Category Archives: Startup general interest

Correction: CB Insights’ “private company health score”

By | Startup general interest | One Comment

CB Insights have released a product called Mosaic which gives private companies a score which predicts their likely future success. The score is derived from lots of data they pull from structured and unstructured sources on the web and then process through a heavy statistical analysis. They pulled data from as many sources as possible looked to see which pieces of it have correlated with startup success in the past and assumed that companies scoring highly on those elements will succeed in the future.

The score has three components, momentum, market, and money. That seems reasonable, although doesn’t give as much prominence to team and product as most VCs do when they talk about startups. I guess CB Insights would counter that team and product drive the momentum score.

There’s much more detail on their site here.

I’m interested for three reasons:

  1. Forward Partners might be able to use Mosaic score as part of our assessment of companies
  2. VCs might start using the Mosaic score as part of their evaluation when they look at our companies
  3. Forward Partners might be able to use the market component of the score to identify new market opportunities as they open up and use that for proactive deal sourcing

Having got that straight in my mind it’s clear we should sign up for a free trial and see what we can do.

The analysis looks thorough and I’m hopeful something will come out of it. Right now I can think of two reasons it might not work for us. Most importantly, I think the analysis is based on correlation not causation, and the score will stop being useful if companies deliberately manipulate some of the inputs (i.e. game the system). For example, the momentum score is partly based on the number of job openings at a company, which is easily manipulated. The second question I have is whether it will work well for the very young companies that we invest in, many of which are too small to have many momentum signals, are in markets that aren’t established enough to have sufficient volume of activity for CB Insights to track, and are too fledgling to have any financial strength.

Update: Earlier versions of this post erroneously referred to Mattermark instead of CB Insights.

Negotiating styles

By | Startup general interest | No Comments

My friend Jason Tavaria posted this link to charts about national negotiating styles to an email group I’m a member of (apologies to other members of the ICE Group reading this for the repetition).

This is how we English negotiate:


I certainly recognise that in myself and my compatriots. Perhaps more interestingly it also helps make sense of where I’m different. I’m very direct by nature and have a strong preference for clarity and speed which leads me to try and push negotiations through the two middle stages as fast as possible. I want to go straight from “reasonable proposal” to “re-packaging” by staying calm and using humour as my tool and can lose patience in the middle stages when people I’m negotiating with are using coded speech and stalling.

And here’s how people in the US negotiate:


The “cards on the table” approach fits well with my style, but no matter how many times I go through fighting in the middle of a negotiation always leaves me wondering if the other person is a … not very nice person. That feeling can go away quite quickly, but it’s definitely there. Knowing that feeling is coming from my British dislike for confrontation definitely helps.

In any negotiation (or interaction in general) knowing yourself and knowing the other side helps find the white space and get a result. These charts are a good tool.


Making sense of the bubble talk and the impact on startups

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

There’s a lot of contradictory advice out there at the moment. On the one hand you have the ‘entrepreneurs should just do their thing and not pay attention to the markets’ folk and then on the other hand there are plenty of observers saying that a bubble has burst.

Many people I respect are in the former camp. Tomas Tunguz said it clearest with his recent post Why the bubble question doesn’t matter which lists the things good companies do and points out that they are the same in bull markets and bear markets. I’ve read posts from Brad Feld in the past saying he doesn’t pay attention to bubble talk and in a post earlier this week Fred Wilson quoted someone else quoting him saying “Markets come and go. Good businesses don’t.” (although he did also point out that if companies need to raise money then the capital markets can affect them).

I have sympathy with this view. Startups and venture funds run for 5-10+ years, are likely to see a recession at some point in their lives (maybe two) and hence need to be able to survive and prosper in both recessionary and growth environments. Moreover, predicting when crashes and recessions will happen is nigh on impossible so trying to manage according to where we are in the cycle is a fools game.

But at same time market crashes changes things for startups. I saw that in 2000 and then again in 2008. When the macro economic climate is tough less money flows into venture funds and startups, so fewer deals get done, valuations are lower and more companies fail. On top that everyone is nervous and deals take longer to complete. Making things worse still, consumers and enterprises have less money to spend and startups find it harder to grow revenues.

It takes time for the impact of crashes to be fully felt in the startup market though. I remember this most clearly from 2000 when I was in a fund that was investing heavily pre and post crash and the VC adjustment took 8-9 months. I think the reaction is slow because VC funds aren’t directly linked to the stock market, VC deal cycles are long, because LPs don’t want VCs to try and time markets and because VCs have staffed up to deliver multi-year investment plans. After a while though VCs find themselves spending more time with portfolio companies struggling with the new environment and the amount of new money in the market drops, and these forces combine to stretch out deal times, reduce the number of deals done and reduce valuations.

Mark Suster set out a number of the dynamics at play in his post Making Sense of the Stock Market Drops in Relation to Venture Financing

Pulling it all together I think the difference between the camps is that the ‘pay no attention to the markets’ folk are talking about best practice startup management in general whilst Suster and others are talking about the impact of crashes in the here and now.


I have no idea if the stock markets will continue to go down or recover but it’s pretty clear to me (and probably to you too by now) that if things don’t get better we will get the negative impacts described above, and if they do recover late stage VC markets will continue to get frothier and that will eventually trickle down to Series A and seed.


I think the best outcome is that the bear market continues long enough to take the heat out of late stage venture but isn’t severe enough to create a rout.

Until we find out founders should follow the old adage ‘hope for the best, but plan for the worst’, prepare themselves for longer fundraising cycles, and think seriously about taking any offers of cash that are on the table, even if the valuation is lower than hoped for. (And, in case you’re wondering we don’t have any low valuation termsheets out there at the moment. Our valuations have remarkably consistent over the two year life of Forward Partners.)

Is the path of technological evolution inevitable?

By | Startup general interest | No Comments

I read an article this week which essentially said the current ‘is it good/is it bad’ debate amongst politicians on the future of the sharing/on-demand economy is as futile as 19th century politicians holding a yes-no vote on industrialisation. They were making the point that the sharing economy cat is already out of the bag and the debate should be focused on how to shape it to bring the most benefit to society, not whether we should somehow try and stop it.

This goes right to the heart of whether technological developments are inevitable. Many commentators, myself included, believe that certain things are going to happen – kids will use more social media, more and more devices will be connected to the internet, ecommerce penetration will grow substantially from where we are today etc. etc. Many others are uncomfortable with this view, believing that we have invented technology and should be able to control it.

I’m currently reading Kevin Kelly’s What Technology Wants which sets out a framework for thinking about this question.

The TLDR is that the broad direction of technological development is pre-ordained, but we have control over the precise nature of how it unfolds.

He makes a helpful analogy with our lives as humans. When each of us is born we are given certain constraints within which we have no choice but to operate. Our genes determine that we have to eat, drink and sleep, have a strong predilection to reproduce, and will have a fairly predictable lifespan. After that the context in which we grow up has a great influence – whether we are we born in an age of physcial or mental labour has a massive impact on our lives, as does the extent of parental pressure to work hard, or follow a particular path, or the strength of the economy and range of employment options when we enter the workforce. Finally the decisions we make also play a big part. Some individuals find the energy to dig deep and overcome genetic limitations, others don’t. Some individuals go with the flow of society, whilst others rebel.

These decisions that we make are doubtless very important. They determine who we are and how we are perceived, and they are what is remembered about us as individuals. But they can only go a small way to transcending our genetics and context. No matter how hard she worked no 5th century woman could fly to Australia. Equally it would be very hard for an aspiring 21st century politician to make a big impact without embracing television and the internet.

Similarly, the direction of technological evolution has three determinants:

  • Structural – there is an inevitable trajectory towards greater organisation of information – first the printing press, then the telephone, then television, then computers, then the internet, then social networks, and so it will continue. Once each of these was invented it was only a matter of time before the next one came along. At a more detailed level there are paths of development which have their own inexorable logic – e.g. two wheeled cart, to horse drawn cart, to motorised vehicle, to self-driving car.
  • Historical – the historical context influences the pace, direction and application of technological development. We wouldn’t have had jet aeroplanes or atomic bombs in the 1940s if it wasn’t for the Second World War.
  • Intentional – at any given moment the citizens of society focus the use of technology in one direction or another, determining for example, whether it is applied for good or evil or whether social justice and harmony is prioritised over wealth creation (the sharing economy debate).

If this framework is correct then as individuals and as policymakers we should accept that technology will continue to develop, that there will be good and bad in that, and that the best thing we can do is try to shape it and bend it to maximise the good and minimise the bad. On the positive side there is a great deal of good to be had, as seen by massive reductions in global poverty and child mortality in recent decades, but on the negative side that does mean the bad can’t be eliminated and whilst we can minimise unpleasant new developments like cyber bullying and even grooming, we can’t eliminate them.

Make sure you have discipline and flair in your startup

By | Startup general interest | 6 Comments




Running a startup requires flair and discipline. Flair gives you the big vision, a great story, the ability to close big deals, to woo employees and to get great press. Discipline enables you to get the small stuff right so the business scales well and is optimised in areas like marketing and supply chain.

Fans of HBO show Silicon Valley which follows the story of a company called Pied Piper might recognise these skills in characters Ehrlich (flair) and Jared (discipline). I’m only up to episode 5 of the first series (late convert) but already Erlich has saved the day with an off-the-cuff speech to a key investor about the company’s vision and Jared has implemented a scrum development process without which they would have missed a key deadline.

Most entrepreneurs have a clear strength in either flair or discipline and but to have both is rare. It’s human nature to value the things we’re strong at and that can lead to entrepreneurs with flair seeing discipline as something that gets in the way, and entrepreneurs who are disciplined viewing showmanship and flair with suspicion. Erlich and Jared don’t get along.

The best companies embrace the need for flair and discipline and manage the inevitable tensions that arise. Founders who do this well hire for the skill they don’t have and let their vision and values determine when they should let themselves be over-ruled.

Advice on changing organisational culture

By | Startup general interest, Uncategorized | 3 Comments

I’ve written a lot in the past about how smart entrepreneurs harness company culture as a tool to drive success. Most of that work has centred around being clear on vision, mission and values and it’s never too early for founders start thinking about these things. Sometimes things go awry though and the culture needs to be changed. That’s a difficult thing to do and I’ve just come across a brilliant 2011 post by Steven Denning which sets out the problem and provides a framework for finding solutions.

If you’ve got time, go read the whole thing. For the attention starved amongst you, what follows is a summary.

Culture change is hard and often fails because culture resists change. Here’s why:

an organization’s culture comprises an interlocking set of goals, roles, processes, values, communications practices, attitudes and assumptions.

The elements fit together as an mutually reinforcing system and combine to prevent any attempt to change it. That’s why single-fix changes, such as the introduction of teams, or Lean, or Agile, or Scrum, or knowledge management, or some new process, may appear to make progress for a while, but eventually the interlocking elements of the organizational culture take over and the change is inexorably drawn back into the existing organizational culture.

But if the culture isn’t working then the company won’t work until it’s fixed, and this framework lays out the tools at a manager’s disposal to create a solution.


The best approach is to start at the top and systematically work down, only using the pure ‘Power Tools’ of coercion, threats, fiat and punishments as a last resort. Common mistakes are to use the ‘Power Tools’ too early and to articulate a new vision without putting in place the management tools to get buy-in and re-enforce the message.

Those mistakes are common, but so easy to make, particularly as an investor. Just writing these sentences is bringing back painful memories of working with CEOs to articulate a new vision, strategy, or direction and then watching as months rolled by and little changed. With the benefit of this diagram it’s clear to me that when things didn’t work it was because I didn’t do enough to make sure the management tools were in place, particularly those designed to ensure top-to-bottom buy-in. That contrasts with companies where we successfully used OKR type structures to get full alignment.

Strategies for seeding marketplaces

By | Startup general interest | 9 Comments

I just read a VersionOne post from May about seeding marketplaces. They identify four strategies (there’s more detail on each in the original post):

  • Identify unique inventory – sellers who don’t otherwise have an online outlet will list on your site (provided it’s easy to do) and you can use their product to drive demand. If you are lucky the sellers will bring some customers with them. Etsy is a good example.
  • Bring inventory from another site – hacking and scraping are common grey area tactics. AirBnB is a good example – see case study.
  • Pay for inventory – I think this only works at the very earliest stages, and even then I’d be careful. Apparently Uber did this in Seattle, paying drivers to sit idle whilst they built demand.
  • Aggregate inventory from other sites e.g. through affiliate programmes – scale comes quickly with this strategy, but adding enough value to become sticky can be challenging.

I would add another, and this is my favourite, and that’s ‘Using demand to acquire supply’. Our portfolio company Lexoo used this strategy, first finding companies that needed a lawyer and then calling up lawyers offering them customers if they register on the site. It’s brutally simple and highly effective. Only works in services marketplaces where customers don’t expect an instant quote.

My other observation is that in most cases one side of the marketplace comes much more easily than the other. On Lexoo supply comes more easily whereas on Appear Here, a marketplace for short term lets on the High Street demand is the easier side. The trick then is to build the easy side to make the marketplace super attractive for the more difficult side.

Keep it simple: Maintain an irrational bias against complexity

By | Startup general interest | One Comment

I’m currently dealing with a complex situation where the complexity itself is starting to affect the outcome, and not in a good way. People and companies avoid complex situations because they take time to understand and because they’re afraid of getting the wrong end of the stick and making a mistake. That’s what I’m seeing now.

The challenge is that complexity is beguiling. Clever tricks and hacks can add to a company’s story and the benefit vs complexity trade off for each one can be well worth it. The problem comes over time when new tricks are added to the old ones to keep the story fresh. The complexity builds up all the time whilst the story only gets incrementally better because the older tricks are forgotten or not worth talking about any more.

Then over time telling the company story well becomes more about simplifying the complexity than anything else.


Much better to avoid complexity altogether, or rather only accept it when the benefit vs complexity trade off is hugely compelling. Hence I say it’s best to maintain an irrational bias against complexity and keep it simple.

This is a lesson I’ve learnt before and now I’m learning again. I’m hoping that writing it down will help me remember it better this time.


The average musician gets $23 for every $1,000 of music sold

By | Startup general interest | 4 Comments


I used to write a lot about the music industry but it because less interesting once Spotify became dominant and everyone accepted that streaming is the future. This chart got me excited again though. Pop stars regularly complain about how little they get when their music is streamed, but they are mistaken in blaming the streaming services. It’s the labels that have the biggest take.

The $1,000 we are talking about here comes from music sales – e.g. CDs. As you can see the label takes $630 from that $1,000 and the band gets $230 which is then shared with their advisors leaving band members in a typical four person band with $23 each.

I saw the chart on Techdirt, a site dedicated to exposing old media rip-offs and BS. It’s great to see them still going. After the chart they go on to explain how even $23 is recoupable against any advance the band might have had, so the true situation is even worse.


Good middlemen in most modern industries have a 10-20% stake. AriBnB, eBay,, TripAdvisor and many others are in this range. Companies that take a 63% cut are open to disruption and it’s hard to see how the labels have held onto their position, much less how they will sustain it.

Spending money is like getting fat

By | Startup general interest | No Comments

“Spending money is like getting fat” is a sub-title from a great Techcrunch post about the dangers of raising big rounds. I love the analogy. As with weight, burn rates are very easy to increase but take large amounts of discipline and suffering to decrease. Moreover, just as food is hard to resist when it’s on the table in front of you, it’s hard not to spend money once it’s been raised. Not least because investors and employees will expect you to spend it.

Big rounds have their place of course, and at the margin we nearly always advise companies to raise more money than less, but radical over-capitalisation or accepting large a investment just because it’s easy and the terms are good is generally a mistake.

It sounds trite to say ‘don’t get fat, stay lean’ but it’s harder for companies to stay lean than you might think. The metaphor is with our bodies, but we can pretty quickly see fat on our bodies. That’s not always so in startups where progress is hard to measure and larger burn rates increase the sense of momentum.

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