Monthly Archives

April 2014

Words of wisdom from Bonobos: don’t hire for experience

By | Startup general interest | 2 Comments

Andy Dunn, founder and CEO of Bonobos is one of the most thoughtful startup CEOs out there. He writes thoughtfully and honestly about his experiences building Bonobos into a successful clothing business and draws out the lessons that apply to startups generally.

In a recent interview with Business of Fashion he said this about hiring:

When hiring, it is tempting to employ someone who has done it before. You actually don’t want that person. You want someone who is about to do it. After all, if they’ve done it before, why would they do it again? Either they’re not ambitious, not growth-oriented, or weren’t that good in their previous role. No matter which it is, you don’t want them. This is one way to screw up your culture — experience-based hiring leads to bringing in those who have the right credentials, but not the right fire in their soul.

He’s totally on the money here. Hiring for experience, sometimes termed as a ‘great CV’ is one of the most common mistakes I see startups make, most often shortly after they’ve raised a big round. Generally speaking it’s best to hire hungry, high potential people with less experience and for less money and take the chance that they don’t step up, than to hire expensive experienced people with the risk that their experience doesn’t translate into high performance in a startup environment.

All that said, it’s hugely helpful if within the team there is experience both of the sector and of business generally, and bolstering levels of experience within the team overall can be a good reason to make an exception to the rule above.

Predicting a long boom, driven by technology

By | Startup general interest | 5 Comments

A lot of VCs love Carlota Perez’s framework for understanding technological revolutions, financial bubbles and golden ages. Fred Wilson is a big fan, I wrote about her back in 2009, and now Marc Andreessen was talking about her in an interview he gave last month. He summarised her theory of development, bubble, crash and deployment like this:

First the new technology is not taken seriously at all. Then it’s taken way too seriously way too quickly – everybody gets too excited. Then there’s a gigantic catastrophe; and only then stuff actually starts happening.

That ‘stuff happening’ phase is where we’re at now, and it’s what Perez calls a ‘golden age’. Internet technologies are getting adopted at mass scale for real world functions that make money. Look at AirBnB, Uber, ASOS, King, and many others. Establishing the right regulatory framework is key to establishing a long golden age such as we had in the 1950s and 1960s and you can see governments the world over struggling to get that right now. If they do then we are in for another long boom.

There are many things that might go wrong, to be sure, but overall I’m hopeful. That’s techno-utopia for you.

Forget tablets, think big screens and small screens

By | Mobile | No Comments

The idea has been building for a while now that tablets are losing significance as a category of devices and last week Benedict Evans posted data that to my mind makes the case unequivocally.

The main news here is that iPad sales have flattened:

iPad salesEvans also has data showing that Android tablets aren’t having much of an impact.

The other parts of the story are that smartphone sales continue to rocket and PC sales continue their slow decline. Check out Evans’ post for more data and a fuller argument.

From the perspective of the ecommerce companies in which we invest the most important conclusion is that smartphones are going to continue to take an increasing share of transactions and the importance of working well on mobile early in the life of a company continues to grow. Evans’ emerging and more interesting conclusion is that it’s making less sense to think too much about tablets as a separate category. The use cases for tablets are not that different to laptops – they are similarly sized items to carry after all – so keeping things simple by thinking about two primary experiences – small screen (smartphone) and big screen (tablet, laptop, desktop) makes good sense.



Bitcoin price is down but adoption is gathering pace

By | Startup general interest | No Comments

Our friends at CoinDesk have just published the State of Bitcoin Q1 2014 presentation embedded below. At first glance it hasn’t been a good year for Bitcoin so far: the price is down 37% year-to-date (along with a couple of people in the office I bought a month or two back on a dip, but alas it has dipped further since then) and the collapse of MtGox and other news stories have been overwhelmingly negative. The more important fact for me is that adoption is growing. 63,000 businesses now accept Bitcoin and the Social + Capital Partnership is forecasting 7.3m wallets by the end of the year, up from c2m at the beginning. That’s not hyper-growth, but it’s very solid.

I’m holding.

Bubble watch: a comparison of 1999 and 2013

By | Exits, Uncategorized | 2 Comments

The markets are hotter now than they have been for a while and people are (once again) talking about bubbles. The data points below show that in terms of the IPO market at least the heat is nothing like what it was in 1999.

  • Median sales of company at time of IPO — $12m in 1999 vs. $106m in 2013
  • Median price/sales ratio at time of IPO — 26.5x in 1999 vs. 5.5x in 2013
  • Total # of tech IPOs — 369 in 1999 vs 45 in 2013
  • Total IPO proceeds raised — $33.5 billion in 1999 vs $8.5 billion in 2013
  • Average first-day stock price increase at IPO — 81% in 1999 vs 20% in 2013
  • Total venture capital dollars raised — $55 billion in 1999 vs $17 billion in 2013

This data is from a Ben Horowitz annotation of a David Einhorn post on RapGenius.

As a side point I’m loving the power of inline commenting on Medium and RapGenius. Commenters can talk directly to the point they are interested rather than having to comment on the whole post or explain which part of the post they are talking about. That makes the comment more powerful and easier to write. I’d love to bring inline commenting to this blog.

Amazon the most aggressive acquirer in ecommerce – by far

By | Exits | No Comments

Click on the chart below to get to an amazing interactive visualisation of 15 years M&A by Apple, Amazon, Google, Yahoo, and Facebook.

From our perspective as ecommerce investors the most interesting thing is confirmation that Amazon is the only volume acquirer in our market, and generally not at huge valuations. That makes it crucial that ecommerce startups can get to high valuations based on fundamentals – i.e. the ability to generate profits and cash.

Click image to see the interactive version (via Simply Business).

The five roles of a startup CEO from founder to leading an IPO

By | Startup general interest | 4 Comments

It’s well understood now that at many of the best startups the founder remains at the helm until the company is very large – Facebook, Google, Microsoft and Oracle are four great examples. It’s also pretty well understood that founders have to be incredibly adaptive to stay effective as their companies scale. This description of changing requirements from CEOs is a helpful guide to anyone involved with fast growth startups (credit Venturebeat):

  1. Innovator – at the beginning the CEO should be great at generating ideas and acting on them
  2. Entrepreneur – then the CEO must be great at marshalling resources, raising money, staying resilient, and getting stuff done at pace
  3. Builder – as revenues start to grow the CEO has to build a team and processes so sales can be repeated and the business can grow
  4. Operator – then as the business achieves scale the role of the CEO shifts to being an operator (careful not to lose the innovation though..)
  5. Enabler – finally, once the business becomes very large with stable and growing profits the focus of the CEO shifts to enabling the organisation to keep humming all around them

We invest at the very early stages and look for our founders to excel as innovators and entrepreneurs first with the potential to be great builders. We hope they will go on to become great operators and enablers but it doesn’t make sense to think too much about that when the companies are still tiny. For a long time now I’ve thought that the biggest challenge founders face in adapting is the need to ditch the stubborn-ness that served them so well in the early stages. Gail Goodman, the founder and CEO of Constant Contact, which provides online marketing services to small businesses and has grown to some $285 million in annual revenue since it was founded in 1998 put it like this:

being relentless in your perseverance can eventually become an obstacle to change … Every founder [eventually] needs to face two ugly truths. The first is that you’re doing something wrong all the time. The second is that your flaws are harming the team.

The trick is to maintain self-belief through this realisation.

The increasing importance of right first time execution

By | Startup general interest | 3 Comments

This Tweet from my friend Nicholas Lovell got me thinking about the changing dynamics of starting companies generally:

Just as it is getting easier to make games so it is getting easier to start companies. Both the amount of money required and the depth of skills required have fallen precipitously, the first driven by open source software and cloud computing and the second by the improving quality of tools, services and advice available to entrepreneurs. (Note building a successful company is still very difficult, it is just the starting that is getting easier.)

As with games the result is that increasing numbers of companies are started each year.

As with games that makes it harder to stand out from the crowd.

The keys to standing out from the crowd are to have a great idea, to execute well and to generate momentum. Early adopters, investors, and the press are always looking for hot new companies that exhibit these characteristics and they have good systems to find them. However, because the number of startups is increasing the bandwidth available to look at each one is declining making it harder for companies to get anyone to take a second look if their execution and/or momentum falters.

Hence it is increasingly important to execute right first time.

(Side note: experimentation and failure are part of good execution in a modern startup so long as the experiments are thoughtful and learning driven.)


Ev Williams’ formula for a billion dollar business

By | Startup general interest | No Comments

At a recent XOXO conference Ev Williams, founder of Twitter and Medium, gave his formula for a billion dollar business (as reported in Wired):

Here’s the formula if you want to build a billion-dollar internet company. Take a human desire, preferably one that has been around for a really long time…Identify that desire and use modern technology to take out steps

He gave Uber as his example. People have wanted to get from A to B since the beginning of time and Uber has just taken some steps out of the process.

The lesson here is that at the end of the day there is nothing new under the sun. We all still have the same basic needs and high potential consumer startups should be able to make a link between one of those needs and what they do. For my money Maslow’s Hierarchy of Needs is the best framework for understanding those needs. Whilst our basic human needs haven’t changed the extent to which they are sated is definitely evolving. That’s where Maslow’s Hierarchy is powerful. By listing our needs in the order in which we need them to be satisfied it makes it easier to see where the gaps are.

The dominant meme in this area is that our physiological and safety at the bottom of the hierarchy are largely taken care of, and that the opportunities now are in helping people with their needs for ‘love/belonging’, ‘self-esteem’ and, particularly ‘self-actualisation’. What’s interesting about Ev’s formula for a billion dollar business is that it shows how to look for opportunities anywhere in the hierarchy – there are opportunities in needs at the bottom of the pyramid if they can be satisfied with fewer steps. The more efficient delivery of health is one such area that a number of entrepreneurs are working on now.

Drones will impact ecommerce from 2017

By | Ecommerce | 8 Comments

Screen Shot 2014-04-08 at 14.30.55This chart is taken from a presentation to DemoLabs by Helen Greiner, founder and CEO of CyPhy works and formerly of iRobot. It’s a capability timeline for drones.

At Forward Partners we invest in the ecommerce ecoystem and one of the sub-areas is innovative product companies building their brands online. I’m interested in the way drones and robots are changing the economics of manufacturing and enabling innovative product companies by enabling greater precision at lower prices, through mass customisation, and through cost effective small batch runs.

According to the timeline above it will be in 2017/18 when drones and robots are “evaluating and managing” that they are having the impact that I describe above. I think we will see the first innovative startups leveraging drones and robots to make amazing products before then. Indeed, I wrote about one example in the bike industry last year.