Startup general interest

Major demographic shift – more people are living with their parent

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When I was studying social science in the 1990s one of the major trends was more and more people living alone. Academics were extrapolating trends and predicting 30%+ of us would be living alone in the future. They were picturing millions of unhappy people living in tiny apartments with insufficient social contact going quietly mad.

Fortunately that hasn’t happened.

As you can see from the third graph along in picture above (data from Pew Research) the number of 18-34 year olds living alone has been constant for a few years at 14-16%.

Note: This data is for US 18-34 years olds only, but I would be surprised if the trends aren’t the same for all ages and also in the UK.

Instead of living alone many more people are staying with their parents (first graph above). I’m sure that creates challenges of its own, but social isolation is at least less of an issue.

I think this data gives insight into social and retail trends. If you are living alone or with parents you are are:

  • More likely to spend time on social media
  • More likely to use dating sites
  • More likely to value experiences
  • More likely to spend money on fashion and other goods which define and display a sense of self

These have all been big growth areas over the last decade.

Going forward it will be interesting to think about how new opportunities and markets play into the trend of more people living with their parents.

Google closed, Facebook and Microsoft open?

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Historically Google has been a pro open web company. Open ecosystems were deep in their DNA and critical to their business model of making money from  search. Facebook, on the other hand, has been accused of trying to partition the web and keep everything within its own domain, and Microsoft has long been aggressive in leveraging it’s Windows Platform to try and own adjacent markets.

With their bot strategies they seem to be going the other way. This is from Venturebeat:

when you’re using the Google Assistant, the interaction is nearly always with Google — when you tell it to buy movie tickets, for example, you’re not talking to a Fandango bot. In fact, there are no other bots to speak of here …. With Facebook Messenger and Microsoft’s Skype, people will be able to interact with a whole lot of bots. There are already Messenger bots for 1-800-Flowers and online retail Spring, and there are Skype bots for Westin Hotels & Resorts and Domino’s Pizza.

Related to this I’ve noticed that Google is serving more and more solutions within its search results page. I was able to book a flight to Nice straight from a Chrome search on my Nexus5X last week. Previously Google courted an open ecosystem of companies and ranked the best ones highest. Now they rank themselves.

I guess it’s good to see that everyone is flexible…

Extreme poverty a thing of the past for most people

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Yesterday I wrote about the benefits of being optimistic. That’s often hard in today’s world where the media bias to reporting bad news gives us the impression that the world is going to pot. ISIS, Middle East collapse, wealth inequality, and the refugee crisis have loomed large in recent years.

However, bad as those things are, and much as I wish they would improve, the overall headline is that the world is improving fast for most people. That’s a long term trend and we can be optimistic it will continue.

One of the main axis of improvement is the rapid decline in the percentage of people living in extreme poverty which has dropped from 44% to 13% over thirty one years from 1981 to 2012. Bravo.


Optimism – another cognitive bias you want to have

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Cognitive biases are unconscious forces that affect our decision making, most of them negatively. Confirmation bias – the tendency to seek out information which confirms what we already believe is one of the most insidious, and sunk cost bias – the tendency to overvalue things in which we’ve invested is another common failing.

However, there are a few cognitive biases that correlate with success. Back in 2013 I wrote about four of them, of which personal exceptionalism, the macro-sense that you are at the top of your cohort is perhaps the most important.

And then today my friend and colleague Richard Hughes-Jones tweeted about another: optimism.

Optimists are normally cheerful and happy, and therefore popular, they are resilient in adapting to failures and hardships, their chances of clinical depression are reduced, their immune system is stronger, they take better care of their health, they feel healthier than others and are in fact likely to live longer.

From Kahneman.

So if we want to be successful we should cultivate a sense of optimism, and of personal exceptionalism. That said, we mustn’t go too far and end up naive or arrogant. The key with positive cognitive biases is to be aware of the bias and keep it in check, but without thinking about it enough to undermine its power.

Evaluating the prospects for life changing inventions

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This morning Chris Dixon posted The typical path of life changing inventions:

  1. I’ve never heard of it.
  2. I’ve heard of it but don’t understand it.
  3. I understand it, but I don’t see how it’s useful.
  4. I see how it could be fun for rich people, but not me.
  5. I use it, but it’s just a toy.
  6. It’s becoming more useful for me.
  7. I use it all the time.
  8. I could not imagine life without it.
  9. Seriously, people lived without it?
  10. It’s too powerful and needs to be regulated

That’s pretty accurate, but with the exception of 10. maybe not that surprising. It reminds me of the Mahatma Ghandi quote “first they ignore you, then they ridicule you, then they fight you, and then you win”, but extended and ported to a different context.

However, most would be life-changing inventions don’t make it all the way to number 10 and the interesting thing for future gazers, including VCs, is assessing how far a product will get. That requires an understanding of customers, use cases, ecosystems, cost trajectories and distribution, and it’s definitely not sufficient to think that if a product is at one stage it will progress to the next. For example, most products that people know about but don’t understand it (i.e. at stage 2) whither and die, and to know that any given product is different requires a hypothesis about how people will come to understand it and see how it’s useful.

Key elements of a brand

By | Startup general interest, Uncategorized, Venture Capital | No Comments

Brand is on my mind this morning. Mat Braddy, formerly CMO of Just Eat and now founder of Rock Pamper Scissors gave a great talk on building challenger brands at our FP Live last night and this morning I read OpenView’s brilliant teardown of how they re-invented their brand.

OpenView are one of my favourite venture capital funds, largely because they are one a small number of VCs globally pioneering a similar model to Forward Partners. Like us they have a bigger team than most other VCs so they can offer a better service to their portfolio companies, and, critically, they have chosen to be very focused so they can build expertise and offer better support. They are focused on expansion stage SaaS companies in the US. We are focused on idea and seed stage ecommerce and marketplace companies in the UK.

I don’t only like them because they think similarly to us, I also love their insight, rigour and clarity of thought, which shines through in the way they went about rebuilding their brand and the way they tell the story.

For me, these are the key insights from last night’s talk and the OpenView process.

  • Strong brands are built from the inside out – they begin with great products and cultures
  • Brands can’t be externally crafted and then applied, they must be truly aligned with what the company does and how it does it
  • The goal of a brand is to articulate the company story in a clear, focused and consistent way
  • A brand is both what the company stands for (mission, vision, values) and how the company is presented (messaging and visual identity)
  • The brand should be informed by both inside and outside perspectives – employees, customers and partners (not just the exec team)
  • The brand can lead and shape how people think about the company, but it needs to be congruent with existing perceptions
  • The best companies present consistent, but different brands to customers/partners, employees, and maybe investors
  • Above all, authenticity is the goal

Just Eat is a great case study for all this. In his talk last night Mat described how they made sure their brand was aligned to the core values of the product (convenience, simplicity), the culture of the company (fun and mischievous), and how they developed it with an inclusive process. Because they were a challenger they wanted to be controversial and that took them to the tagline “Don’t cook, Just Eat”, with the positioning that take-away is better than cooking. His advice to other challengers is to adopt something similarly controversial and then really commit. Just Eat pushed their commitment to the tagline and mischievous positioning as far as forming the Don’t Cook political party and putting forward a candidate in the Corby by-election (check out the jet-pack…).

OpenView followed a similar process but they’re a VC in the serious business of helping companies succeed, so they took a more serious tone. Their tagline is now “Powering Expansion”, which neatly captures what they do for the Series A and B companies they back.

Think of your company as an organism

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When I started work in the mid 1990s enlightened companies had moved from hierarchical command and control structures to a more empowered model for the enterprise, and more and more companies were headed in that direction. Then, in 2003 Lou Gerstner, former CEO of the famously hierarchical IBM, published Who says elephant’s can’t dance?, the story of how he revitalised the company by delegating power to employees, and we all knew the revolution was complete.

But now the wheel has turned again.


The hierarchical model broke down under two forces:

  1. The pace of change increased and nimble companies that didn’t have to go back to the centre for instructions started winning
  2. Something about late stage capitalism meant more and more employees wanted autonomy rather than to follow orders – particularly the more capable ones

These trends have continued apace and we’re reaching the point where the empowered enterprise model of setting a vision, building consensus, and managing by objectives is breaking down. The pace of change is such that even 1-2 year articulations of the company vision needs to change frequently and best people now want to be co-creators at every level of the company. We are now moving from the empowering employees to putting them in control.

Wolff Oins just published a report into management attitudes which captures this shift brilliantly:

  • The Premise of the organisation shifts from Motivation and delegation to focus and liberation
  • The underlying belief shifts from workers are willing and best motivated by a vision and rewarded with a career to workers are individualists who want to be their own leaders
  • The management style shifts from painting vision, building consensus and managing by objectives to suggesting purpose, designing culture and encouraging experimentation
  • The company shape shifts from network to ecosystem
  • The company spirit shifts from rational brain to organism

For me the notion of ‘company’ as ‘organism’ captures the modern firm brilliantly. Organisms can be directed, but they have a life of their own and are comprised of an ecosystem of cells, each of which has its own agenda. Organisms can do marvellous things, but they are messy and hard to control. That’s a much more accurate view of today’s companies, and especially today’s startups, than an orderly rational brain or a network.

Forecasting in venture capital

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Good VCs need to be good forecasters. We need to predict which companies are going to succeed and second guess future trends so we can develop our firms to stay ahead of the curve. Deloitte have just published an interesting synopsis of Tetlock’s Superforecasting which gives us some insights into the types of people we need to recruit and the habits we need to cultivate to be good at the forecasting game.

The main and most surprising insight is that deep expertise doesn’t produce more accurate predictions. Tetlock ran prediction competitions over five years with multiple teams and found that the best predictions came from people with the following characteristics:

  • broad expertise
  • open minded
  • sceptical of deterministic theories
  • cautious in their forecasts
  • quick to adjust their ideas as events change
  • embrace complexity
  • comfortable with a sense of doubt
  • highly numerate (but don’t use sophisticated mathematical models)
  • reflective
  • learn from their mistakes

This is a good list for VCs too. One thing that stands out as a little different for me is that the best investors get behind big themes – e.g. the internet, open source software, SaaS, ecommerce, mobile, marketplaces – which feel a bit like the deterministic theories that super forecasters are sceptical of. However, even with these it’s important to keep an open mind and back off quickly if they aren’t playing out as planned. Mobile is a great example. As a category it’s yielded some amazing companies and investments, but many investors went too early and lost money – me included. I made my first mobile internet investment in 2000 in a business that was years ahead of it’s time helping banks to get their services on WAP phones. I’m not saying I’m a super forecaster, but I did learn from that and backed off from mobile until after the iPhone.

The other interesting point from Tetlock is that prediction skills can be improved by good sharing and debating within teams and by training focused on thinking in terms of probabilities and removing thinking biases.





Two types of intelligence and the current state of AI

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These pictures were painted by a robot called Pix18. He or she (it doesn’t feel right) is a decommissioned factory robot trained to paint by picking up a paintbrush and painting on canvas. That’s pretty remarkable and shows how advanced AI is getting.

However, despite what we see here creativity is still largely beyond non human intelligence. Singularity Hub just published a great interview with Hod Lipson, professor of engineering at Columbia University and the director of Columbia’s Creative Machines Labs, who is pushing the next frontier of AI.  He posits that there are two types of intelligence:

  1. Convergent intelligence – Taking in large amounts of information and making a decision – e.g. whether to invest in a stock or pull out at a roundabout
  2. Divergent intelligence – Starting with an idea, or with a need, and then diverging to create many new ideas from it- e.g. designing a new robot different to anything we’ve seen before

You’ve probably guessed the punchline already. Machines are good, and increasingly better than humans, at convergent intelligence but not so good (yet) at divergent intelligence. That’s why we have automated trading and self driving cars, and will soon see robots flipping our burgers and slowly taking over all routine tasks, but still need humans to solve messy problems where there’s fuzziness around goals – e.g founding a company.

More interestingly Lipson contends that to crack divergent intelligence our AIs must become self-aware and reflective. That’s the key to the creative process. And once machines are self-aware and reflective they are arguably conscious. Some of them will certainly seem conscious.

The moment when we have divergently intelligent machines is perhaps the moment when the AI explosion occurs, with all of it’s massive potential upside, downside and uncertainty. I’m hugely excited by this future. If you are I recommend reading Hod Lipson interview in full.

Fundraising is a numbers game

By | Startup general interest, Uncategorized, Venture Capital | 6 Comments

These are Forward Partners dealflow stats for the first four months of 2016

  • 832 leads
  • 47 first meetings (6% of leads)
  • 8 second meetings (17% of first meetings)
  • 2 deals (25% of second meetings)

We met an additional 53 companies at FP Office Hours. In some ways they are like first meetings and they do sometimes lead to deals, but they are only 15 minutes long and many of them are speculative in nature so I excluded them from the analysis.

I imagine other investors have a similar leads:meetings:deals ratios and the headline here is that it’s only once you’ve got to a second meeting that there’s a reasonable chance of getting investment, and even at that point it’s only 25%. Getting a first meeting is an achievement in itself which often makes it feel like the prospects of getting investment are better than they are, but that feeling can lead to dangerous complacency. The numbers say you need four second meetings and as many as 24 first meetings to have a good chance of a deal.

Raising money is best thought of as selling equity in your business, and the fundraising process is a sales process. Unless you have strong relationships it’s a numbers game.

If you do have strong relationships then it’s about how strong they really are – e.g. if you know investors well enough that you are in effect coming in at second meeting level then you only need 4.

The smartest founders have a strategy for their fundraising and build a plan which they execute with discipline. They know who their targets are and which investor is their favourite, and they make sure they have enough names in their pipeline.