what he should do to make the business fly straight out of the traps. Initial tests on CPAs and conversion rates have also been very promising.

Secondly, Matt was a sole founder when he joined us. He’s a commercial and operations guy by background and with our assistance in customer development, development, design and marketing he has been able to move extremely rapidly. Now that he is out of stealth mode with a live site we are helping him find a co-founder and build his team out.

Hopefully that gives you a sense of why SnapTrip is exciting and of how Forward Partners works with companies from the earliest stages.

David Norris joins us as Partner

By | Announcement, Forward Partners | One Comment

I’m excited to let you know that David Norris joined us today as my Partner. Our mission is to generate superior returns by making great investment decisions and by being amazingly helpful to our companies. The reason I’m excited is that David is THE MAN to deliver on the second part of that promise. He’s been COO of some amazing businesses, including HouseTrip and LiveBookings, and will now help our founders succeed just as he helped the founders of those companies.

This is how he explained his reasons for joining us:


Why I became a VC

Today I am proud to join Forward Partners as a VC.  Having worked in VC backed growth businesses for many years, I’m now changing seats and changing gear, looking forward to helping the best UK entrepreneurs succeed.
Why I have taken on this challenge now, at this moment in time, really boils down to 3 reasons;
  1. The VC model is changing and I believe that the approach that we are taking at Forward Partners will become the future of early stage tech investment.  I am truly excited about being instrumental in defining that model.
  2. I have real practical experience having worked in multiple high growth international startups and I hope to provide sound advice that will really help entrepreneurs succeed.
  3. We are in the midst of the greatest disruption to civilisation since the industrial revolution; we’re living through the 21st century gold rush and there’s never been a better time to start a tech business.
In some ways, today reminds me of some advice given to me back in 1986.
Mr Jackson stood in front of our 6th form class. “Many of you in this room in 20 years time will be in business and you’ll be managers. You will be in charge of other people, many of whom will have not have the same opportunities in life that you have had. If you are to do your job well and be successful you will need your team to be on your side. You will need to understand the world from their point of view”.  As we were about to head off to University he advised us to think about using this opportunity to live in the inner city, to get a part time job to pay our way and mix with the real world. “In 20 years time you will thank me for the advice, I promise”.
I took his advice. I went to Manchester. I lived in a house next door to a B&B for ex-cons. I worked nights in canteens, waited tables with old Irish ladies from Moss Side. I worked in an Oxfam shop one afternoon each week. I constantly worried about money. I studied, graduated.
Living in the inner city of Manchester gave me the experience to draw on as a manager later in life.
I’m reminded of this because I now find myself in a position to help entrepreneurs having worked in startups myself.  I can draw on this experience because I know the stresses and strains of startup life.  I know what it takes to bring order to chaos and to scale a company.  I know how expensive it is to prematurely scale.  I’ve tested pricing models and conversion rates. I’ve hired and built great teams.  These are the details that are needed to turn vision into reality.
I’ve worked in digital businesses since 2000 as Product Manager, ECommerce Operations Director and most recently as Chief Operating Officer (3 companies). In the early days I had to apply myself to learn HTML and CSS (I built a hobby website), set up Adwords campaigns, learn SEO tactics and so on. Most of the technology we now have in the digital space wasn’t here 15 years ago. (Nor does most of the technology of the future already exist).  I’ve worked as a COO in some fantastic high growth companies over the last 7 years. There’s no textbook for that. I learnt a lot by simply getting hands on and trying things out.  I’m a great believer in the rewards of evolutionary methods. Take ingredients that exist, reform into new variants, test and measure what works. Keep and do more of what works, discard what doesn’t.
2014. Forward Partners, London. Here I now find myself looking forward to a great opportunity to work with and support some of the very best entrepreneurs in the UK.
At Forward Partners we look to invest in early stage tech businesses. We don’t simply provide the money. We can provide support, resources and knowledge. We maximise the chance that an entrepreneur will capture their opportunity.
I’ve been lucky to work for and with successful entrepreneurs. I now know two important facts;
  • an entrepreneur needs a compelling vision of the future to disrupt the present
  • the path to that future is riddled with uncertainty
At Forward Partners we help entrepreneurs systematically uncover assumptions in their business model and find ways to test those assumptions. By doing so early and by using our expert team of designers, product managers, developers and marketers they can refine their business model without needing to hire full time staff or find their own office space.
This massively improves the odds of the vision becoming reality.
With the use of our lean start up methodologies and design thinking an entrepreneur can increase their chances of success at a lower cost and arrive at a viable business model sooner.
Equally, I am looking forward to learning from some of the most innovative and brightest entrepreneurial minds in the country, to continue learning and absorbing new methods and ideas.
When the time comes to grow the company, having people around that have done it before to be on hand to advise and help once again improves the odds of success.  I have real and deep experience in building and executing plans and this is where I can be useful.
The VC model is changing. There have been a few VCs that I’ve worked with that have management experience in internet businesses. However they are the exception. Many VCs know only of their startups through board meetings and conversations with CEOs and their senior teams. They are not involved in the nitty gritty of getting stuff done.  The next generation of successful VC firms will combine robust investment experience with practical operational experience.
I’m not sure who said it, but it’s a favourite maxim of mine, “Vision without execution is hallucination”.  If VCs can help entrepreneurs with execution (and I mean really help, not just the odd intro to another portfolio company or refining pitch decks for the next round) and we can do it early in the life stage of the company, we can become real springboards for success. There are few VC firms in the US taking this approach and at Forward Partners we intend to lead with this approach in the UK and reinvent venture capital.
Finally, there’s been no better time to build a tech business. Now is an amazing time in human history. We are in the midst of a technological revolution.
In the last 15 years, the cost of production has gone down, distribution has gone mainstream.  This means that entrepreneurs can very quickly and easily validate business models using lean startup methodologies.  Knowledge gained 15 years ago that would have cost millions, now costs tens of thousands.

What can go digital will go digital.  There are thousands of businesses waiting to be born to exploit and succeed in the new competitive landscape.

In this new world, startups that learn early by rigorously testing assumptions in their business model can succeed with relatively small capital outlay.   When capital is then later invested in earnest, it is for growth and exploitation of a proven model.
Forward Partners is at the heart of this new approach and I am excited to be part of the team.

Bonobos company culture

By | Startup general interest | No Comments

I’ve just read a humble and thoughtful interview with Andy Dunn, the CEO of Bonobos. I have no inside track on the company but it seems like he is building a great business. As evidence I’d point to the fact that they have lasted for seven years, that they have 200 happy employees, that they have raised $73m, and that they have 350,000 fans on Facebook (although none of these are sure signs of success).

This is my favourite piece in the interview:

What is your greatest achievement?

The most proud I’ve ever felt was when Bonobos was named by Crain’s as one of the top 50 places to work in New York. Building a company that customers love already puts you in the top decile, but building a company that employees love is the most elegant challenge in business. That’s the top 1%. So many people don’t like their jobs or their bosses.

It is especially meaningful to me coming from 2007, when I felt like I had no idea what I was doing or how to build an organization where humans could be motivated and engaged. I once thought “company human values” were things people wrote on posters with pictures of an eagle soaring in the sunrise. I always thought that was a cliché.

I have learned there is actually something to it. What helped me was when we had about 30 employees, I took stock of the 10 best people I had ever hired and made a list of the five attributes that I believe unified them and all the great people we have hired since. Those are self-awareness, judgment, positive energy, intellectual honesty and empathy. I worked those five values into how we hire, fire, promote and retain people; we have gotten pretty empirical about it. That process of being thoughtful about how to create and protect our culture has been more important than I would ever have imagined when we began.

Most great companies have a clear sense of their values and culture and it’s often when they have around 30 people that they write it down. It happens at 30 people because that’s when if becomes hard for the founder to be close to everyone in the company and unless the culture is written down it often gets lost.

I highlighted Bonobos’ five values above. If you are thinking about what your company’s values and culture picking the best bits from other companies and adapting them is a good way to go. Alongside Bonobos Hubspot and Netflix are well worth looking at, as is the work of Ray Dalio.

Whither tablets?

By | Mobile | 6 Comments

broken heart tabletsAt the moment it seems everyone is talking about a blog post by Andreessen Horrozitz partner Zal Bilimoria titled Our love affair with the tablet is over. First, I love that he used the picture above to illustrate his point, and second, I think he is dead right. Bilmoria was formerly of Netflix. These are the three key paragraphs from his post:

Post-launch, the new [Netflix tablet] app significantly increased retention and streaming hours. It won reviewer praise, barely missing out on winning the Best Tablet App of 2011 at the Crunchies — it was a hit. And then it seemed, as soon as it had arrived, the tablet lost its momentum.

At Netflix, we witnessed a dramatic increase in phone usage for the streaming service — all that binge-watching of “Sons of Anarchy” and “House of Cards.” The reason was obvious: As phone apps improved in terms of quality and speed, users abandoned their tablets for the device in their pocket that could access the Web anywhere and anytime from Wi-Fi or cellular connections. Conversely, only 12 percent of tablets have cellular connections, instantly making them non-mobile devices. And very few people will shell out for a second wireless plan in addition to their phone. Based on the momentum of the phone, Netflix decided to merge the tablet and phone UIs.

Even the awards circuit lost interest in the tablet. The year after our tablet app premiered, the Crunchies ditched the Best Tablet App award. They haven’t brought it back since.

Use of tablets in the Brisbourne family matches this pattern – enthusiastic early adoption and less and less use over time. Two examples:

  • I used to have a Nexus 7 in the bedroom to read news, but I smashed the screen a couple of months ago. I initially thought I would wait until an interesting new tablet was released and buy that as a replacement but I’m now quite at home with reading news on my phone and probably won’t bother.
  • We keep an iPad in the kitchen which is theoretically for the adults in the house but occasionally the kids use it and it isn’t there when Fiona and I want it. That doesn’t seem to matter anymore because our phones are a fine substitute. I wanted the iPad the other morning to buy some new vitamin C, for example, but it wasn’t there, and to my surprise buying from Natures Best on my phone was a breeze. The only thing that we really need the iPad for is Spotify and that’s mostly because it connects easily to our Bluetooth speaker.

When people talk  about Bilimoria’s post they all say the same thing as I’m saying – they are using tablets less and less. This doesn’t mean that tablets are about to disappear, but it does mean that for most new mobile oriented startups the right strategy is to think phone first.



How to be happy

By | Startup general interest | 6 Comments

Jeff Weiner, CEO of LinkedIn has posted Five keys to happiness that he learned from his mentor and happiness expert Ray Chambers:

1. Live in the moment

2. It’s better to be loving than to be right

3. Be a spectator to your own thoughts, especially when you become emotional

4. Be grateful for at least one thing every day

5. Help others every chance you get

It’s a great list to read and be inspired to improve behaviour. Being grateful for something every day is one thing I can get better at immediately.

I want to think about three of them in a work context though as it seems to me there is a trade off between getting stuff done on the one hand and living in the moment, being loving rather than right, and helping others all the time on the other. It seems to me that in these three areas (1, 2, and 5 in the list above) we should be striving for the right balance, and the thing to do is assess where you are at the moment and whether or not we should do more of them.

Anonymity doesn’t work so how can we have privacy?

By | Privacy, Startup general interest | 8 Comments

Secret is the hot new app in the Valley. People read it for the gossip, and people post gossip there because they post anonymously. Last week people were even chatting on Twitter about the amazing gossip on Secret!

Sam Altman of Y Combinator wrote this in a post about Secret:

Anonymity breeds meanness–the Internet has proven this time and time again.  People are willing to say nice or neutral things with their name attached–they need anonymity for mean things and things they are embarrassed about.  In fact, the closer to real identity internet forums get, the less they seem to decay.  Anonymous social networks have been (thus far, anyway) in the category of services that get worse as they get bigger–unlike services like Facebook or Twitter that get better as they get bigger.

This matches my experience of web communities. Trolls are always anonymous.

I think this observation leaves us with two theoretical choices for the future – either we have large online communities where people use their real identities with everything that means for privacy, or we don’t have online communities at all. However, the genie is out of the bottle and online communities are here to stay, meaning option two isn’t really an option at all, and we are destined to live in a world where people share stuff online using their real identities.

The interesting question, then, is what that world looks like, and the recent rise of Snapchat and other ephemeral messaging services can be understood as a move to share online more privately. I think we will see more of this sort of thing over time as society searches for a new equilibrium for privacy and sharing that works in the digital age. 

The danger of cumulative graphs (aka vanity metrics)

By | Startup general interest | No Comments



The two charts above graphically illustrate the danger of cumulative graphs. Total messages is a nice graph to look at and share with people because unless the business is literally dead it is always moving up and to the right. This is what makes it a vanity metric. But it’s dangerous because it makes it hard to see what’s going on in the business. I posted these graphs because the ‘Total Messages’ is a particularly deceptive chart. Even an experienced eye looking at the ‘Total Messages’ probably wouldn’t notice the problem until August or September, whereas anyone looking at the ‘Monthly Messages’ chart would have seen the problem in July. Less experienced folk might be looking at the ‘Total Messages’ in December and still miss the fact that there was a problem.

The lesson, of course, is to stay away from cumulative total graphs. They might be good for motivational purposes but they run the risk of fooling people, including CEOs, into thinking things are ok when they are not. As an investor when I see cumulative graphs I wonder if someone is trying to bamboozle me. Then I wonder whether the entrepreneur might be fooling herself.