Monthly Archives

September 2015

Old European brands aren’t cool anymore

By | Startup general interest | No Comments

Screen Shot 2015-09-29 at 16.10.55

This is Coolbrands 2015 list of the top brands, chosen by a panel of experts and 2,500 members of the British public. They don’t disclose the weighting.

What’s striking about this list is the prevalence of new(ish) digital brands and relative absence of classic brands, particularly big fashion houses. It really is out with the old and in with the new. I make it seven tech brands and, being generous, five classic brands (Ray Ban, Alexander McQueen, Chanel, Aston Martin, and Liberty). Sony, Bose, Rolex, Dom Perginon, and Selfridges all fell out of the list.

There’s also a shift towards US brands. Apple has been top for four years in a row now.

Looking at the types of brands that are doing well I’m struck by the extent they are rooted in great product. I like to say that the essence of a strong brand is a good promise delivered and companies like Apple, Instagram, YouTube and Spotify all deliver in spades. That contrasts with some of the brands that are falling off this list which are rooted in prestige.

Ad-blockers and product quality

By | Advertising, Startup general interest | One Comment

The rights and wrongs of ad-blockers have been debated for years. My view is that people who block ads are choosing to free-ride on users who don’t, and whilst I would stop short of calling it immoral, I don’t think it’s good behaviour. However, the number of people blocking ads has always been relatively small and the subject has mostly been of academic interest. The interesting thing now is that post iOS 9 that might change.

Three forces are at play here:

  • The trend to mobile – smaller screens and slower connections make ads more intrusive
  • Growth in support for the the anti-ad/pro-privacy meme
  • It’s getting easier for users to block ads

The Apple vs Google battle is an important part of the backstory. As Jason Calacanis details here, Apple’s assault on ads and its pro-privacy position helps in the iPhone vs Android battle and is a direct attack on the core of Google’s business.

Also important is that the online advertising industry still hasn’t got it’s act together. Ten years ago I was hopeful that the adtech was on a trend to become more about product, less about relationships and in the process would shed a lot of it’s shadier practices. That manifestly hasn’t happened and we still have an over-complicated landscape characterised by opaque relationships and misaligned incentives that doesn’t serve advertisers as well as it could.

Meanwhile larger advertisers have been moving an increasing percentage of their budgets online (they have to go where the audience is) which is crowding out startups.

It’s still early days for iOS 9 ad-blockers, but it seems likely we will see an acceleration of the trend of startup founders focusing on product quality as a way of rising above this mess. Since the advent of social media native advertising, earned media, and customer referrals have been growing in importance as part of the startup advertising mix and they work best for high quality products.

Moreover, the products that really win in this environment aren’t simply of high quality, they are also noteworthy, delivering moments of ‘wow’ that stick in the mind.

The mindset of a good investor

By | Uncategorized, Venture Capital | One Comment

There were two articles on my Twitter list today about the mindset of good investors. The first was a Techrunch article explicitly about bias in VC decision making. They identified six cognitive biases investors suffer from (similarity bias, local bias, anchoring, information overload, and gender bias) and offer some tips for making bias free decisions. I’m fascinated by cognitive bias because by definition it’s hard to weed out, and reading the Techcrunch article this morning I wondered if that fascination is rooted in a subconscious desire to keep working on myself to be a better investor.

Stepping up a level, the conclusion I’ve come to over the years is that the key to avoiding bias and making good investment decisions is total objectivity. No emotions, thorough analysis, and clearly understood reasons.

The tips in the Techcrunch article are in fact all tactics for keeping discipline in these three areas. Documenting decision making processes, establishing and constantly refining investment criteria, and following principles are all ways of taking the emotion out, making sure the analysis is thorough and the reasons understood.

I haven’t thought of it in this way before but a number of the things we do at Forward Partners serve to bring thoroughness and clarity to our investment analysis. The most important are clearly understood deal criteria (top of the list: every deal must have the potential to return the fund), standard format investment papers, and a culture of open debate and shared ownership of deals.

The second article was an Economist review of Superforecasting: The Art and Science of Prediction. By Philip Tetlock and Dan Gardner, which details the characteristics of people who are good at predicting the future. They drew on a contest run by American spies in the wake of the Iraq debacle:

Begun in 2011, it posed hundreds of geopolitical questions (“Will Saudi Arabia agree to OPEC production cuts in November 2014?” for instance) to thousands of volunteer participants. A small number of forecasters began to pull clear of the pack: the titular “superforecasters”. Their performance was consistently impressive. With nothing more than an internet connection and their own brains, they consistently beat everything from financial markets to trained intelligence analysts with access to top-secret information.

Tetlock analysed the superforecasters and found they shared the following characteristics:

  • clever, but “by no means geniuses”
  • they viewed the world as complex, requiring different approaches to understand different areas (no simple rules or models)
  • comfortable with numbers and statistical concepts like regression to the mean, but not statisticians
  • hungry for information
  • willing to revisit predictions in light of new data
  • able to synthesise material from sources with very different outlooks on the world
  • self aware and reflective
  • willing to learn from their mistakes
  • more interested in why they are right or wrong than whether they are right

All of these traits are learnable and for the investors amongst you this is a good checklist of things to be doing and/or to work on. Investing, after all, is about predicting the future.

More data showing traditional TV viewing dropping fast

By | TV | 2 Comments

It’s premiere week this week in the US when the new season of TV kicks off and the news is that in key age groups far fewer people are watching (Nielsen data from Ad Age):

  • Number of adults age 18-49 watching dropped by 8%
  • Number of adults age 18-24 watching dropped by 18%

The fact that younger viewers are dropping TV faster than older viewers suggests the decline in TV viewing will accelerate. And it doesn’t take many years of 8-18% declines before there’s nothing left.

The big beneficiaries so far are of course internet and mobile streaming services YouTube, Netflix and HBO Go (the latter is now 2015s top grossing app). That’s old news though. What’s more interesting is where the next opportunities are coming, and with changes of this magnitude to an industry the size of TV there will others.

The one we’ve been thinking about recently is video and commerce. YouTube is on an amazing run and has spawned a whole ecosystem around YouTube stars, but making money on the platform is difficult and commerce isn’t well enabled. It looks like there’s space for something better.

Consistency of thought – vice or virtue?

By | Startup general interest | One Comment

Marc Andreessen once said:

Ask yourself, would you rather be right or successful? That needs to be top of mind at all times because times change and we change. You want strong views weakly held.

And I just read the following advice from Jeff Bezos:

He said people who were right a lot of the time were people who often changed their minds. He doesn’t think consistency of thought is a particularly positive trait. It’s perfectly healthy — encouraged, even — to have an idea tomorrow that contradicted your idea today.

These opinions are striking because they are counter-intuitive and backed up by strong supporting logic.

But are they right?

For me the answer is yes, provided they are used sensibly.

Consistency is important to other people in your life. If they don’t know where you stand on stuff it makes it hard for them to go about their business. If a CEO changes the company strategy too frequently his company will soon be a mess. Moreover, people who change opinion too often lose credibility with their peers.

As a sidebar, it’s interesting that Andreessen stresses that views should be ‘strong’. I imagine that’s because the views and opinions are important because they influence other people, and that other people take strong views more seriously than weak views. There’s a certain paradox here though, which is that one of the reasons people take strong views seriously is because they assume strong views won’t change.

So consistency has it’s place and Andreessen and Bezos shouldn’t be taken too literally. That said, it’s destructive to hold onto wrong views just because we held them before. Bad decisions will result, along with spurious justifications that will undermine our credibility. Moreover, our brains are hard-wired to be consistent and a string of cognitive biases make it hard for us to recognise when we are wrong – e.g. confirmation bias.

As with everything in life the answer is to find the right balance (I find myself saying this so often now it’s starting to get boring….). I think Andreessen and Bezos are saying these things and others, myself included, are remarking on them because most people err too much on the side of consistency and don’t get the balance in the right place. This balance is particularly hard to strike because our unconscious brains are at work pushing us to be consistent. Part of the answer is to make sure our opinions are well thought through, and the other part is to keep the antennae highly tuned for signs we are wrong.

When planning and modelling the process is more valuable than the answer

By | Startup general interest, Uncategorized | No Comments

This morning I was reading from the OSF Playbook about how they have built an ‘open source decision making model’ for investing in deep science startups. That’s a worthy endeavour, but what stood out for me is this quote:

we gained the most insight from the process of building the model, not from an absolute output number

There are two interesting things about this.

Firstly, building a model is the much more valuable than using somebody else’s. If the folks at OSF got value from the process not the answer then anyone who plugs in their own assumptions to the model and gets their own answer will be missing out on the most important insights.

Secondly, it’s also true that when startups build financial models they learn more from the process than from the numbers that come out at the end. A model can be tuned to give any answer its author wants and founders often question why investors want to see them. Here we have the answer – investors value the process of creating the model rather than the output number (although seeing the level of ambition in a startup is important).

In more detail, the value in building financial models mostly comes from being explicit about key assumptions. What are gross margins today and how will they evolve? Same for customer acquisition costs, salesforce effectiveness, account management costs and customer service costs. Eyeballing these assumptions gives a detailed understanding of how the business is expected to evolve and where the risk points are.

In labour marketplaces algorithms might be better for workers than regulation

By | Startup general interest | One Comment

Tim O’Reilly just wrote a great post suggesting that in labour marketplaces, like the one Uber operates, algorithms might offer a better deal to workers than regulation. It’s a complex argument and Tim’s long post is well worth a read if you have the time. For those of you in the mood for a summary the centrepiece of his argument is that Uber allows market forces to determine prices and allows individual drivers to determine when and where they work. Those two features combined result in a more efficient system that works out much better for drivers (and everyone else) than it would if regulators force them to make their drivers employees. As Tim notes, top down micro-management of low cost work-forces to match supply and demand have been ‘a disaster for workers’. Think Walmart or McDonalds.

There are a couple of other factors at play here too. Firstly Uber has expanded the market – people take more cabs because it’s cars are reliably available at short notice. Secondly Uber drivers are in charge of their own lives in a way that salaried employees never are. Uber drivers decide when to work, and where to work. Moreover, Uber’s surge pricing helps them with that decision. As Dan Pink highlighted autonomy is a major driver of job satisfaction.

Nothing is wholly good or wholly bad and there is, of course, a flip side to this. Uber’s algorithm sometimes causes problems, including one case of gouging passengers during a crisis, and overly aggressive behaviour from Uber execs certainly makes one pause for thought, but these seem more like problems that can be ironed out than flaws in the model.

Stepping up a level, ‘Algorithms beat regulation’ is a very radical idea and Tim’s article is a call for academics and policy makers to start thinking about it seriously.

Superficially it sounds to me like it could work and therefore merits investigation. One of the most obvious challenges is that labour marketplaces have huge economies of scale and could end up as natural monopolies, requiring a whole new set of interventions from the regulator. Another obvious challenge is to understand whether the Uber model works in the same way outside of taxis.

In the short term, if it is true that labour marketplaces can offer a better deal for both workers and customers then we should expect the model to become much more prevalent. It’s interesting that despite massive investment in the sector not many of the other labour marketplaces has taken off like Uber has, and there are rumours that a couple of the larger ones are struggling to make their unit economics work. A thorough strategy piece analysing the different players and their models would be a very interesting read.

If this topic interests you check out Azeem Azhar’s email newsletter The Exponential View. It’s where I saw the link to the O’Reilly article.

Sharing a sense of wonder: Brand and messaging for startups

By | Startup general interest | No Comments

The best startups create a sense of mission that transports customers and investors to a place in the future where the possibilities are wonderful. “Have all the worlds information at your fingertips” was exciting for Google’s investors and customers, and closer to home from our portfolio “Dress well with no hassle” is similarly exciting for’s customers and shareholders today.

In a post titled Brand first Arnold Waldstein put it this way:


When you pitch your vision you are sharing a sense of wonder. A sense of personal possibility.

It’s  your job to do the same thing for the market when you are launching your product.

Where what you believe becomes a large part of what the market adopts. Where your sense of inspiration around an idea becomes the customers sense of wonderment around how it works for them.

Dwell on some of these words for a minute, particularly ‘wonder’, ‘personal possibility’, and ‘sense of inspiration’. They’re powerful.

What Arnold’s written here can be used to think about the strength of a mission. Is there a sense of wonder? Does it let people dream about possibilities?

It’s easy to think how this test works with exciting consumer companies, but it works for all companies if you allow that the sense of wonder and possibilities need only apply to target customers. For example, I imagine that manufacturers of food packaging companies were inspired by the possibilities for Tetra Pak when they first heard about it.

Tips for productive advisor-entrepreneur conversations – argue intelligently and criticise kindly

By | Startup general interest, Uncategorized | 5 Comments

A couple of days ago I wrote that startup advice should focus on the ‘why’ and the ‘what’. Today I’m going to write more about how to do that.

A common pattern is for advisors to pattern match with something they’ve seen before and come quickly to a piece of advice that feels right to them. That’s great and hugely valuable when it chimes with the entrepreneurs intuition, but when it doesn’t the dialogue can deteriorate to brute force persuasion and sullen acceptance or passive resistance.

Focusing on ‘why’ the advice is appropriate is a big help, as I wrote about last time, but getting into the right frame of mind emotionally and attitudinally is also a big deal:

  • Think of areas of disagreement as opportunities to learn. Don’t avoid difficult conversations for fear of getting advice you don’t wan’t to implement or having your advice ignored.
  • Make it your goal to find the best solution, not to win the debate.
  • Listen first and then debate second. If you can summarise what you’ve heard in words the other side would use, list your points of agreement, and note anything you’ve learned before you go to say your piece.

Not every conversation can end productively, but the hit rate can be increased, and with that comes learning, better insight and ultimately business success.

This post was inspired by a summary of philosopher Daniel Dennett’s thinking about arguing intelligently and criticising kindly.


Using The Path Forward to determine fundraising strategy

By | Forward Partners, Startup general interest, Uncategorized | 2 Comments


As you might have seen we launched The Path Forward last week as a guide for ecommerce and marketplace entrepreneurs in their first year (diagram above). We’ve been using it internally for a while and we’ve noticed that we find it easiest to get excited about startups that are at Step 1: Valid Idea, and Step 3: Valuable Business. When we meet new companies at Step 2: Valued Product, entrepreneurs have made choices and started down a path which inevitably shuts off some opportunities that were there earlier but they haven’t got far enough along to know whether those choices are good.

It turns out we’re not alone. I saw this on Founders Notebook earlier today:

You can only raise money by pitching the “Dream” or by selling “Traction”. So either bootstrap your startup, or raise money in the early “dream” (no code, no plan, just a dream) phase or in the “traction” (the model is working) phase of your business.

The Path Forward is a good tool for understanding what makes a good dream and what qualifies as good traction. To summarise what’s on the site, pitching a “Dream” works best when the need has been proven with customers and a prototype really resonates, whilst pitching traction works best when the business looks set to scale. If you want more detail go to The Path Forward, click on the ‘About the Path Forward’ button and check out the definitions of Step 1: Valid Idea and Step 3: Valuable Business and associated Waypoints. (“Waypoints” is the name we’ve given to the sub-steps you can see in the graphic above.)