Be helpful, not right

By | Startup general interest, Uncategorized | No Comments

I’m very excited about our FP50 mentor network which we launched last night with a dinner for mentors and a couple of our portfolio companies. wrote about it under the headline Tech leaders unite to support UK’s fledgling e-commerce start-ups, and that’s about right. I was humbled by the quality of our guests.

We put a great deal of thought into making sure FP50 will be really helpful to our startups. We asked CEOs and founders what they want from mentor relationships, asked mentors what works for them and looked extensively at other mentor schemes in operation.

What we learned boils down to two things:

  • Long term mentor/mentee relationships deliver the most value
  • It’s crucial that FP50 adds value to mentors as well as mentees

So those are our two objectives.

One of the ways we can add value is to help people be better mentors and mentees, so at the dinner we had a talk from startup coach Richard Hughes-Jones on how best to give advice. It was his thoughts on the difference between directive and non-directive coaching that provoked the most discussion on my table afterwards.

When mentoring, the first instinct of many of is to jump into solution mode and try to fix problems by suggesting solutions. Often the advice is framed as “I’ve seen this situation before and you should do X”. That’s a direct coaching style and is appropriate in some circumstances, particularly in the very early stages of a company where there’s lots of things to do and the founder doesn’t have much time to think about any of them. A non-directive coaching style helps the founder to think through the problem and come up with their own solution. It takes more time, but is often more powerful, particularly if the situation is complicated and the match with the mentors previous experience not perfect.

It was in this context that Richard said “It’s better to be helpful than right”, which is my takeaway quote for the evening.

Simply giving the right solution to a founder is no use if they don’t understand it or internalise it well enough to implement it properly, or it hasn’t been explained well enough for them to tweak it to their precise situation. In these scenarios it’s better to help founders think through the problem a little bit, even if they don’t get to a final solution. Best of all is for them to have the right solution and be fully ready and able to implement it, but that isn’t always possible.

The next step with FP50 is to get those long term relationships started. The Slack group we set up is busy with people introducing themselves and hopefully that combined with direct introductions will be enough to get the ball rolling. Our next event will be in three months.

It’s not just generation Z that craves authenticity

By | Startup general interest, Uncategorized | No Comments


Business of Fashion wrote yesterday about what brands should do to tap into generation Z – that is youngsters born from the mid-90s onwards. They identify a number of interesting differences between generation Z and their forbears:

  • Online nearly all the time – born digital and never experienced life without technology
  • Spend less money on fashion (down from 45% to 38% of teenage spend 2005-2015) and more on technology (up from 4% to 8% of spend) and food (up from 7% to 22% of spend)
  • Surveys also show that they care less about fashion
  • Teenage spend is down overall – one survey says down 31% from 1997-2014
  • They scrutinise brands carefully – reading backstories looking for congruence with their own values
  • Todays teenagers are more altruistic and entrepreneurial than previous generations
  • They value shareable experiences – in part because social capital comes more from social media than wearing logos
  • They reject the exclusivity that underpinned brands previously popular with teenagers – e.g. Abercrombie and Fitch

I can see two trends at play here. First is greater use of technology and the second is an increase in the value of authenticity. It’s no accident that the two arrived together, because whilst social media is often used to promote image and falsehood a much greater part of it’s use is genuinely authentic, largely because it’s now much harder to hide the truth.

Generation Z may be the more extreme than their elders in adopting these trends, but they are not alone. Where I live in north London the adult population is strongly favouring companies with quality products sourced sustainably – i.e. brands that are authentic to them – and I see this trend more widely.

When I look for opportunity I look for trends to back, and this trend towards authenticity is reaching ever larger parts of society and has a long way to go.

Internet retail in an age of unlimited choice

By | Startup general interest, Uncategorized | One Comment

I like think of internet retail as having two phases.

The first phase was to replicate high street superstores online. Large warehouses replaced physical stores and purchases were made via web browsers instead of by visiting in person. The internet retailers had three structural advantages; warehouses can be bigger than shops, warehouses are cheaper than shops, and delivery is more convenient than going shopping (for some goods). Hence they are able to compete with high street retail on range, convenience and price.

This model works best for product categories where people know what they want – like books, music and electronics. Amazon is the standout winner.

The second phase is to offer a vastly greater range and solve the problem of discovery. Generally that will mean not holding stock. Because the range is now very big there is too much choice for consumers and it’s critical for companies in this space need to offer quality curation. Without quality curation the customer experience will suck and the businesses won’t enjoy huge success. These ecommerce 2.0 companies therefore compete on range and discovery. Note that they lose a little on convenience because they don’t hold stock and delivery is slower. A key enabler is brands and manufacturers being set up to dropship, something that is only happening now.

This model works best for product categories where people don’t know what they want – like fashion and sports. There are no standout winners yet, but there are some good startups. Thread and Lyst are two examples that we’ve invested in (the latter back when I was at DFJ), and we’re looking at another one right now in the gardening space.

I’ve described a simple sequential two phase model here. Reality is a bit more complex with some phase 1 businesses that take stock still doing a great job of curation (e.g. Net-A-Porter) and some companies offering vast range but without curation (e.g. Amazon MarketPlace).

All this is on my mind this morning after reading Benedict Evans’ latest post Lists are the new search.

He makes a couple of points that are relevant to my two phases of internet retail model.

The first is that Amazon’s potential might be limited by its lack of curation. They have a 25% share of the print book market in the UK and USA and it’s possible that a good portion of the other 75% doesn’t start from knowing what book they want to buy. Independent book retailers excel at discovery. They put books on tables for people to choose from and their staff are able to make in person recommendations. Apparently only a quarter of Amazon’s book sales are from its recommendations platform.

That suggests that even in the categories ‘dominated’ by Amazon there’s an opportunity for new businesses that excel at curation.

The second point is that hand crafting tight lists of products and automating the matching process is a method for scaling curation. Gathering enough information about the user to quickly route them to a perfect list is the key to making this work. Apple Music and Spotify both have a partially manual recommendation process like this, as does Thread.



Price drops, volume takes off

By | Startup general interest, Uncategorized | 2 Comments

solar chart

Price elasticity of demand is a function that economists study for different products. With the odd exception demand goes up when price goes down, but sometimes the function is linear and other times you get more of a step change.

As you can see, solar energy is a product where there is a step change. This chart makes it remarkably clear how quickly demand grew once solar energy became cheaper than alternative sources. It also suggests that growth will continue at a staggering rate as cost declines further. Note also that as more money flows into solar more money flows into solar research, so there’s a high chance those further cost declines will come through.

Why being a VC is more difficult than people think

By | Startup general interest, Uncategorized | 3 Comments

I’ve seen Mark post a few versions of this tweet over time and wanted to write a post about it. I agree with him, but the reasons are complex. Fortunately Steve Schlenker, co-founder of DN Capital has captured most of them in his Quora answer to the question: How hard is it to be a venture capitalist.

Before I go any further let me say why I’m writing this post. I can see that it might look self-serving, but my motivation here is to help others thinking of becoming investors. To get it out of the way, I’m definitely not writing because I want anybody’s sympathy (I don’t) or because I want to say how clever I am for overcoming the difficulties (not my style).

I’m writing this post for people who are thinking of becoming investors because lots start investing, lose their shirts, and then wish they had done something else with their money. I’ve seen that happen to angels, entrepreneurs, and corporate VCs.

The root of the problem, I think, is that from the outside venture capital looks easy, especially during bull markets. The papers are full of stories about IPOs and big exits and it seems like every private company is able to raise money, even the ones that have obvious flaws. Moreover, even experienced and successful venture capitalists are investing in companies that look stupid. Ergo – investing is easy. The most glaring omission from this simple analysis is the timing lag that makes venture capital so hard. As Steve says, excepting hyped sectors, most companies take 7+ years to reach maturity, even in the good times. The IPOs and big exits on Techcrunch everyday, therefore, received investment back before the markets were hot and most of the private companies that seem so exciting today will face the difficult challenge of a down market in the years to come. Many will fail.


Making consistent returns as a VC requires building a portfolio of companies in the difficult times that are ready to exit when the good times come. That necessitates raising capital when nobody wants to invest in venture and having the vision, discipline and patience to build value in a portfolio over time. All three of these are far from easy, but it is raising capital which is the hardest, particularly here in Europe where the venture industry is only just losing the awful reputation it gained during the 1999-2000 bubble. That said, even once they have money most investors pick bad companies. Surprisingly few funds back enough winners to make enough profits to reach carry. I haven’t seen data, but I would be surprised if more than 30% of funds get there.

Finally, the skill-set of a successful venture capitalist is incredibly broad. Ronald Cohen, founder of Apax and one of the founders of the VC industry here in Europe put it this way in his book The Second Bounce of the Ball:

[investors] have to be financially trained and to have an understanding of management, but you also have to have a strategic brain while being sensitive to tactical and people issues

To that I would add empathy, patience, grounding, creativity and hustle. There’s no single career that prepares you for that. Banking and consulting will give you strategy and tactics but not the operational experience and running a startup doesn’t teach strategy. So everybody has to learn on the job. Then on top of that experience makes a massive difference, as Steve says:

The best investors are the ones who have LOST money in the past so can recognize a pattern of what NOT to do, as much as a pattern of what TO do.  This is truly one of the great internship businesses, don’t assume because you have made great angel investments, or built a successful company yourself, or made public sector investors a lot of money in the same sectors that you can immediately pivot those skills into managing LP capital deployed in a structured way into early stage private company risk positions.

I could say more, especially about the day to day challenges of running a fund and investing, but this post is over 700 words already and I think I’ve made my point. Venture investing is hard because the job is inherently difficult and the required skill set is exceptionally broad. That’s also what makes it fun.

I recommend Steve’s Quora answer if you want to read more.

Victoria’s Secret’s success came from a deep understanding of customers

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In 1982 Victoria’s Secret was a four store chain headed for bankruptcy. Their strategy of selling lingerie to men wasn’t working. Leslie Wexner bought the company and sales now top $7bn, with analysts seeing $20bn in global potential. In the speciality retail world they have market leading sales per square foot and profits. Victoria’s Secret is now one of two primary brands at L Brands, a $28bn company where Wexner is CEO, Chairman and Founder. He’s now 78.

BCG Perspectives made a thorough analysis of what made Wexner and Victoria’s Secret a success. Interestingly, much of the insight that made the business work is the sort of insight that comes from customer development. Customer development only emerged as a thing in the last 5-10 years, so in one sense they were ahead of their time. In another important sense they weren’t though, because whilst Wexner’s instincts took him to the right place he relied on the magic of his own intuition rather than understanding that appropriately structured customer interviews are a powerful tool for developing and checking gut feel.

The following are quotes from the BC Perspectives post (emphasis mine):

  • Consumers cannot think in abstractions. They cannot envision a new concept. They cannot predict their own behavior.
  • A curious mind asks the questions that open up the consumer to talk about her latent dissatisfactions, hopes, wishes, and dreams. A curious mind knows that functional goods sold en masse earn a good return, but breakthrough profits come from satisfying emotional needs. A curious mind does not jump to conclusions but tests carefully and thoroughly.
  • You need to get into the heads of consumers and be able to tell their stories. It is both art and science.
  • Winning solutions respond to the distinct and specific needs of a group of consumers.
  • A curious mind does not jump to conclusions but tests carefully and thoroughly.
  • Completely understand your customers by seeking an intense, complete, and empathetic view of their lives and the context for their purchases.
  • Deliver infinite growth by having your customers talk about you, exclaim about you, and tell their friends and colleagues about you.

This chimes with a lot of our thinking, as captured on The Path Forward. As mentioned above, the best way to glean these insights is through structured customer interviews. My partner Dharmesh wrote a guide to doing great customer interviews here.

Disney’s new streaming service is the way of the future

By | TV, Uncategorized | One Comment

I’ve long thought that producers of TV and movie content should build direct relationships with their customers over the web. It’s been slow to happen though, largely because the content producers were wary of retribution from their cable, satellite and IPTV partners if they launched properties that competed with them. So instead of content owners moving to the web we got new web companies stepping into the void – largely Netflix, Amazon and Hulu. To start with they were aggregators in the same way as cable companies were aggregators and they competed with traditional TV companies for content – a happy world for content producers like Disney.

But then Netflix and Amazon started commissioning their own content and it started to look like the traditional TV content companies had missed a trick and left the door open for new players.

But now Disney is pushing back. They’ve just launched a direct to consumer streaming service, DisneyLife, for their content here in the UK. HBOGo is similarly a direct to consumer streaming service from a major content creator, albeit in the US.

You might be wondering, where does this all go?

I think we will see more TV content companies build direct to consumer propositions. That seems pretty certain.

The more interesting question is what happens to the consumer proposition. At the moment most people buy a subscription service from a cable or satellite provider which includes connectivity and a menu of options, maybe have a Netflix or Hulu subscription on top, and probably buy the odd movie from iTunes or Google Play.

Going forward the number of places where consumers can go to buy TV content is going to increase. There’s really value to subscription services which allow for a low effort, lean back TV experience where nobody has to think about whether it’s worth paying for the next show, but there’s a limit to the number of services anyone is going to subscribe to. That points to a significant part of the market going on a pay-per-view model. Maybe that will continue to be aggregated on iTunes and Google Play, but maybe new aggregators will arise which take the show from the content owners site and charge a lower margin. Maybe they will also offer superior browse and discovery.

Finally – this is a cord-cutters vision of the future where access is unbundled from content.

Similarities between raising a venture fund and raising for a startup

By | Uncategorized, Venture Capital | No Comments

It’s becoming a cliché that read raising for a VC fund is like raising for a startup. I know this because fur much of this year I’ve been on the road for Forward Partners and when I tell entrepreneurs what it’s like they smile, give me a knowing nod like we’re insiders together, and say “it’s just like raising for a startup”.

The basic similarities are lots of meetings, unpredictable processes, lots of wasted time, and a feeling that there really ought to be a better way.

I’m at the Super Investor conference in Amsterdam, which is the main event each year when private equity and venture capital fund managers and their investors (Limited Partners out LPs) get together. At the Fundraising Summit yesterday LPs repeatedly made the following points which really cemented the point:

  • LPs receive around 400 fund pitches per year and invest in 8-10. Comparable numbers at VC funds are 1,000 pitches for a around 10 investments (Forward Partners will have received a little over 2,000 pitches this year and will have made 6-7 new investments).
  • A major complaint from fund managers is that LPs don’t reply to their emails and let them know how their investment case is progressing. Forward thinking LPs are saying they understand this and work hard to get a quick ‘no’ to funds they aren’t going to back. Entrepreneurs say the same.
  • Like top startups, the top funds have it easy. LPs all want to invest in them, their fundraising processes are short, and they can command good terms.
  • Other funds find it much more difficult, with fundraising taking 15-18 months, which is 5-10x as long as it takes the top funds.
  • LPs are working hard to differentiate themselves so they can get into the best funds.
  • Relationships are important, and they want to invest in managers they trust.
  • LPs are starting to advise find managers on what to put on their investment decks and how to present themselves generally.

Those are the similarities. One of the big differences if that LPs benefit less than VCs when they are innovative and take risks with new funds. That makes it harder to be a startup fund and harder to get traction with new VC models.

The new Nexus5x is a good workhorse

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I got the new Nexus 5x Google phone on Sunday and have been using it for five days now.
I like it.

It’s a bit bigger than my old iPhone 6 and I was worried at first that would be a problem, but I can still use it one handed and it fits in my pocket OK.

Whilst we’re on the negatives the software mostly isn’t as pretty as iOS and I find myself stabbing frustratedly at the screen a little more often than I used to. I think the battery drains a little faster too.

But the swipe-to-type keyboard works much better, and for me that’s a huge bonus. Writing an email of any length was always a pain for me on my iPhone. Non-swipe typing is too slow and the third party swipe keyboards were glitchy and even when they’re working they don’t seem to work as well as on Android.

In contrast the native swipe keyboard works brilliantly on the Nexus 5. So much so that I feel comfortable processing loads of email on the device and writing long notes (including this blog post).

The other good thing about this phone is the finger print sensor on the back. It’s a fast and convenient way to wake up the phone that has been very reliable so far. More so than the finger print sensor on my old iPhone.

Beyond that the apps are much of a muchness. My password app Lastpass auto-fills inside apps on Android, which is nice, but I miss being able to text from my laptop like I could when I had an iPhone.

So I’m happy to be back on Android (although I will have to buy a new watch…) but reading this post back the striking thing is how little there is to choose between the Nexus 5x and the iPhone.

Developments in discovery on mobile

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In August I wrote posts about the gap between browsing and purchasing on mobile and solutions for closing the gap. The problem is that filling out forms on mobile web sites is too painful for most people and that apps aren’t good for occasional purchases because people forget they have downloaded them.

Two recent developments may be changing the game.

First, announced today, the latest version of Chrome for iOS has a form auto-fill feature which, if implemented well, might get people checking out on mobile much more. Admittedly this feature has been available on Chrome for Android for some time.

The second is deep linking into apps. Spotlight searches will now show results from apps on the device. The picture below is from an investor update our shoe-commerce portfolio company Stylect sent around earlier this week. It shows how a search for Laboutin on Spotlight returns a result from inside the Stylect app. That brings the customer back to the Stylect app without them having to remember to look there.


One of these developments favours the mobile web, whilst the other favours the app economy. That’s the Google vs Apple battle playing out right there.