Monthly Archives

June 2014

Researchers find cognitive bias in monkeys

By | Startup general interest | No Comments

I love it when scientists find human characteristics in monkeys. I’m not sure if that’s because it’s fun to anthropomorphise or because it tells us that those characteristics are embedded deeply in our DNA. Probably both.

Perhaps the best known example is that monkeys have a keen sense of fairness, many studies have now shown that they get upset if rewards for tasks are not equal (one here).

The new news today is that monkeys share the human predisposition to see patterns where none exist – the clustering illusion. Monkeys suffer from cognitive bias just as we do.

This tells us why cognitive biases are so hard for people to overcome and reminds us that we should factor them into our business plans. Here are a couple of examples:

  • Once someone is invested in a service the sunk cost fallacy will make them hard to shift/easier to retain – upshot: encourage customers to invest time/money/reputation in your service
  • Due to the clustering illusion people will irrationally expect winning streaks to persist – upshot: raise money when you have momentum
  • Once someone’s mind is made up the confirmation bias makes it hard to change – upshot: invest heavily in making a good first impression


Labelling Forward Partners as an ‘Ecommerce investment studio’

By | Forward Partners, Uncategorized | 13 Comments

One of the exciting things about Forward Partners is that we’re blazing a trail in the investment world. Our model of backing entrepreneurs and then also investing heavily in a team and co-working space to support them is new. I like that about us. Our bet is that the investment in support will pay dividends when our companies exit, and if we are right our entrepreneurs will win big and we will win big.

Being new comes with a challenge though, and the challenge is that there is no easy way to describe us. We are a bit like an accelerator programme, a bit like an incubator and a bit like a straight early stage fund, yet we are also different to all of these things in crucial ways. When entrepreneurs hear the word ‘accelerator’ they think classes of twenty startups on three month programmes. We invest in 1-2 companies per quarter that join us for a year long programme, and we invest in late-seed stage companies too. The word incubator reminds people of 1990s incubators that invested cash with one hand and then took it back with the other by forcing their companies to spend money on their real estate and other services. We definitely don’t do that. Finally, we are different to early stage funds (and many of them are great early stage funds) because we spend much more money supporting our portfolio.

‘Startup studio’ is a fourth label that has been used to describe us, but it has been something of a catch-all term used to describe any company that is in the business of creating, or helping to create, companies, and hence of limited use.

That changed last week when Makeshift and NESTA convened a workshop to discuss whether ‘startup studios are a thing’. I couldn’t make the workshop but arrived just as it was ending so I could join the panel discussion afterwards. My first conversation was with Nick Marsh, co-founder of Makeshift, who excitedly explained that they had brought some much needed clarity to the subject by coming up with three different categories of ‘startup studio’:

  • Entrepreneur led studios that exist to help their entrepreneurs find the next idea. They pursue multiple ideas in parallel and then often settle on one. They are usually self-funded by the entrepreneurs. Examples include Obvious Corp in the US (which spawned Twitter and Medium) and Makeshift and Just Add Red here in the UK.
  • Agency led studios that grow out of creative agencies looking to exploit good ideas they’ve had and/or take advantage of spare capacity. Examples include Mint Digital and Neverbland.
  • Investor led studios that offer a very high level of service to the entrepreneurs they invest in providing them with a mix of capital, office space, developers, designers, recruiters and fundraising support. Examples include Forward Partners, Science Inc, aspects of Betaworks, and maybe Rocket Internet.

Nick sets these definitions out and provides more detail in a very helpful blog post.

‘Investor led studio’ or better ‘Ecommerce investment studio’ could be a great way to describe Forward Partners. The tagline on our website is ‘The catalyst for ecommerce startups’ and that’s great for marketing copy because it conveys the sense that we help make things happen. However, it’s less useful in conversation because it doesn’t help people understand what we do. I like ‘Ecommerce investment studio’ because it makes it clear that we focus on ecommerce, that we have an investment mindset, and that we help our companies with the services that studios provide. The residual issue is some vagueness around the services we provide, but I think people in the startup ecosystem have a vague idea and at least we’ve teed up the question.

My interview on FrenchWeb

By | Announcement, Forward Partners | No Comments

Last Friday my friend Steph Bouchet (aka @rougefrog) stopped by our office to interview me for FrenchWeb, embedded below. It’s a good 12 minute intro to Forward Partners, the sort of companies we like, what we do here, and what makes us different. I also talk a little about the current state of the UK startup scene.

There’s a couple of minutes in French about Little Printer and then I’m on from 3.40.

Thanks Steph!

London Calling #12 by frenchweb

Saying ‘no’ is often right, but don’t leave people hanging

By | Startup general interest | 2 Comments

Creative People Say No by Kevin Ashton is a great reminder on the importance of saying ‘no’. The post starts by quoting lots of famous people saying ‘no’ to opportunities so they have more time to be creative, and then comes the money quote:

Time is the raw material of creation. Wipe away the magic and myth of creating and all that remains is work: the work of becoming expert through study and practice, the work of finding solutions to problems and problems with those solutions, the work of trial and error, the work of thinking and perfecting, the work of creating. Creating consumes.

I love this quote because it recognises that graft is at the centre of creativity.

In his post Kevin is mostly talking about artists and authors, but his message applies equally, if not more, to entrepreneurs. Great entrepreneurs say ‘no’ a lot. This won’t be new news to many of you, but I haven’t seen it explained this well before. An entrepreneur is creating a company and just like in the quote, when the magic is wiped away it’s all about working hard at learning and doing.

Later in the post Kevin recognises that saying no is difficult because it often feels confrontational or rude. I feel that a lot when I refuse meetings with entrepreneurs, and I can sometimes feel that people are worried when they say no to meetings with me. If we are saying no for the right reasons these feelings are, of course, unhelpful and we should try to get beyond them.

We can help each other in this regard by being courteous. When asking for meetings that means phrasing the request as a request and not being too pushy. When receiving requests that means answering, even if the answer is a ‘no’. Not answering leaves the asker wondering if they have been deliberately ignored or just forgotten, which invites pushiness and exacerbates the problem.


Thinking of UX work as a search for new experiences

By | Amazon, Startup general interest | No Comments

At the end of yesterday’s post on Android and Amazon Forks Benedict Evans wrote:

Amazon has never been a user experience company in that sense – it thinks about user experience the way Fedex does, as something to focus on ruthlessly, but not as a playground for new experiences.

I’ve been long on Amazon for ages now (and hold some stock), but this got me thinking.

When I look at the companies we’ve been investing in recently they are all delivering new experiences and their success is predicated on delighting customers. We love it when there is a real ‘wow’ moment. That’s what happens when people get their book from Lost My Name or when they’ve swiped 10,000 pairs of shoes on Stylect, to take two of our most recent investments.

I think those ‘wow’ moments are increasingly important for Amazon and other large companies too. Existing user flows should still be optimised, of course, but these days that’s table stakes. It’s the ‘wow’ moments that get customers excited, makes them loyal, generates word of mouth marketing (the most important kind), and gets free press.

I’m skating slightly ahead of the puck here, but given that everything is changing and commoditising with increasing pace these days all companies (large and small) will have to deliver those wow moments to stay relevant. And that means thinking about UX as a playground for new experiences.

As a side note, I see this as another reason to be long startups.

Om Malik on why valuations defy metrics

By | Startup general interest | No Comments

Yesterday Om Malik reminded us that predicting the future is hard. That’s true, but in the startup industry we have to do it every day. Both as investors and entrepreneurs.

When companies attract high valuations their investors are predicting the future too – either that the business will trade in M&A at a ‘strategic multiple’ or that they will generate big cash flows. For larger valuations it is the latter. Om had this to say on why predicting cash flows has become difficult:

Today we live with new realities and new technology companies, which end up with opportunities and growth curves that can’t be predicted (in either direction.) A lot of traditional metrics of business don’t account for the changed metabolism and velocity of business due to presence of the network and, more lately, the concept of anywhere computing.

The most important of the ‘new realities’ that Om refers to are that products are digital rather than physical, allowing them to grow friction free and that computing is now ubiquitous. Put those things together and the possibilities for never-seen-before growth and equally rapid collapses.

Investors are left with the exciting prospect of betting big on highly uncertain outcomes. For those that get it right the rewards are rich. But predicting the future is hard, and many more investors will get it wrong than get it right. Moreover, as computing becomes more ubiquitous and software eats the best companies will grow ever faster and their future cash flows will be even harder to predict. There are no new metrics or valuation methodologies on the horizon, so expect to see more hard to understand valuations. Even in the absence of a bubble.


Growing wealth inequality should be addressed now

By | Startup general interest | 12 Comments

In my news feeds today I read that twice as many British households are in poverty as 30 years ago and saw Alex Payne’s letter to Marc Andreessen which calls bullshit on the assumption that tech development will solve our social problems.

I couldn’t agree more.

As well as being plain wrong from an ethical perspective growing wealth inequality will ultimately undermine economic growth. We’ve already seen increasingly frequent riots in London and Paris, a big increase in the popularity of protest parties, and a rising global protest movement generally. If these trends persist economic growth will either be choked by social unrest or by the election of radical politicians.

Unfortunately the underlying drivers of wealth inequality – globalisation and automation – are both accelerating. Like Marc Andreessen, I believe that ultimately developments in tech will create enough wealth that inequality will cease to be a problem, but those days are some way off and the prospect of dark times in the interim is very real.

Many tech enthusiasts are also neo-liberals and have a strong tendency to gloss over the dark times as something ‘the market will fix’. That’s probably true over the long run, but is likely to come at an unacceptable human cost.

Wealth inequality is partly of the technology industry’s making and I would like to see us advocating policies designed to alleviate the problem in the short term. I quickly get out of my depth here but I would expect them to include significant increases in retraining and back to work budgets and measures designed to promote social mobility.

And the time to act is now. The underlying drivers are exponential in nature and if problems come they will come on us in the blink of an eye. We need to take steps in advance of that.


More on understanding your customers: 3 keys to virality

By | Uncategorized | No Comments

These three conditions for creating virality were listed on Founders Notebook a month or two back:

The most powerfully growing products do three things at once:
1.They make you look smart to the people you invite.
2. They give real value to you when the people you invite join.
3. They give real value to the people you’ve invited once they sign up.

As with my post yesterday, these are all about understanding and respecting your customer. Respecting that they will only do things if it makes sense for them and understanding what will make them look smart, what will give them value and what will give their friends value.

There’s no substitute for understanding customers.

Barkbox’s path to 100m revenue: understanding and respecting the customer

By | Startup general interest, Uncategorized | 4 Comments

Henrik Werdelin, co-founder of Barkbox a subscription ecommerce service for dog owners wrote a great post on Medium detailing The 6 counterintuitive ways Barkbox grew to a 100m business. It’s a great read combining high level thoughts about approach (be the place to hang even if users aren’t buying) with tactical specifics (be very active on Instagram).

There is one thread that runs through the entire post though, and that is to understand and respect the customer. Here’s a crude abbreviation of six ways designed to make my point (but do read the full post):

  1. “Give a shit [about the customer], … thinking that customers are idiots … is toxic, … elevate support as a focal point of the company”.
  2. Obsess on your user flow.
  3. Use email in a way that’s sensitive to the customer.
  4. “Let users do the talking [on social media]”.
  5. “Be the place your customers hang even when they aren’t buying”.
  6. Be pushy with sales only once intent has been established, but be polite

Each of these is about understanding and respecting the customer. In other words, the key to getting 100m revenue was customer focus.

Putting the customer first, or at the centre, is such a well worn cliche these days that it’s easy to be dismissive but it’s still rare for companies to go as far down this path as Barkbox has. Still rare, but increasingly common, especially amongst the best companies. Understanding and respecting the customer results in good product and an authentic brand, two critical success factors for effective marketing in the social media age.

Yet doing it well is still hard.

I’ve blogged this point from a number of different perspectives and my view is that thoroughly understanding customers (aka customer development) is as important as hypothesis driven development and build-measure-learn cycles. It’s one of the areas in which we are working hard here at Forward Partners, but we have yet to collectively wrap our heads around how to do it really well.