Nic Brisbourne's view from London on technology and startups

Good hustle

By | Startup general interest | 6 Comments

Back in January Seth Godin wrote about Two kinds of hustle:

  1. The hustle of always asking, of putting yourself out there, of looking for discounts, shortcuts and a faster way.
  2. The hustle of being more generous than you need to be, of speaking truthfully even if it delays the ultimate goal in the short run, and most of all, the hustle of being prepared and of doing the work

This is a great breakdown. As Seth goes on to note hustle type 2 is largely unused. That’s a shame because it’s this second kind of hustle that makes the world a better place and is more effective in the long term.

It’s interesting that hustle type 1 is often associated with entrepreneurs, and saying XYZ has ‘good hustle’ is a common compliment. Dave McClure even went as far as saying that the ideal startup founding team of has a hacker, hustler, and hipster. I buy into the notion that entrepreneurs should have hustle, but some take it too far. We all know people who hustle too much, and their constant search for quick wins can be wearing and undermine relationships.

Most startups hit tough times at some point, and in those moments when survival is the only imperative there can’t be too much of  hustle type 1. At other times there should be a balance, and the more a company grows the more the balance should tilt towards hustle type 2.

Not all businesses can be a habit

By | Startup general interest | No Comments
Nir Eyal’s book Hooked has become the go-to manual for anyone wanting to build a habit forming business, and who wouldn’t want to build one of those? Businesses that are part of our regular routines profit hugely from regular custom without marketing spend, and many of today’s biggest businesses have habits at their core. Want to know something? You probably reach for Google. Have some time to kill? There’s a good chance you go to Facebook (unless you’re a millennial…).
But not all businesses can be based on habits.
Habits are, by definition, part of our routines, and most of our routines are daily. When you think about it, it is only a small fraction of businesses that we use daily. The others we find each time afresh each time we need them, or maybe remember them if they have a powerful brand. On the desktop we find things via Google and we also use Google to help us remember the brands we only half recall, and that has worked fine. Booking holidays, buying clothes, fixing up our houses – these are all examples of things we spend big money on but don’t interact with regularly enough to build a habit.
Apps are changing the game for these non-habit forming businesses on mobile.
Habit forming businesses are able to get an icon on our home screens and maybe lure us back via notifications. Non-habit forming businesses, which you could define as those which we don’t want to download an app for, are challenged by the fact that traffic is now predominantly on mobile and skews more that way each month (Baby2body, one of our partner companies, gets 91% of it’s traffic from mobile), and that within mobile an increasing share of time is spent in apps.
The solution to this problem is not yet clear, although there are some hints. What we need is a mobile equivalent to Google search, including paid marketing (these things exist on mobile, but the user experience isn’t equivalent). I suspect the answer will lie in a combination of services being surfaced through contextual app platforms, of which maps, messaging and maybe calendars are the most obvious, and a much smarter notification stream.
Facebook’s new Messenger Platform is a sign they are thinking this way about the future and in China Baidu maps already acts as such an app platform for millions of users.
How this plays out, and how quickly, is critical for the mobile strategies of most ecommerce companies, including many of our partner companies.

Are accelerator programmes backing more mature companies?

By | Uncategorized, Venture Capital | One Comment

This tweet from YC’s Sam Altman was in my feed this morning:

You can see why he’s pleased. Lots of his companies have got a $1mm revenue run rate which is a sign they are valuable.

It takes a while to get to a $1m run-rate and I’m wondering if YC is trending towards backing more mature companies and fewer true startups.

Here in the UK it seems to me that Seedcamp and Techstars have made a similar shift in strategy. It makes sense, they get similar equity positions in businesses with more proof points that are therefore more likely to be successful. On top of that the introductions these programmes can make to potential investors, customers and advisors are more valuable to companies that have product and revenues.

That leaves a gap for true startups. Which is where we play :-)

Fundraising advice: Don’t over optimise on terms

By | Startup general interest | No Comments

Everyone loves a high valuation and it’s natural for founders to want to minimise dilution. They will most probably go on to raise multiple rounds of venture capital after all. And look at what Zuck achieved…

But companies that spend too much time optimising terms end up as net losers. YC’s Sam Altman explained why in a post last year:

Startups are usually a pass-fail course — either you succeed or you don’t.  If you fail, maybe you get acqui-hired, but that’s happening less frequently and is usually little better than just getting a job at the acquiring company instead.
The important thing is to get good investors, clean terms, and not spend too much time fundraising. The biggest problem comes from chasing high valuations. Contrary to what many people think, at YC we encourage companies to seek out reasonable valuations. Valuations are something quantitative for founders to measure themselves on, and there are lots of investors willing to pay high prices, so they don’t always listen. But I’ll say it again: trying to get really high valuations is a mistake.
If you’re clearly in a position of leverage, it’s fine to push for a high valuation, but don’t jerk investors around. Just say what you want and don’t get into a lot of back and forth or term complexity. Also remember that very high valuations often push out good investors.
And don’t forget the prime directive of fundraising strategy: set things up so that you never do a down round. The badness of a down round is difficult to overstate; in fact, the threat of that is the best reason not to take a super high price when you’re offered one.  If you raise at such a price, everything has to go perfectly in order for your next round to be an up one.

We think about valuation the same way. Much better to have a smaller piece of a bigger pie and the best way to get a big pie is to get good investors and minimise time spent fundraising.

The emotional off-switch

By | Venture Capital | One Comment

I was talking with another investor last week about what it takes to be successful in this industry and made the point that it takes a certain type of person to be able to remain human whilst repeatedly saying ‘no’ to entrepreneurs who are asking you to join them in pursuing their dream, and, even more difficult, occasionally saying no to the follow-on funding that would allow existing investments to keep going. This investor is a successful investment banker turned VC and he replied that all the most successful bankers he has known have an ‘emotional off-switch’. Most of the time they are great people fully engaged across a range of emotions, but when the occasion demands it they say ‘this is business’ and proceed with what they think has to be done without emotion. We agreed that without an ‘emotional off-switch’ it’s hard for people in senior roles to make consistently good decisions.

I’ve been dwelling on this since and have had three further thoughts:

  • Whilst it’s important to assess the pros and cons of big decisions without emotion it is important to understand the impact the decision will have on the emotions of others (and yourself). If a course of action will cause emotional damage that should be on the list of cons.
  • Flicking the ‘emotional off-switch’ can’t be an excuse for bad behaviour. The responsibility to behave well remains unchanged.
  • It isn’t just bankers and investors that need an ‘emotional off-switch’. Entrepreneurs (and possibly everyone who takes big decisions) needs one too. Times when entrepreneurs need their ‘emotional off-switch’ include when team members aren’t working out, when folks need to be hired in over the heads of the founding team, when customers are difficult and when new initiatives aren’t working out. It’s interesting to note that all of these examples are when things aren’t going well. That’s because letting go is emotionally challenging. Correspondingly, one of the most common laments I hear from successful founders is that they wish they had moved more quickly on difficult decisions instead of holding off in the hope that things would get better.

I suspect that many people wouldn’t like to have an emotional off-switch, but then leading companies and investing isn’t for everyone. For those of us who choose these vocations finding that switch and knowing when to use it are pre-conditions for success. Following this post I will be more mindful about how and when I use mine.

Politicians don’t understand authenticity

By | Startup general interest, Uncategorized | No Comments

One of the defining characteristics of business this century is the return of authenticity. For much of the twentieth century success for large corporations was driven more by great marketing than great product. The internet, and particularly social media, opened up communications and changed that. The truth will out now. In the days of television advertising companies could control the information consumers received by buying the airwaves. We used to rely on adverts for information about products. Now we rely on reviews and social media.

Hence product quality increasingly trumps marketing and brands worldwide are embracing the need to be authentic. That is to think about the customer first and throughout.

Politicians haven’t caught up. At least in the UK.

And it’s a tragedy.

I’ve been making this argument increasingly frequently as we head towards the general election. Here in the UK, as in much of the developed world, electorates are turning to protest parties because they feel poorly served by the incumbents. In the UK UKIP and the SNP have been the main beneficiaries.

Focusing on the UK, in my view people are turning away from Labour and the Conservatives because those parties have no authenticity. They have no conviction and they don’t stand for anything. Instead they produce policies they think will extend their appeal to new voters without alienating their current supporters. As a result the promises seem hollow and people don’t want to vote for them.

I’m writing this today because I’ve just read a BBC article titled Have modern politicians lost the art of rhetoric? which makes many of the same points.

This development has many causes, not least the collapse of the Keynes vs classic/monetarist economics, the rise of opinion poll politics, developments in modern journalism and the rise of the career politician. Those are some major headwinds, and they make it hard for the major parties to get out of the rut they are in.

I don’t have a solution to offer, beyond the obvious feeling that to recapture the hearts of the electorate it will take strong individuals whose primary motivation is to make a difference rather than to govern. They will have to be very strong to prevail because the party machinery is works to marginalise such people. We need these strong individuals though, because I believe we are headed towards difficult times when developments in technology will lead to massive shifts in employment patterns and, unless we are careful, worsening inequality of wealth. Steering the country through these shifts will require difficult trade-offs and hence strong leaders who can bring the country with them. Those leaders will need to be authentic.

The two reasons early stage investors should be active investors

By | Uncategorized, Venture Capital | One Comment

I’m on a panel at an investor conference tomorrow discussing the merits of active investing, which will be a debate about how much investors should do above and beyond the provision of cash. I’m writing this post to get my thoughts straight.

As you probably know, Forward Partners bundles help from our startup team, our proven methodologies and office space with our cash investment so I will be talking my own book tomorrow and hence here. Forgive me for that, but I do think we are in the vanguard of a trend towards ever more active investing.

This is, in fact, a trend that has been underway for some time. Twenty years ago 3i dominated venture capital in the UK with a very low touch model. I’m told their sell at that time was ‘here’s some money and we won’t bother you as long as you hit your numbers’. Then, when I joined the industry in 2000, people started talking about ‘The Silicon Valley model’ of venture capital where partners took board seats and actively hustled for their portfolio companies. Over the last fifteen years that has become accepted best practice.

Now we are part way into the next change, which is to an even more active form of investing where investors employ teams of people to help their investments, as we do.

The first reason for this change is that the investment world is increasingly competitive. It used to be that access to money was restricted to a few privileged individuals and simply getting money was an achievement, even for the best companies. That’s still true in less developed parts of the world, but in San Francisco and increasingly in London there are multiple sources of venture capital working very hard to find good investments and entrepreneurs sitting on quality opportunities have lots of options. Transparency provided by the internet makes this true at all stages, but it’s especially true at the earliest stages where capital requirements have declined precipitously. If you need less money there are more people you can get it from.

The second reason is that entrepreneurs looking to rapidly build traction without raising much money need more help. In the 1990s when companies needed £2-5m to get a product to market they had money to hire a team of people to help them. These days most startups need only a fraction of that to launch – our idea stage partners get to significant traction within a year on a £250k investment – which means there isn’t much money to hire a team and the founders have to cover a lot more of the bases themselves. Big picture this increased capital efficiency is great for entrepreneurs because they suffer less dilution, but it does mean they have to do things they aren’t skilled at.

The opportunity for investors is to help fill the gaps. For example, if an entrepreneur is skilled at marketing but not design then if the investor has a good designer who can help the entrepreneur doesn’t have to spend hours reading blogs and having coffee with friends to figure out what good looks like and hire a freelancer. Moreover, if that designer is very good the result for the company will probably be be better. The company will eventually need to bring design skills in-house and if the investor’s designer is smart she will combine a focus on the job in hand with helping the company build a strong capability in design. That’s partly about educating the founder, partly about helping her employ a great designer when the time is right, and partly about supporting the new hire when he starts.

The gaps that we most often fill are product, development, design, marketing, recruitment and fundraising.

In summary, early stage investors are becoming more active to differentiate themselves from the competition and win the best deals, and because their investments need more help. Most of the best funds are embracing this trend and hiring dedicated teams so they can add more value. This post is long enough already, so I won’t list examples here beyond saying that Andreessen Horowitz and Google Ventures have taken this strategy further than other funds in the US and I think we have taken it the furthest here in the UK.

Every job you do has your signature on it

By | Startup general interest | No Comments

I just read this on a post by Slack and Flickr founder Stuart Butterfield titled Rules of Business:

Every job you do has your signature on it

When I was around 10 or 11 years old, my father offered me $10 to move a cord of recently-delivered firewood from the driveway into the garage and stack it up inside (I am old; $10 was a great deal of money back then). I managed to get all the firewood inside but rather than it being stacked against the wall, it was more or less evenly distributed across the floor of the garage. I expected my payment, but instead got some advice: “Every job you do has your signature on it — do you really want to sign that?” I always remembered that and if I am going to do something, I make every effort to do it right. (I also properly stacked the wood afterwards, even though it took forever, and I got paid in the end.)

It’s great advice, and also easy to forget. Successful people are generally hugely productive, which means they get a lot of stuff done fast, and constantly have to trade-off speed and quality. Deciding whether you’d be happy putting your name next to a piece of work is a good test of whether the quality is high enough. As companies and individuals we are judged on what we produce and if we if it isn’t of a quality that we would put our name to then our brands will suffer.

At the same time we have to remember that perfection can be the enemy of progress and there are also occasions when we run short of time and it’s important to just ship, even if it’s something we aren’t proud of. It takes good judgement to know when ‘good’ is ‘good enough’ and when to break the rules and sacrifice quality for expediency. Acquiring that good judgement is something we should all strive for over time, and being conscious (mindful even) about our decisions as we go helps our judgement to become better more quickly.

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