Monthly Archives

July 2015

Software doing the work of cameramen

By | Startup general interest | One Comment

“Software is eating the world” and “robots are taking all the jobs” are much used phrases these days. That’s because they are regularly proven to be true in new and surprising ways.

I was surprised earlier today when I read this excerpt from a Fast Company interview with Chris Anderson, founder of 3D Robotics:

“The first phase of our little adventure was getting robots to fly. That was super hard, but we got there,” he says. “The next phase was putting cameras on them, and stabilizing with a gimbal. That was pretty hard, but we got there, too.” What we’re missing, he says, is “the aesthetics of a good shot.”

Solo, in concert with GoPro, is designed to deliver that perfect shot, with very little technical skill on the part of the pilot. “There are these well-established Hollywood conventions about what makes a great shot; they have this combination of classic framing and paths, which are typically done by teams of professionals,” he says. “We turned all that into software.”

The first paragraph is a cool description of the challenges in getting drone mounted cameras to work well. The second paragraph is the best though. 3D Robotics have captured the art and craft of Hollywood camera professionals in software. If it works as well as Anderson implies then it could be the sort of highly visible development that helps people to viscerally understand that change in employment patterns is coming fast and that we should start preparing.

Government and startups: It’s not them vs us

By | Startup general interest | One Comment


There’s a widespread notion in the tech world that governments get in the way of innovation. The idea that slow moving, self-interested bureaucracies make it harder for nimble entrepreneurs to change the world by raising taxes and creating regulations is an easy narrative – but it’s wrongheaded.

The problem starts with a mistaken view that the public and private sector are separate entities in conflict with one another. There is no point where one stops and other starts. Rather they bleed into one another. Society needs a range of services to function and some are best provided by government, some by the private sector and many by a blend of the two. Transport infrastructure and defence are examples of ‘public goods’ that are best provided by government. The prison service and the health service are amongst those best provided by a blend of government and the private sector. Finally, food and clothing are on the long list of things best provided by the public sector.

In different times and in different countries there have been a multitude of experiments where services have been moved between the public and private sector, but these three categories have always been present, from black market economies in communist Russia to transport infrastructure in the USA.

The chart above shows how theory translates into practice. It’s from a Techcrunch article urging startups to partner with government rather than fight it. I couldn’t agree more. It’s what society needs, and as we can see from the frequency and size of the green bars above, it’s a good way to make money.

Choosing people over algorithms

By | Startup general interest | 5 Comments

It seems to me there might be an emerging trend back towards human curation. LinkedIn’s new Pulse App features human curation, the same is true for Apple’s forthcoming news app, and Apple’s new music service similarly makes a big deal about it’s human editors, including former BBC Radio 1 favourite Zane Lowe.

Two of these examples are from Apple, making it early to generalise, but there’s definitely a strong meme that humans are better than algorithms when it comes to recommending content.

I wonder three things though:

  • whether large companies prefer human curation because it leverages one of their strengths vis a vis startups – capital
  • if this is more about positioning than substance – human curation sounds better to most consumers than recommendations from a machine
  • whether the real answer is a combination – human curation augmented via AI – we’ve made one investment on that basis and are considering another one now

Let’s design the future of capitalism

By | Startup general interest | 7 Comments

As regular readers will know I’m optimistic about the future. I think there’s a strong chance that advances in technology will bring us cheap and abundant energy, machines that can do most of our work for us and medicine that delivers longer, happier and healthier lives. But, as I’ve also written before, the path between here and there will most likely be very rocky. Automation will replace jobs at an increasing pace over the next decade or two and without radical change wealth inequality will skyrocket to dangerous levels and existing welfare structures will collapse.

My kids will enter the workforce in 10-15 years and I’m worried by what they will find.

There’s a counter argument to this, most vocally espoused by Marc Andreessen, which says that every time technology replaces jobs the capitalist system finds new work for people to do. We’ve seen that movie play out multiple times over the 200 years since capitalism rose to prominence in the UK’s industrial revolution and we should expect to see it again.

The only thing I know for sure is that there are no certainties, and Andreessen might be right, but I think it’s more likely that this time it will be different. If I’m right it will either be because the destruction of jobs will happen much faster this time and the job creation won’t come close to keeping pace, or because automation will take the new jobs too and there will be a permanently lower requirement for human labour going forward.

In both these ‘it’s different’ scenarios we will need more income redistribution to fund bigger and better safety nets and radically better retraining and back-to-work programmes. Otherwise we will end up with a large permanently unemployed underclass and riots on the streets. A universal basic income is one solution that’s being increasingly widely touted.

Right now it’s still hard for most people to believe that we are headed to a post-scarcity world and think it’s a waste of time thinking seriously about how we navigate from here to there. The common reaction to pending automation is to fear job losses and robot overlords, think briefly about restricting technology development, decide that’s futile and then put off change for a few years because the problems aren’t imminent and the solutions are hard. The point they’re missing is that most of the pertinent technologies are developing on exponential curves – change will come slowly and then it will come FAST.

Capitalism is a system designed to optimise the distribution of scarce resources. That’s what money does. If we are entering a post-scarcity world then almost by definition we will need a new system. If we are entering a period of difficult adjustment then keeping equality of wealth and opportunity within reasonable bounds will be a difficult global challenge. Either way, we should take the opportunity to design our future system rather than simply let it happen to us.

Designing our future system requires thinking through where we collectively stand on acceptable levels of wealth inequality and how much we support the right to work. That’s worth doing even if I’m wrong and Andreessen turns out to be right.

For further reading see Vivek Wadhwa’s recent post on Venturebeat.

Retail’s future is to solve the paradox of choice

By | Startup general interest | No Comments

The primary function of retail used to be access/distribution. In the vast majority of cases consumers had to visit high street shops to get products and manufacturers went through physical retail to reach customers.

One of the big promises of the web is that brands/manufacturers will form direct relationships with consumers. They can build their own showrooms and take orders direct over the web capturing the retail margin for themselves. So far it’s mainly startup manufacturers that have gone this route – Bonobos and Warby Parker are famous examples from the US and LostMy.Name and Spoke from our portfolio are blazing a similar trail over here. Established brands are now moving slowly in this direction – but they need new capabilities and have to worry about conflict with the retail partners that drive the vast majority of their sales. Most established brands that now sell direct still only have a fraction of their product range available on their own sites and pricing is often above what can be found in retail.

So retail’s raison d’etre is losing relevance.

But consumers are faced with a new problem – too much choice. The web makes all the products in the world available, and a wealth of research has shown that whilst we say we want choice, too much of it makes us less happy and results in fewer purchases. This is the Paradox of Choice.

The new opportunity for retail, therefore, is to solve the paradox of choice. Give consumers access to all the inventory there is and then help them to a decision. At it’s heart new retail will be about personalisation and recommendation, making smart use of data and artificial intelligence to guide people to purchase decisions. Conversational interfaces will be an important secondary part of the mix as each of us will effectively have to programme the services we use and very few of us have the patience to learn syntax and commands for new apps.

These new retailers will sit between brands/manufacturers and consumers. They will handle less stock, have fewer staff and take less margin than traditional retail, but they could/should be much more profitable. Thread, Stylect and Top10 are good examples of these ‘new retailers’ that we’ve invested in.

Matching product solutions with problem spaces

By | Startup general interest, Uncategorized | One Comment

We held our monthly office hours yesterday morning, meeting with twenty idea stage founders over a period of two hours. It’s a a high octane set of fast paced meetings that I look forward to very much. It’s great meeting lots of great people and learning about lots of great ideas so quickly.

The last one I met had identified a large and fast growing market riven with inefficiency. The more we delved into it the more excited I got. Big markets with lots of opportunities for improving things are great places to start new companies. Then, when we got to discussing his company’s product/service, I knew that he wasn’t yet at the point where we could have a serious investment discussion. He knew that existing products in his market were of inconsistent quality and that consumers go to extreme lengths to buy them anyway (often gathering in groups to buy wholesale on AliExpress), but was only just coming to the conclusion he wanted to build a product company and had a feeling that the best opportunity lay at the premium end of the market but couldn’t articulate what his product differentiation would be or how he would price it.

That’s fine. We will keep talking and help him through that process, but right now he has identified a great problem space but hasn’t matched it with a compelling product solution.

That contrasts with another company we are talking with where the founder started selling a product to his friends and family because he loves delivering it and they love buying it. In this case the product solution is already defined in great detail and we have been working with him to work out how big the opportunity is.

In other words he has built a compelling product solution and it’s unclear whether it’s in a great problem space.

The best business opportunities match great problem spaces with compelling product solutions. Most businesses start with one and then work to find the other. “Technology looking for a problem to solve” is a cliched way of describing interesting solutions with poor problem spaces, and perhaps more common but lacking a common descriptor is companies in interesting problem spaces constantly ideating in search of a product people want.

Entrepreneurs who know their problem space but not their solution should, with discipline, be able to ideate, research and iterate their way to a compelling product. Entrepreneurs with a compelling solution are in a more binary situation – either their problem space is interesting enough or it isn’t.


Ecommerce companies’ team requirements in the first six months

By | Uncategorized, Venture Capital | No Comments

What follows is a generalised model for startup team building. Every company is, of course, different, but using this model as a starting point will, I hope, be helpful.

Team structure in early stage ecommerce and marketplace companies is a function of manpower and skills necessary to build the company and the founder(s)’ skillset(s). Companies with lots of cash sometimes add people more quickly, but that drives the burn rate up, often without a compensating increase in the chance of success..

In the first couple of months the focus should be on making sure the idea is valid, requiring the following activities:

  1. Development of the company vision and strategy
  2. Search for a point of deep emotional resonance with customers – research work
  3. First iteration of the product vision
  4. First iteration of company messaging
  5. Design and development of landing pages and prototypes
  6. Finding the first few customers

Items 1 and 2 should be done by founders and require generic business skills. Items 3-6 are more specialised and can be done by founders if they have the necessary product, development and marketing experience, otherwise they need outside help. The development requirement might be full time, or approaching full time, but the product, design and marketing requirements are part time. As a guide, the companies that we work with at this early stage generally need around 10 hours per week of product work, 20 hours per week of design and 5 hours of marketing, but there’s a lot of week on week volatility.

The minimum team to move quickly for these first couple of months is a full time founder, a full time developer (or FTE), and part time product, design and marketing support. Bigger teams move faster but overall efficiency can suffer.

The next few months should then be about the product – proving that the idea can captured in a product that resonates with customers. The key activities at this point are:

  1. Develop version one of the product – strong enough to scale
  2. Build deep understanding of early adopters
  3. Develop brand values and core messaging
  4. Build version one of the visual identity
  5. Get into the habit of month on month growth
  6. Start tracking key metrics and build a company dashboard
  7. Operational activities to support growth

The man hour requirements for this product step will be the same as for the idea step, but with another 0.5-1 developers, double the marketing time (now circa 10 hours per week), and then sufficient interns and customer service people to cover the operations. A lot of the operational activities will fall to the founder, but it’s common to have 1-2 interns or early hires at this time. It’s important by this point to have someone numerate on the team. Also, early hires should be capable of dealing with ambiguity and fuzzy role definitions.

I’m writing this post in part to get my thoughts straight ahead of a conversation with a founder we’d like to back who is weighing up the pros and cons of working with Forward Partners vs building her own team. As a reminder, we bundle talent and office space with cash when we invest in companies, allowing the founder to spend more time working on the company and less time hiring. One of the other benefits is that companies can dial up and down the time they need from us more easily than they can with freelancers or employees. And the quality of our team is awesome.

A company should, of course, get it’s own team pretty quickly. We help with the tough problems of finding developers on day zero and resourcing part time roles with varying time requirements. And then we help with talent acquisition too (recruiting is difficult!), so companies get started fast and become self sufficient within six months. We’ve also seen our companies able to save money by hiring for talent over experience and leveraging the experience in our team to bring people quickly up to speed.


Shout out to Matt Buckland, Head of Talent at Lyst for his comments on an earlier draft.

Facebook gets to $250bn valuation in record time – respect

By | Facebook | No Comments

Facebook’s share price was up 2.4% on Monday taking its market cap above $250bn just three years after its IPO and eleven years after it was founded. Bloomberg and other sites are lauding Zuckerberg and co for beating current record holder Google’s eight years from IPO to $250bn valuation. Those with long memories will know that Facebook went public with a much larger valuation than Google ($104bn vs $23bn) so the more apt comparison is Facebook’s eleven years from founding to $250bn with Google’s fourteen years. Still great though.

What impresses me most about Facebook is the way they’ve done it. As you might have read in the Lefsetz letter today

Once upon a time Facebook was a place to connect with your friends.

Now it’s where you go for information…news, video, even music video.


What’s amazing about Zuckerberg is he’s willing to admit he’s wrong and change course and constantly improve his product.

And there’s the amazing shift from desktop to mobile too.


Change is, of course, happening faster and faster all the time, so it’s likely the next record holder for time to $250bn has already been founded. What’s also likely is that the founder will have an even greater appetite for radical change and experimentation than Zuckerberg, who in turn is proving to be more radical than his slightly older counterparts at Google and Amazon. And Bezos and Page are in turn more radical than Gates and Ellison. There’s a lesson here….


Market size determines funding strategy, not vice versa

By | Venture Capital | 2 Comments

Market size – or more accurately addressable margin opportunity – determines how valuable a company can be, and the size of the exit in turn determines how much a company should raise. Alex Iskold, MD of Techstars New York put it like this in a recent post:

Venture Capitalists are looking to deploy millions of dollars, and they are looking for multiple times return on that capital. That is why, in addition to founders, VCs focus heavily on the size of the market. If they don’t believe the market is large enough, they won’t invest.

There is nothing wrong with starting a business in a smaller market. You can still get capital, but not necessarily via VCs. Understanding the size of your market before going out to raise money is an important thing to do for every single business.

Simply put, if the exit is £100m and you want to keep £50m for yourself then the investors will get £50m, so if they are going to make 10x+ then the company can have raised a maximum of £5m.

Investors at every stage are doing this maths, and the exit size is a function of the market. That’s why investors with large funds obsess so much over market size. Investments in small or medium sized markets won’t move the needle for them.

A lot of entrepreneurs approach this subject the wrong way round. They figure out how much they want to raise and then they write a deck and writing the market becomes an exercise in selling the investor and justifying the amount of money they are seeking. When the market is genuinely huge that works fine, but often times it isn’t, and investors will walk away if they don’t feel it’s big enough for them to make a meaningful return. Worse, market size can be a difficult topic to give feedback on. If an entrepreneur has claimed the market is worth billions and the investor feels it is worth much less then feeding that back can invite confrontation, particularly if the founder has made a big play about the size of the opportunity. Good investors want to give feedback when they say ‘no’ to investments, but they say ‘no’ a lot and unless they have had meetings they will want to minimise the amount of time they spend giving it – and that means avoiding back and forth debate on questions like market size.

There are plenty of entrepreneurs who have used their sales skills to raise money this way even when the market is small, but that usually doesn’t work out so well in the medium term when the burn rate is high and everyone is disappointed because the market has limited growth.

It’s much better to have a firm view on the opportunity size and build the fundraising strategy from that.

The shrinking digital divide

By | Uncategorized | No Comments

Screen Shot 2015-07-13 at 10.41.59

A certain amount of inequality is essential to the functioning of the capitalist system under which we all toil, and which is, for now at least, the best system available for organising the world’s resources. However, when there’s too much inequality a strong sense of unfairness kicks in and markets stop functioning well, as those who feel a strong sense of injustice vote for politicians with radical policies or turn to violence. Examples in history abound, with the French and Russian Revolutions being best understood as resulting from unsustainable levels of inequality.

More recently we’ve seen this play out with riots and public disturbances within advanced economies like the US, the UK and France and arguably on a global scale with widespread anti-American feelings in parts of Asia and Africa. This points to the relatively new development that extreme inter-national inequality is emerging as a problem in the same way that extreme intra-national inequality has been for some time. It’s a new development, but one that’s perhaps unsurprising given the massive increases in international trade and travel (including migration) and the way technology is shrinking distance.

The digital divide contributes to the economic divide and so it’s great to see the pace at which mobile internet penetration is growing. 94% of the world’s population now have access to a mobile signal, 48% can access the mobile internet and 28% are subscribed to a mobile internet service, and you can see from the chart above that penetration is growing fast. Barriers still remain and there’s plenty of work to be done, not least in bringing costs down and bringing local language content online, but those with internet connections have a better chance of rising out of poverty than those who don’t.