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.

Forecasting in venture capital

By | Startup general interest, Uncategorized | 2 Comments

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.





Fundraising is a numbers game

By | Startup general interest, Uncategorized, Venture Capital | 10 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.


Being a VC isn’t about having all the answers

By | Startup general interest, Uncategorized | One Comment

This tweet really hits home for me. As VCs and board directors we’re often assumed to have great knowledge about startups, and that’s fair enough given we’re there to help. However, we end up feeling under pressure to live up to the assumption, i.e. to look competent and to be able to help.

As I remember all too clearly, that pressure is particularly intense for younger VCs who are building their experience. We all know that sometimes the only route to success is to ‘fake it till you make it’ – and that applies just as much in venture as in other industries.

None of this is to say that it isn’t great being a VC, it is. Just not great all the time.

So what should we all do?

  • Investors: take Steve Schlafman’s advice and realise that going and finding an answer from someone else is almost as good as knowing it yourself, and a lot better than guessing. CEOs can usually tell anyway. Believe me.
  • CEOs: instead of asking for opinions or advice ask investors for examples of similar situations to the one you’re facing.


Knowing your customer is key to conversion rate optimisation

By | Startup general interest, Uncategorized | No Comments

Conversion rate optimisation is a hot topic these days. Google Trends identifies it as an official “breakout” term meaning searches for that phrase are up over 5,000% over the last few years.


We’re looking at an arms race here. Most of these people searching will be improving their conversion rates which will enable them to pay more for traffic and still hit their customer acquisition cost targets, and unless you match them you will find it hard to compete.

The chart above comes from an article I was reading this morning with nine principles for conversion rate optimisation. They are principles you can use before you have enough traffic to run meaningful AB tests.

  • Speed – Amazon estimates that for every 100ms increase in page load time there’s a 1% decrease in sales, and more generally page load times over 2-3s leads to massive customer drop off.
  • Singularity/Simplicity – pages with only one goal and no clutter convert much better. A Whirlpool email campaign improved clickthrough by 42% when they reduced the number of calls to action from four to one.
  • Clarity – meet your audience’s expectations with a plain language statement of how the customer benefits from the call to action and clear design
  • Identification – know your audience’s aspirations, lifestyles and opinions and reflect them in your design and copy
  • Attention – sites have eight seconds to grab a user’s attention. Headlines are the most useful tool and should generally be less than 20 words.
  • Desire (a subset of attention) – show the user what’s in it for them. Likeability, social proof, hero images and customer logos are good tools.
  • Fear (a subset of attention) – show the user what they lose by not taking the call to action, particularly effective when the pain of the customer problem has been made clear. Urgency (order in 40mins to get delivery by Wednesday) and scarcity (only 5 left in stock) fall into this category.
  • Trust – people trust sites that look good, show customer service contact details, and have customer testimonials. They make their minds up on trust in 50 milli-seconds.

The eagle eyed amongst you might have noticed there are only eight items on the list, that’s because I combined a couple. There’s much more detail and lots of good examples in the original post, which is well worth a full read.


Six of these eight tips (singularity, clarity, identification, attention, desire and fear) require that you know your customer, yet a remarkable number of founders start building their products and sites without developing that understanding. Your intuition probably isn’t good enough. What’s more remarkable still is that every entrepreneur we talk to knows that understanding their customer is important and most of them have done some superficial research, but only a minority have a deep enough understanding to make the calls that will give them the conversion they need to kickstart their business. That’s one of the reasons many businesses founder just after launch.

The tools to get the understanding are available to everyone so there’s no excuse. All it takes is well some well structured customer interviews.

Short term clarity vs long term upside

By | Startup general interest, Uncategorized | No Comments

We’re all happy in the Forward Partners office this morning because one of our partner companies has just sent an update showing they’ve been growing at 30% per week for the last fourteen weeks. That’s quite some growth and I couldn’t be happier for the team there. It’s well deserved.

But it got me thinking about the trade off between short term clarity and long term upside in seed stage investing. Every business that’s successful raising venture capital has a plan that gets them to a massive exit, or at least that’s the way it should be. That plan will show short term activities that generate value and significant revenues in the out years. The interesting thing is that all the plans I can think of are noticeably stronger at one end or the other. Either there’s a lot of clarity about the short term plan but the upside story is hazy, or it’s clear that if they nail it the upside is huge, but there’s uncertainty about how to achieve success in the first six to twelve months.

To be clear all this is a matter of degree. Good companies that get funded have good answers to the short term and long term questions, they just don’t have excellent answers to both. Not when they’re at the seed stage.

Deep tech investments (think Palantir) tend to be stronger on the long term than the short term, whereas ecommerce and marketplace businesses (think Amazon or ebay) are generally stronger on the short term. People are successful investing on either side of this trade off, but in our seed stage experience companies with relatively more clarity on the short term have better chances of success. They are more likely to generate momentum in the short term which gives them the platform to raise more money so they have time to develop clarity on the big picture. Conversely I’ve seen too many companies with amazing upside stories fail because they didn’t make enough progress after their seed round. Momentum is everything.

All of this is part of the reason Forward Partners focuses on transactional businesses in fashion, healthcare, travel, fintech and so on. We’re invest very early and these types of companies are able to quickly generate momentum and get the proof points they need to raise their next round of finance, as we’re seeing with our partner who’s growing at 30% per week.

Why some big firms struggle to compete with startups

By | Startup general interest, Uncategorized | 2 Comments

Founders and investors in their startups have to choose which markets to attack and by extension which companies to compete with. Most often that’s done by looking for industries where there has been little innovation and/or the founder has a plan that leads to a sustainable competitive advantage. As an example from our portfolio, has built a personalisation algorithm which allows men to “dress better without trying”. They are competing with offline and online fashion brands that haven’t changed the buying experience much beyond putting their inventory online.

It’s interesting to ask why it takes a startup like to exploit this ‘personalisation’ opportunity. Selfridges, Mr Porter or any other established fashion brand could have gone after it at the same time or earlier and with more resources.

A big part of it is that change happens very fast these days and big companies inevitably gravitate to a manageably small number of opportunities that are most likely to move the needle in the short term, taking them towards the obvious and away from ideas that are higher risk/higher return.

However, another part of it is that many big companies aren’t organised to innovate well. Drucker foundation strategist Steve Denning says that focusing on short term share price movements is a big part of the problem:

Why are firms failing to be entrepreneurial and invest in long-term growth? The answer isn’t hard to find. Once a firm embraces maximizing shareholder value and the current stock price as its goal, and lavishly compensates top management to that end, management naturally focuses on exploiting the existing business and bolstering the stock price by increasing dividends and share buybacks, at the expense of innovation and investing in the future.

And focusing on shareholder value requires a culture that’s incompatible with innovation:

Even worse, shareholder value theory has joined forces with hierarchical bureaucracy. Once a firm embraces shareholder value theory, the C-suite has little choice but to deploy command-and-control management. That’s because making money for shareholders and the C-suite is inherently uninspiring to employees. The C-suite must compel employees to obey. With only one in five employees fully engaged in his or her work, and even fewer passionate, innovation and entrepreneurship are even less likely.

Not all big companies are like this of course, but most are. Interestingly, many of the world’s biggest companies today have eschewed shareholder value theory and remain entrepreneurial to the core – Apple, Amazon, Google and Facebook are four good examples.

When assessing whether industries are ripe for disruption looking at the DNA of leading players is informative even before the disruptive idea is formed. Companies focused on shareholder value (including many PE backed businesses) and, more obviously, those which are hierarchical and bureaucratic, make good targets. Those that are entrepreneurial to the core, not so much. Returning to Thread, the large entrepreneurial companies in fashion are mono-brand plays innovating through supply chain management, and the multi-brand retail focused companies that might be competitors are more stuck in the bind that Denning describes.

Three types of acquisition – view from a public company CEO

By | Exits, Uncategorized | 2 Comments

At a conference last week Autodesk CEO Carl Bass said that he thinks about acquisitions in three buckets:

  • companies that are really people who have a technology that Autodesk wants to build up (acquihires)
  • middle-size companies, meaning they have product that they’re selling, maybe even internationally
  • large scale acquisitions

He wants to make lots of acquisitions in the first category, a handful in the second, and only rarely in the third. For context note that Autodesk is a $13bn market cap company, and are thus likely to make fewer large scale acquisitions than much bigger businesses.

This sort of tallies with my experience and what I’ve heard lots of investment bankers say over the years, which is that companies get acquired for up to around $100m without having to show that they are sustainable in the long term. But as deals get bigger analysis of forecasts and the financial impact on the acquirer become much more important.

In terms of Carl Bass’s categorisation, I would say that most acquihires are sub $50m and that middle-sized companies get you up towards the $100m level and maybe a little way beyond.

$10-20m revenues is the threshold for most high growth businesses that gets you into what I would call ‘large scale’ territory of $100m+ exits.

Also very important to note is that the number of acquisitions declines precipitously as the valuation rises.

Finally, a huge caveat, I put these rules and recommendations out there because I think they are a useful guide, but the quality of revenues varies hugely between companies and intellectual property and other elements can also drive valuation. Moreover, much is driven by luck in this industry and individual counter-examples abound..

All this is written primarily with ecommerce, marketplace and software companies in mind.




Challenges for conversational commerce

By | Startup general interest, Uncategorized | One Comment

I’m excited by the prospect of conversational commerce. Accessing the services we want from inside the messaging apps where we hang out is a powerful proposition. No downloads, easier registration, more context, fewer clicks – what’s not to like?

The problem we’re wrestling with is how the vision will be realised.

I wrote before that service discovery will be a problem for startups, and now having read this post from Betaworks investor Matt Hartman I’m mindful of a couple of other issues:

  • The most exciting part of the conversational commerce vision is bots conversing with users on messaging services. At a minimum that will take learning a set of commands and some people are talking about ‘command line interfaces’. The issue is that I can’t see mainstream users learning many commands, let alone any syntax. Matt talks a lot about this and rightly notes that the value of a service deteriorates rapidly with the number of commands a user has to learn. He also points out that services may be able to pull data from the phone which reduces the need for the user to remember commands or answer questions, and that they will be able to use their conversation history to remind themselves of commands they have used in the past. I’m not sure either of these is enough to make services easy enough for users outside of techy early adopter groups. None of the successful services I know ask users to learn anything analogous.
  • The conversational commerce meme is more driven by developers and investors than consumer demand. When suppliers generate hype around a new idea that is designed to make them more money I call it ‘vendor push’, and it often ends with a whimper. Cell broadcast and 3DTV are two examples that spring to mind, but there have been many others, mostly in software and telecoms for some reason.

I’m optimistic by nature, which is one of the reasons I’m excited by conversational commerce, but as an investor you have to look for reasons why things might not work. In this case the growing number of issues is starting to dent my optimism.

It’s tough building a startup in your evenings and weekends

By | Startup general interest, Uncategorized | 3 Comments

Deliveroo founder Will Shu was interviewed by CityAM and gave a piece of advice that is close to my heart:

Unlike many higher flyers turned entrepreneurs, Shu doesn’t advocate seeing your startup as a Saturday project – if you’ve got an idea, you need to go for it. “Guys from finance are taught to hedge themselves – ‘I’ll work at Goldman, do my startup on the weekend or advise a couple of good ones and see if I can get in on that’ – but it’s important to be irrational, actually. Unless you give it 100 per cent, it’s very hard to succeed.

This advice mirrors what we’ve seen over and over again. Some people do manage to really get their startups moving without giving up their day job, but they are definitely the exceptions. Much more common is that founders find they can only develop their idea a small way without diving in full time. That was the case with Luke McCormick, the founder of Edge Retreats who we backed at the beginning of last year, was the case with Ben Furber of The Gifting Co who we backed in September last year, and is the case with the founder of what I hope will be our next investment (we’ve signed terms and are in exclusivity now, so I can’t reveal who it is).

Luke started Edge Retreats over a year before we invested. He did the evenings and weekends thing, and got a friend to code his first site, also in his spare time. He got his first few customers during that period but it wasn’t until he left his job at Secret Escapes that the business took off. It was at the same moment that we invested and our team became his team so there were multiple factors at play, but Luke’s full time commitment was the key that unlocked our investment and therefore everything else. Twelve months on from there he closed his next round of investment and is properly off to the races.

Conversely, we’ve been talking with one founder who has been doing the evenings and weekends thing, used his bonus money to get an agency to build the first version of his site and start transacting, but he won’t leave his job and is struggling to raise funds to keep the business growing. There are lots of other people in this situation who struggle to get their business past first base, mostly because potential investors and employees don’t want to follow founders who aren’t sure enough of their business to commit full time. These companies also have two related problems; progress is slow because the founder is only part time on the project and building great product with outsourced development is very hard.

So Will is right, it’s important to take the leap of faith and give 100%. Otherwise it’s very hard to succeed.

UPDATE: A couple of you have pointed out that it can work to do the research and analysis piece of starting a company in evenings and weekends, including building prototypes and first product, and that it’s only when you start ramping up that it’s important to fully commit. I agree and wasn’t trying to say anything different. That’s what Luke did.