Monthly Archives

April 2015

Don’t be in denial

By | Startup general interest | 2 Comments

I’ve just read YC Partner Jessica Livingston’s Subtle Mid-Stage Startup Pitfalls. The whole post is a great cautionary read, but I want to elaborate on one of her pieces of advice:

Don’t for a second be in denial if things are going badly or growth is flat. If you’re vigilant about diagnosing problems like these, you’ll be more likely to nip them in the bud. The sooner you acknowledge that growth is flat, for example, the more time you’ll have left to fix it.

This advice is easy to give in the abstract general case, but harder when you see it happening in practice – nobody likes to be told they’re in denial. Much better to catch yourself first then, because it happens to all of us from time to time.

The key is to be paranoid. Look for signs that things might not be working and acknowledge them. That doesn’t necessarily mean react to them or change anything. It means think about them and have an explanation and a plan. Often that explanation will be short term volatility driven by something out of your control and the plan will be to wait, but look at it, acknowledge that it’s a concern, and then keep an eye on it. Have a position on when it will bounce back and be wary of giving yourself more time if the bounce back doesn’t come as expected. Have this discipline for everything from metrics (revenues, engagement, etc.) to progress in deal and partnership discussions to hiring and employee issues.

As an investor I love it when entrepreneurs have great data and a great feel for their business and they point out the issues to me, including little ones, with an explanation of whether they have taken action or are waiting to see if a trend develops. Then we can have a discussion. If I have to point out the little slips and downturns then it niggles at the relationship and I wonder why the entrepreneur isn’t bringing it up – have they noticed? or, are they in denial? Neither of these are good.


Solar might save the world – encouraging data

By | Startup general interest | 2 Comments

Top_5_Solar_StatesLook at that rapid increase in solar power capacity in five US states!

These increases are great news for two reasons Firstly, as we all know, solar is much better for the environment. Secondly as capacity rises, production rises, and with production increases come R&D increases which will continue to drive down the cost of solar energy. The cost of producing a gigawatt hour using solar has been declining exponentially for 20 years now, and with this sort of growth in production and R&D spend that trend is sure to continue or even accelerate (as a point of comparison, increased investment caused the cost of sequencing the human genome from an exponential decline to a faster than exponential decline).

All of this is super important because cheap solar energy is one of the best shots we have of surviving on this planet with increasing population and declining food and water stocks. Cheap enough energy unlocks large scale water desalination and hydroponic farming techniques.

Now I’m wishing even more that the UK had better weather…


Apple is now a phone company

By | Apple | One Comment

Screen Shot 2015-04-28 at 13.57.42

Apple released their results yesterday after another blockbuster quarter. You may remember that in Q4 they reported the largest corporate quarterly earnings of all time. Without the Christmas bump last quarter was always going to be less, but it still came in as the company’s second best quarter ever.

What I hadn’t realised is the extent to which they’ve become a phone company. As you can see from the chart above iPhone revenues were 3x all their other product lines combined. I see Mac computers everywhere and would have guessed their sales were rising faster than they are.

I wonder if we will see watches on the chart next quarter..

Note: the other surprising thing for me in these results was the extent of Apple’s business in China. Chinese revenues are up nearly 3x over the last two quarters, have passed sales in Europe and are now nearly 80% of revenues in the US.

More detail on Techcrunch

Building the best founding team

By | Forward Partners | One Comment

The founding team sets the mould for future employees of a company. The oft repeated cliche that A players hire A players while B players hire C players is very true. So getting those first few team members right is key. And that includes the choice of co-founder.

The challenge for entrepreneurs not lucky enough to know someone who can be their co-founder is that the majority of investors will only invest in co-founding teams. This forces entrepreneurs to find a co-founder before they can do anything else when their time would be better spent working out if they have a valid idea. Sometimes that can mean compromising on quality.

Investors, of course, have their reasons for only investing in teams, and Satya Patel of newish US VC Homebrew just set them out in a blog post:

  • Idea validation: If you can’t convince someone else to join you in pursuing your idea, maybe it’s not worth pursuing.
  • Pressure to perform: Having a co-founder makes you responsible to someone else, which in turn puts pressure on you to deliver results, probably faster than you might otherwise.
  • Emotional outlet: In startups the highs can be high but the lows can be low.  And the inevitable trough of sorrow can be a lonely place.  Surviving the anxiety and emotion of a startup can be much easier when the burden is shared.  It’s great to see much more dialogue about the emotional challenges of being a founder.  One way of fighting depression and other forms of emotional distress is by having a co-founder with whom you can be open and honest about your fears, struggles and insecurities.
  • Skill diversity: No one person, no matter how brilliant, has all of the skills needed to make a startup successful. Having co-founders with complementary skills can make it much easier for each person to say no to everything but the tasks most critical to achieving success.
  • Hiring strength: Multiple people on the team means a broader network from which to recruit, a diversity of skills with which to evaluate candidates and a more pronounced culture for potential hires to experience.  Having co-founders just makes hiring easier.
  • Sounding board: Co-founders lie awake at night worrying about the same things as you. They’re just as committed to the mission as you. And they’re equally invested in seeing all parts of the company work as you.  And so they will challenge you, scold you and push you (and often hug you) unlike anyone else at the company can or will.

If you are a regular reader you will know that at Forward Partners we do invest in solo-founders. We are big believers in the power of teams and strongly encourage our partners to find co-founders, but we are happy they do that after we invest.

With that context you can imagine that I was keen to read Satya’s reasons for preferring teams to make sure we aren’t missing anything. Rather than not missing anything it turned out that we are providing solutions. For every challenge of being a solo-founder that Satya listed Forward Partners is the answer.

  • Idea validation: Forward Partners validates the idea by deciding to invest.
  • Pressure to perform: We meet with our solo-founders weekly to help them stay focused.
  • Emotional outlet: Our team is there to help founders through highs and lows, we organise socials so everyone can blow off steam, and we encourage our partners to lean on each other for further support.
  • Skill diversity: Every solo-founder we partner with instantly gets a team of eight experts working on their startup covering product, design, development, customer acquisition, recruitment and fundraising.
  • Hiring strength: Our partners are supported by our in-house Head of Talent, get access to all of our networks for recruitment, and use their team of experts to help interview candidates.
  • Sounding board: The whole Forward Partners team is available and gets used as a sounding board. Moreover we are strong in different areas and the founder chooses whose best for any given issue.

I’m not saying that Forward Partners is a substitute for a co-founder. As I wrote above we work hard to help our solo-founders find a partner to be at the heart of their business with them, and we do that for the reasons that Satya lists. What I am saying is that we can fulfil the functions of a co-founder for 3-6 months whilst idea is validated and the business gets started.

The beauty is that after three months when it is time go find that co-founder the story is much stronger and better candidates are drawn to the company.


Sector and stage focused investors can add more value

By | Forward Partners | 5 Comments

It’s obvious when you think about it, but Forward Partners’ focus on early stage ecommerce is critical to us being able to help our partners the way we do. We invest in companies in the first couple of years of their life, with more at day zero than any other point and because they are in the same sector and at the same stage they face the same problems. We’re still learning, but we’ve invested in 28 companies now and some patterns are emerging. It seems that we make the most difference by helping founders:

  • Create a product customers love
  • Build a strong founding team
  • Find the path to scalable growth

And it’s not high level and general advice that we offer, rather it’s specific actionable advice coupled with the manpower to help by doing (if that’s what the founder wants).

All of which only works because we are so focused. Because all our partners started work with us when they were early stage ecommerce businesses we have gathered a roster of tools, tricks and best practices which have been tried and tested many times over. Even within early stage ecommerce every company is different, but there are large areas of overlap, and we are constantly learning and tailoring our knowledge.

Without those areas of overlap we wouldn’t be able to help in the same way.

As it is we are able to double down on the areas that make the most difference.

Eleven truths about facts and hypotheses

By | Startup general interest | 5 Comments

From Brainpickings. So good I’m going to reproduce them in full. They were written by philosophers and scientists but apply to startups.

  1. All beliefs in whatever realm are theories at some level. (Stephen Schneider)
  2. Do not condemn the judgment of another because it differs from your own. You may both be wrong. (Dandemis)
  3. Read not to contradict and confute; nor to believe and take for granted; nor to find talk and discourse; but to weigh and consider. (Francis Bacon)
  4. Never fall in love with your hypothesis. (Peter Medawar)
  5. It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories instead of theories to suit facts. (Arthur Conan Doyle)
  6. A theory should not attempt to explain all the facts, because some of the facts are wrong. (Francis Crick)
  7. The thing that doesn’t fit is the thing that is most interesting. (Richard Feynman)
  8. To kill an error is as good a service as, and sometimes even better than, the establishing of a new truth or fact. (Charles Darwin)
  9. It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so. (Mark Twain)
  10. Ignorance is preferable to error; and he is less remote from the truth who believes nothing, than he who believes what is wrong. (Thomas Jefferson)
  11. All truth passes through three stages. First, it is ridiculed, second, it is violently opposed, and third, it is accepted as self-evident. (Arthur Schopenhauer)

Trust moving from individuals to systems

By | Startup general interest, Uncategorized | 8 Comments

Trust decline Screen Shot 2015-04-21 at 14.50.11

I just saw this rather depressing chart in the Washington Post. I guess there are a bunch of things that used to be commonplace that we don’t do anymore because we are worried about bad people – hitchhiking and letting our kids play on the street are two examples that spring to mind – so maybe it isn’t a big surprise. Not good though.

What’s curious, though, is that the sharing economy has exploded whilst trust has been declining. How can it be that we are more afraid to hitch-hike, but more willing to stay in a stranger’s spare room? As the Washington Post points out the explanation is that we are moving our trust from individuals to systems.

In other words we might no longer be willing to trust a random hitchhiker, but we have learned to trust a rider’s average 4.9 star review on BlaBlaCar.

“Reputation is everything” is an old cliche, but maybe it will be increasingly true. As more and more people find employment and suppliers through marketplaces from ebay to Uber maybe it will become true that those of us without a good rating will start to find life more difficult.

Perhaps more interesting is what new companies can do to leverage these trust systems. Free delivery or maybe point of sale credit to customers who have good ebay buyer ratings is one such idea, on the basis that these customers will have higher life time value and/or will be less likely to make returns. Generalising, we get to the question of what a good rating on service X implies about how a customer will use service Y.

Considerations for would-be founders

By | Startup general interest | One Comment

One of the biggest reasons startups fail is that the founders give up. Sometimes that happens because the idea didn’t turn out to be strong enough, in which case “c’est la vie”, but sometimes it happens because the entrepreneur wasn’t sufficiently prepared for the journey, and in that case it’s a crying shame.

The following quotes are from an answer I just read on a Quora answer from Justine Musk which sets out what it takes to be extremely successful (which is the goal for VC backed startups).

First the warning:

Extreme success results from an extreme personality and comes at the cost of many other things. Extreme success is different from what I suppose you could just consider ‘success’, so know that you don’t have to be Richard [Branson] or Elon [Musk, no relation] to be affluent and accomplished and maintain a great lifestyle. Your odds of happiness are better that way. But if you’re extreme, you must be what you are

Then the need for a mission or cause to sustain both you and the company:

It helps to have an ego, but you must be in service to something bigger if you are to inspire the people you need to help you  (and make no mistake, you will need them). That ‘something bigger’ prevents you from going off into the ether when people flock round you and tell you how fabulous you are when you aren’t and how great your stuff is when it isn’t. Don’t pursue something because you “want to be great”. Pursue something because it fascinates you, because the pursuit itself engages and compels you. Extreme people combine brilliance and talent with an *insane* work ethic, so if the work itself doesn’t drive you, you will burn out or fall by the wayside or your extreme competitors will crush you and make you cry.

Then the advice to take care of yourself mentally and physically (this is an area of huge importance where investors could do much more than they are today – something we are thinking hard about):

It helps to have superhuman energy and stamina. If you are not blessed with godlike genetics, then make it a point to get into the best shape possible. There will be jet lag, mental fatigue, bouts of hard partying, loneliness, pointless meetings, major setbacks, family drama, issues with the Significant Other you rarely see, dark nights of the soul, people who bore and annoy you, little sleep, less sleep than that. Keep your body sharp to keep your mind sharp. It pays off.

Learn to handle a level of stress that would break most people.

I’m posting all this mostly because it brings out how tough it is to be an entrepreneur. The support ecosystems are improving, in part due to firms like us focusing squarely on how best to support success as well as pick winners, but the journey remains difficult and it’s much better to go into that eyes open than to start and then discover you have embarked on a challenge you wouldn’t have begun if you knew more at the outset.

Three useful questions for assessing business ideas

By | Startup general interest | No Comments

One of the unusual things about Forward Partners is that we invest in business at the idea stage. Often that means we are backing a single entrepreneur with nothing more than a slide presentation. One of our slogans is “No product, no traction, no team. No problem.”

Consequently we often get asked “How do you assess ideas?”

These three questions which came from the Y C application form and were on Founders Notebook this morning are a great guide:

1. What’s new about what you’re making?
2. How do you know people need what you’re making?
3. What substitutes do people resort to because it doesn’t exist yet (or they don’t know about it)?

The other major thing we look at is the market – is the opportunity large enough to build a business worth £100m+ (taking into account market size and margin).

If the answers to these four points are strong, we feel the entrepreneur has the right stuff, and it’s’ a UK based ecommerce company then we are going to be very interested.

Picasso on the power of just starting

By | Startup general interest | 5 Comments

To know what you’re going to draw, you have to begin drawing.
–  Pablo Picasso

Picasso was a prolific genius and one of his tricks was to remember that the act of starting to draw got him started on the path of building the vision for his creation.

This trick stands for most any task. The act of getting started is very powerful in beating procrastination and getting things done.

A simple message to take into the weekend.