Monthly Archives

July 2014

Her – a movie about artificial intelligence

By | Startup general interest | One Comment

Last night Fiona and I watched Her, a kind and sensitive film about love between a human and an artificial intelligence. I’ve embedded the trailer above in case you want to take a look.

It’s a great film on two levels. Firstly as a modern era human love story and secondly for the way it shows what artificial intelligence will bring to society. Her shows how powerful artificial intelligences will be, the range of emotions they will have and how they will evolve and explores issues of mutual dependency. All of this is played out without the usual ‘machines vs humans’ narrative which allows for a more nuanced investigation of the issues. It’s powerful stuff. I’d love to say more, but won’t for fear of ruining the film.

We will most likely have a $1,000 computer with the power of a human brain before the end of the next decade so the stuff of science fiction could be with us very soon. It’s impossible at this stage to say how it will play out, but I’m excited to see it. Will the machines have personalities? Will they have soul’s? Will they treat us well?

For better or worse we will have answers to all these questions inside the next twenty years or so.

Making it easier to buy stuff online will drive growth

By | Ecommerce, Uncategorized | 3 Comments

Kieran O’Neill, founder of our portfolio company Thread likes to quote Paul Graham saying ‘if you make something easier for people to do, they will do more of it’. At Thread Kieran is making it easier to buy fashion and as a result the majority of his customers report that they spend more on clothes after becoming Thread customers than they did before. Amazon’s ‘One click purchase’ is another great example of a service that gets people to buy more by making it easier.

Yesterday Twitter and Facebook made separate but similar announcments that customers will be able to buy stuff directly from Tweets and their Facebook newsfeeds. Here’s how Facebook described their ‘Buy button’:

With this feature, people on desktop or mobile can click the “Buy” call-to-action button on ads and Page posts to purchase a product directly from a business, without leaving Facebook.

The purchase will be made using credit card and presumably shipping address data stored by Facebook. It sounds like it could be as easy as buying something on Amazon.

Twitter’s announcement was that they have acquired a company called Cardspring which has payment technologies, and they have outlined how merchants will be able to interact more with customers within Tweets, although they have stopped short of announcing a ‘Buy button’ of their own. I suspect it’s just a matter of time before they do though.

All of this is similar to a ‘buy in the page’ service offered to media companies by Lyst that allows people to buy items they are reading about without clicking to a different site.  (Lyst was one of my portfolio companies when I was at DFJ.)

For me these services which take a step or two out of the process of buying stuff online represent an important evolution. Ecommerce is slated for massive growth and making it easier to buy will be one of the drivers.

Startups: make your sites responsive

By | Startup general interest | 2 Comments

Google has upped the intelligence of it’s mobile search and now indicates when sites won’t render well on a mobile device. It’s a short step from there to not putting those sites in the top search results. This comes in the year when Google expects mobile search volume to pass desktop search volume, and makes it clear to me – responsive design is the only option for startups now. That can be difficult when resources are tight but without responsive design half of search queries won’t find you. The result: your V1 website is much less likely to get the traffic you need and you will have a hard time knowing whether your idea is working.

I’m sure that many of you have been building responsive sites for some time, but we have now reached the point where for the vast majority of startups there is no sensible alternative – and that includes B2B startups.

$1bn invested in UK startups in last six months

By | Venture Capital | 3 Comments

In June I shared some CBInsights data on investment into London startups through Q1 under the headline London: A startup ecosystem in the making. This week TechCrunch published Crunchbase data for the whole of the UK showing a similarly strong picture.

Screen Shot 2014-07-15 at 17.57.45

Success begets success in the startup world and these investment figures wouldn’t be happening if it weren’t for the success that has been enjoyed by companies like Just Eat,, and Zoopla. That’s not the whole story though, because confidence also breeds success. That’s why it’s important we keep shouting about the things that are going well.

I’m pleased to say that the last week has seen Google Ventures arrive in the UK and Seedcamp announce their new fund. They will help keep the investment rate growing.

How 20 customer interviews enriched Lexoo’s strategy

By | Uncategorized | 4 Comments

We recently invested in Lexoo, a marketplace connecting SMEs with legal services. We were attracted to the opportunity because there are an increasing number of freelance lawyers who are doing equivalent quality work for startups at 20-30% of the cost of working with a big law firm. The founder, Daniel van Binsbergen, is an impressive individual so we backed him to build a marketplace to help SMEs and freelance lawyers find each other. You could think of it as like Elance or oDesk for the legal sector.

Lexoo is one of our very early stage deals, and as was the case with our other early seed deals SnapTrip and Parcelbright the CEO worked with our Product Partner Dharmesh to conduct a structured set of customer interviews. Taking inspiration from Rob Fitzpatrick’s The Mom Test we are careful to ask questions that reveal customers’ true feelings and motivations and avoid vanity conversations.

And the findings were remarkable.

It turns out that the price of legal services is important to SMEs, but that there are some bigger issues at play. Most people hate buying legal services because they don’t know what they need, don’t really know what questions to ask, and are afraid that if they make a mistake it will cost them big time down the road. Moreover, recommendations from friends don’t work very well because most people aren’t sure whether their friends really know a good lawyer from a bad one and because it’s hard to ask difficult questions or negotiate with a lawyer that’s been introduced by a friend.

These findings have transformed Lexoo’s strategy. The plan had been to be efficient at matching SMEs and lawyers and build some workflow into the platform to make it sticky – e.g. for invoicing. Now we will build education into the platform so SMEs can be smart in their procurement of legal services and get over the difficulties described above. Daniel likes to give the following example:

SMEs use lawyers a lot to review employment contracts, but the cost of doing so can vary from £300 to £1,400 depending on the complexity of the situation (options, founder status, restrictive covenants etc.). On Lexoo we will build functionality so our customers can work out where on the range they should position themselves and understand the questions they should ask. And then we will connect them with a range of suitable lawyers.

Lexoo will now be adding much more value to it’s customers. That’s exciting!

Finally – some of you who read this blog helped out with the customer interviews. Thank you!

Bitcoin: things only grow this fast when something important is happening

By | Startup general interest | 11 Comments

Coindesk just published their quarterly ‘State of Bitcoin‘ presentation. This slide stood out for me:

Screen Shot 2014-07-14 at 20.42.32

Looking at the massive year on year increases in most of these metrics I’m reminded of some wise words from Jeff Bezos. In around 2002 I was stuck in my hotel room in Egypt due to food poisoning and the only English TV available was an American business channel. I forget which it was. In fact the only thing I can remember from 48 hours of television is an interview with Jeff Bezos. When asked why he founded Amazon he said that he was working on Wall Street in the early 1990s when someone showed him how fast the internet was growing he knew that something very important was happening. Otherwise you just don’t get growth like that.

You can see from the chart below that the number of internet hosts grew 10x from 1989 to 1993 – that’s roughly 2x a year. Bezos founded Amazon in 1994, so this was the data he was looking at. You can see from the table above that Bitcoin adoption is growing faster than that – 3x to 685x depending on which measure you choose. As with the internet back then major use cases are still unclear, but as with the internet they will come.


Great slides showing the potential in ecommerce

By | Ecommerce | One Comment

Business Insider has just published a great deck showing the potential in ecommerce. We’re focused on the ecommerce ecosystem, so I guess I would say this anyway, but the opportunity is truly exciting. TL;DR ecommerce is a juggernaut already, still growing fast and with miles to go. Billions of dollars of retail are coming online for the first time each year and will do for some time to come.

These are my two favourite slides:

Screen Shot 2014-07-11 at 13.29.56 Screen Shot 2014-07-11 at 13.27.56

Sad as they are for the companies involved and the high street generally these store closures suggest very fast movement from offline to online in specific sectors. Our challenge as investors and entrepreneurs is to find the sectors where this will happen next.


I’m a stock picker

By | Forward Partners, Uncategorized | 14 Comments

There’s a lot of people now who think that the only way to make money in venture is to have an investment in one or more stand-out successes with exit values of $1bn+, the so called ‘Unicorns‘. The thinking goes that for early stage investors it’s all but impossible to tell which those companies are likely to be, and that the best strategy therefore is to give yourself the maximum chance ending up with a stake in a Unicorn by investing a small amount in a large number of startups. This is sometimes called a ‘spray and pray’ strategy.

At Forward Partners we have a different view.

The first challenge is to the premise that the way to make money in venture is to invest in Unicorns. If you have a small fund then it’s very possible to generate good returns by investing in companies that achieve exits in the £100-500m range.

Let’s run the numbers.

A good fund returns 3x cash-on-cash to it’s investors. If you have a £30m fund (our target) then you need to give £90m back to your investors. Add a bit to cover management fees and you are looking for exit proceeds totalling £100m. If you have 30 companies in your portfolio and 20% of them are hits then you need each of those hits to return £17m on average. That could be six exits at £100m where you have a 20% stake, six at £200m where you have a 10% stake, six at £400m where you have a 5% stake or any combination of the above.

In other words, no need for a Unicorn. We still want to back Unicorns, of course, and many of our investments have that potential, it’s just that we’re not relying on getting lucky.

Which brings me to the second challenge, which is with the premise that at the early stage it’s all but impossible to accurately predict which companies are going to succeed and which aren’t. If the definition of success is $10bn+ I can agree, but at lower levels I think skilled investors who stock pick can materially out perform the market average you will get from spray and pray.

When you boil it right down it takes two things to be a skilled investor: smarts and good information. Let’s take the information piece first. If you have been a successful investor for a while then you will have seen lots of companies up close and had a distant connection with many more. You will also be well networked and be amongst the first to hear about new deals and new trends. These amount to substantial information advantages. However, information is only useful if you have the smarts to exploit it properly. That’s partly about the ability to spot patterns, and partly about the discipline to reflect and think deeply about what you are doing.

I like to think that we have the information and the smarts to be good stock pickers, and that we will have enough exits in the £100-500m range to make Forward Partners a great fund. Then, if we have done our job well, there is also a reasonable chance that our best company will turn out to be a Unicorn. Then the fund won’t be great, it will be amazing.

Scaling user growth: don’t bank on partnerships

By | Startup general interest, Uncategorized | 5 Comments

Andrew Chen has a great post up detailing the ways to scale user growth. He lists the four (paid, viral, SEO, sales – for B2B) and then ‘other’ in which he says:

There’s the odd partnership, like Yahoo/Google, that can help make or break a startup – but these are rare and situational. But sometimes it happens!

Partnerships are seductive because they promise big returns based on little work, once the deal is closed. Moreover the big company you are talking to is probably promising big things. However, as Andrew says, they rarely come off. Usually the deal doesn’t close, even after endless meetings, and then the next most common outcome after that is the deal is signed but for some reason doesn’t deliver the promised growth.

Almost without exception the right strategy is put in the hard graft to find a paid, viral, SEO or sales route to market think of partnerships as a small effort high risk/high reward endeavour. If partnerships look like the most viable way to grow then it’s probably time to look again at the fundamentals.

Finally, if you got this far (or even if you haven’t) then you should go read Andrew’s post in full. His advice on how to balance non-scalable customer acquisition with scalable acquisition at the early stages is spot on.

The worlds largest food companies are all ancient…

By | Venture Capital | One Comment

Business Insider just published an infographic showing the Ten companies that control nearly everything we eat and their sub brands. Eyeing the list I was struck that there are no new companies there. Digging into it a bit further it turns out that the average age of these companies is 107 (and that’s taking the most recent dates).

In a world where incumbents are getting turned over faster and faster that’s remarkable (the average tenure in the S&P 500 is now 18 years – see here).

These are all great firms with strong brands that have shown great adaptability, but I would be amazed if there isn’t an upstart in that list at some point soon. My impression is that investors are paying more attention to food startups now, maybe this is why. Soylent anyone?

Full list of the companies and their founding year below.

  • Pepsico: founded 1919
  • General Mills: founded 1866
  • Kellogg’s: founded 1906
  • Associated British Foods: founded 1935
  • Modelez Internationa: founded 1923 as National Dairy Products
  • Mars: founded 1911/1920 (Wikipedia gives two years)
  • Danone: founded 1919
  • Unilever: formed 1929 by the merger of British soap maker Lever Brothers and Dutch margerine maker Margerine Unie
  • Coca Cola: founded 1886
  • Nestle: founded 1867