There’s an interesting post up on Venturebeat this morning suggesting that investors can find all they need to know about a startup by observing a product meeting. Good investing is a little bit more complicated than that, looking at market size and competition is also important, for example, but there are some great points made.
Rather than think of them as due diligence points I think it’s better to understand them as cultural guides, and in that spirit I’ve turned them into three recommendations for how the team should operate:
Build a culture where the team comes agreement and respect that agreement. Tension, one-upmanship, brinksmanship, differences in vision or strategy, holding grudges and revisiting decisions are cancerous in a startup and need ironing out or eliminating.
Founders and CEOs should be open to discussing any and all aspects of their business. Decisions have to be made and respected (as per 1.) but all options should be on the table at the start. Willingness to discuss different ideas shows strength and leads to better decision making.
The CEO must be respected as the sole leader, otherwise the strategy and vision are likely to veer off course from one day to another, at least in elements of detail. This needs special attention when there are multiple founders.
These things are easily said, but difficult in practice. They require a high level of self-awareness and a willingness to enter into difficult conversations addressing power, status, and ultimately security within the company. Great founders embrace difficult challenges.
Recruiting great staff is the biggest challenge for many startups. This is the central conclusion of the Scale Up Report and we see it every day in our own operations and at our partners. Training and education are a big part of the solution, but skilled migrants are another. Hence I was encouraged to see the UK is close to top of the chart when it comes to share of foreign born population with tertiary degrees.
Digging into this a bit more (largely by reading the FT article containing the graph above) it transpires that despite all the furore from anti-immigration parties migration has fallen since the 2008 crash by to an average of 3.6m per year – a drop of around 1m. Moreover, the percentage of people who are migrants has held steady since 1960 at around 3% of the global population – now about 232m people. Surprisingly, the increase in migration is therefore best understood as a result of population growth rather than globalisation.
Also interesting in the FT article is the chart below showing that for most countries migrants are net economic contributors.
Most migrants are in search of better economic opportunity. Hence they head for countries that are doing well. That’s why migration has been rising in the UK recently whilst on average worldwide it has been falling. Spain and Greece, by contrast, have seen increases in emigration. These tides will turn of their own accord.
I’m writing about this because here in the UK we should be proud that well educated people want to come to our country and recognise the critical role they play at startups and in the economy more widely. The current anti-immigrant and anti-Europe rhetoric is both wrong and damaging.
I just read Ev Williams’ 10 Rules for Startups and I love No. 7 Be Greedy. I changed it to ‘Get Income’ in the title because that’s what he really means. Here’s the rule, quoted in full.
#7: Be Greedy
It’s always good to have options. One of the best ways to do that is to have income. While it’s true that traffic is now again actually worth something, the give-everything-away-and-make-it-up-on-volume strategy stamps an expiration date on your company’s ass. In other words, design something to charge for into your product and start taking money within 6 months (and do it with PayPal). Done right, charging money can actually accelerate growth, not impede it, because then you have something to fuel marketing costs with. More importantly, having money coming in the door puts you in a much more powerful position when it comes to your next round of funding or acquisition talks. In fact, consider whether you need to have a free version at all. The TypePad approach—taking the high-end position in the market—makes for a great business model in the right market. Less support. Less scalability concerns. Less abuse. And much higher margins.
I like this because it’s brave.
And because it aligns with our thinking here at Forward Partners.
It’s brave because it takes the position that scale isn’t always the most important thing. That runs counter to the ‘go big or go home’ meme that runs through much of the startup world, and the idea that monetising too early can be detrimental to growth.
To my mind there are some companies where it makes sense to shoot for volume first and monetise later, with social networks being perhaps the best known example, but there are many more where selling something early makes more sense.
Within the ecommerce ecosystem where we focus getting to income early is nearly always the right strategy. In addition to the benefits of giving you options and putting you in a stronger position re funding and acquisition talks, ringing the cash register validates demand for your product and puts you in constant dialogue with your customers (don’t forget to listen). Finally, once you have revenues you can start focusing on growth, and as Paul Graham has noted growth is a habit and it doesn’t take many percentage points week on week or even month on month before a business becomes big.
Amazon is committed to driving down costs and providing better value for its customers. They’ve also been in trouble for paying low wages in their fulfilment centres. Hence it’s not surprising that they are investing heavily in warehouse automation systems. Back in 2012 they acquired robotics company Kiva and now they have announced their latest generation warehouse which uses “robotics, vision systems, and other high-end tech”.
The interesting thing for me is what this means for jobs. There have been lots of predictions recently that up to 40% of employment is at risk from automation and artificial intelligence such as Amazon is deploying. As you can see from the picture above the new warehouses do still have human workers, so we aren’t looking at a 100% automation scenario. However, if we compare the growth in Amazon’s employees with their revenue growth we can get a picture of the extent to which these new technologies are displacing human labour.
Amazon said recently that it will hire 80,000 additional workers to fulfil customers orders this holiday season. That’s a 14% increase on last year. Revenues meanwhile are growing at 21% so it follows that without the robots there would have been a requirement for more additional workers. A 21% increase in additional workers would have taken the total to around 85,000, making it a reasonable first level assumption that the robots have taken 5,000 jobs.
Moreover, it would be interesting to see the job numbers broken down by fulfilment centre. My guess is that the newer centres are more tech enabled than the older ones, and in those new ones a greater amount of human labour is being replaced by robots.
And is this a bad thing?
In the long run, no, so long as we can feed and house everybody it is a good thing that robots are liberating us from menial jobs. In the short term it’s also good, so long as unemployment stays low. Additionally, whether it’s a good thing or a bad thing is slightly irrelevant because it’s happening and it would be a huge mistake to try and stop it. That would mean forcing companies to use less efficient means of production undermining which would undermine competitiveness and send business and jobs to jurisdictions that weren’t restricting the use of robots.
It’s been said that we are always sceptical about things invented after we are 35. That contrasts with things invented when we are 15-35 which we embrace and sometimes make a career out of, and things invented before we are 15 which are so normal so as to be unremarkable. So the internet feels dangerous to my parents, was a career opportunity for me, and is so normal for my kids that their first words might have been “Ask Google”.
The result of this truism is that people are starting feeling isolated, out of date and old before their time. A number of my 41 year old school and university friends have side-stepped social media altogether and it is likely they will now never feel at home in online public forums. Most of them will live for another forty years, missing out. Moreover, as the pace of change comes faster and faster more and more of the best things in life will have been invented in the last ten or twenty years. If this goes on these ‘best things’ will be lost to the older half of the population who will end up having almost nothing to talk about with their younger counterparts.
Part of the reason over 35s don’t adopt new technologies is that they romanticise their pasts. I’m writing this today having just read a brilliant essay by Andrew O’Hagan titled In defense of technology.
He begins by lampooning himself in an imaginary conversation with his daughter which illustrates the point that new technologies have made our lives better:
My daughter rolls her eyes whenever I begin my stories of woe. “Here he goes,” she says. “Tell the one about how you used to walk to school alone. And the other one, about how you had to remember people’s phone numbers! And: Watch this. Dad, tell the one about how you used to swim outside, like in a pond or something. With frogs in it!”
“You know, darling. It wasn’t so long ago. And it wasn’t such a hardship either. There was actually something quite pleasant about, say, getting lost as you walked in a city, without immediately resorting to Google Maps.”
Then he goes on to make the point that believing in a better future is also to admit the possibility that the past wasn’t that great – and with that comes much mental unpleasantness. It is your past and my past that we are talking about, the pasts that we created. If those pasts weren’t great then then maybe we weren’t great either. Much easier to romanticise the past than to allow that thought to roam around our minds. And to romanticise the past we must discount the future.
New technologies are hard to adopt. Social media creates all sorts of new ways to make embarrassing social gaffs and silly mistakes as you climb the learning curve, a learning curve that you may never conquer. Couple that with an over-rosy recollection of the good old days and it’s easy to see why people get sceptical and refuse to adopt. Then, once they are on the outside, the scepticism hardens.
Not a good thing.
I don’t have any answers beyond a recommendation to stay open minded and a personal commitment to staying objective about the pros and cons of changes as they emerge (and there are always pros AND cons). I am genuinely worried for some of my contemporaries though, as without change this problem is set to get worse, not better.
If you’ve got this far do go and read O’Hagan’s essay. It is beautifully written and laugh out loud funny.
One of our core beliefs is that at the heart of every great business there’s a great entrepreneur. It says so on our homepage and it underpins our strategy at Forward Partners – we have set ourselves up to be attractive to the best entrepreneurs. That manifests itself throughout our business. We try to run quick and transparent investment processes, we try hard to add value through due diligence, our terms are fair and simple (we will release them soon as standard docs for anybody to use), and, most importantly, in addition to money we bring heaps of ingenuity and ecommerce startup experience to our partners. We want smart people with smart ideas to choose Forward Partners because drawing on our resources will give them the best chance of success.
I’m writing this now because I’ve just read a great article on Wired about Startup Factories. First up, I think factories is a bad word here. Startups don’t come off production lines, they are hand crafted works of art. Moreover, they are fashioned from within, not shaped by the building in which they are housed.
With that off my chest I will say that the article does a good job of explaining the different models out there, and to be fair it does say at the end that ‘You can’t manufacture magic’. It breaks startup factories down into two categories:
Vehicles for parallel entrepreneurship – e.g. Max Levchin’s HVF – the idea here is to allow entrepreneurs to work on more than one company at a time
Studios which create, invest in and acquire companies, usually round a theme – e.g. Science and Betaworks – the idea here is to create a constant stream of companies
The biggest difference between the two is the number of companies they work with, with studios working on many more.
As I’ve said it’s a useful article for understanding the space, but I think the narrative overplays the role of process and underplays the importance of the people who found and run the businesses. The implication is that with the right meta structure it doesn’t matter that much who is running the underlying companies, or at least it’s easy to find people who are good enough. I’m just not sure that’s true. If we are right that at the heart of every great business there’s a great entrepreneur then if you want to be involved with multiple great startups it makes sense to make sure they have great entrepreneurs from day one.
It’s been troubling me recently that at first glance the trend towards mobile and the trend within mobile towards apps mitigates against startup ecommerce companies. Amazon is one of the first apps I download whenever I change phone, but it’s the only ecommerce app that I have, and that’s because Amazon is the only place I shop frequently enough to be bothered to download an app. I’m not the best example customer because I don’t shop much, but generalising the problem I think there aren’t many categories of ecommerce where the interaction is frequent enough to merit an app. Grocery shopping is a weekly event for most people and that merits an app, and shopping for shoes is a monthly endeavour for many people, hopefully frequent enough for our portfolio company Stylect to prosper, but most shopping isn’t like that.
So it was interesting to read a great post from Intercom.io this morning about the End of apps as we know them. It’s one of the bests posts I’ve read in a while, largely because I think they may well have mapped out how mobile services will be designed in the future. The quick summary is that they believe engagement and interaction will shift from within apps to within interactive cards in a notification or ‘Google Now like’ stream. It’s a long post, but if you are involved with apps or mobile design you should definitely go read it (I linked to it twice to make it easy for you).
The idea that we will stop opening apps and live within a stream of cards requires quite a headshift, but it makes a lot of sense to me. Having pages of apps is highly inefficient and reminds me of browsing the web in Yahoo or AOL days – there has to be something better and a highly personalised and contextual stream of interactive cards sounds like a good answer.
Ecommerce discovery would then be through the cards of other services. As an example, maybe you find out about Stylect from within a Twitter card and then agree to receive regular cards direct from Stylect – that could be by downloading an app which sits in the background barely seen. Search will still play a role, but maybe a greater percentage of stuff we want is finding us rather than the other way around.
Getting discovered then requires getting a presence in cards, and to me that feels like social media advertising rather than search advertising. Perhaps unsurprisingly this muted shift from web to cards might be bad news for Google and good news for Facebook, Twitter, and whoever’s next.
Finally, for all this to work the personalisation and contextual targeting needs to be great. The cards need to be good enough that we want to read them. That’s different from some of the irritating notifications I get today.
The pitch deck guide below is one of the best I’ve seen. Thanks to my friend @alexhoye for sharing.
It’s a great guideline for content – both everything that should be in a deck and a slide by slide guide – that’s hugely valuable, but the other thing that’s important is to sell a story. One simple and highly recommended way to do that is to cultivate a sense of inevitability, another is to make it exciting by following standard story telling arcs – e.g. crisis, struggle, resolution or the hero’s journey. These latter techniques reside more in the voice over than the pitch, but they should be reflected in the deck.
Slide 8 shows an overview of what should be in deck. If you only have 30s go straight there.
It’s a pretty common for futurists to lament that public perceptions of the future are generally dystopian. Hollywood often gets much of the blame for providing us with Terminator, The Matrix and many other nightmare visions of the future, but our evolutionary history is perhaps more responsible. Simply put, we are built to be pessimistic. The best way to stay safe on the African savannah was to be super sensitive to anything that might represent a threat, so our brains evolved to be good at predicting danger to the extent that we are drawn to bad news and scary movies. Maybe Hollywood is just giving us what we want…
Either way, it isn’t helpful to society for us all to have a negative perception of the future. The next generation of scientists and entrepreneurs need to be inspired by something, just as many of the current generation were inspired by Star Trek which, particularly in the Next Generation Series’, presents a very positive view of where we might be headed.
I’m writing about this today because Kevin Kelly has done something about this problem. For those who don’t know Kelly or his work I would describe him as ‘the futurist’s futurist’. He doesn’t have the public profile of a Ray Kurzweil or Chris Anderson, but he has done an amazing amount of great thinking and writing about technology and where we are headed, for which he is hugely respected, particularly by those with an interest in the field. And he was the founding editor of Wired Magazine.
The thing Kelly did was send out a request to the internets asking for “100 word descriptions of a plausible future 100 years from now that he would like to live in”. He said he would give $100 to the best one he received.
First off, notice the way he constructed the request – the key words are “plausible”, “100 years” and “would like to live in”. The answers needed to be realistic, looking an awfully long way out (take a second to picture the world as it was in 1914), and positive. As he notes, wrapping that into 100 words is tough.
He wrote up the results here. In summary, he received 23 replies which contained three broad themes:
we will have abundant clean energy from solar or fusion
the physical and digital will be further merged into a ‘holistic internet of everything’
artificial intelligence and robotics will have transformed our economy into one of plentitude and creative work/play
Kelly lists all the replies in the summary, but cited this one from John Hanacek as his favourite:
Physical and virtual realities are meshed together with no distinction. Ideas are given sovereignty with their creators rewarded fairly and directly. The world itself does the drudgery of assembling itself across all sectors that information science has been applied, which is limited only by the quantum information underpinnings of the universe. Humans have taken up their primary purpose of creativity and now work with other intelligences of any kind to ask questions and achieve answers, with an eye toward more questions. “Human” has taken on flourishing new meanings. Imagination has been unleashed upon the world in a literal sense.
And this was what Kelly came up with himself:
2121: Population 4 billion; 85% urban.Cities boom, empty suburbs struggle. Agriculture acreage reduced with GMOs. Nature monitored quantitatively; green lands expand with genetic engineering. Solar, fusion, mini nukes generate cheap power. Climate change adapted. Creative middle class the new majority, globally mobile. Computer pilots make travel common internationally. Eco and heritage tourism primary income for poorest. Robots takeover remaining blue-collar jobs in Asia and Africa. Internet of everything physical continued. Universal library, and universal lifelong education for free. All humans always on the net anywhere. Brain interface, wearables. Co-veillent tracking ubiquitous. Quantified self for personalized medicine. Techno-literacy (managing) skills mandatory.
These are both inspiring visions of the future. For me the best bit is that cheap energy coupled with artificial intelligence and robotics will have freed us to focus on creative work. Also important is that we have cracked the science behind food production sufficiently well to feed the world, which I expect to still have a much greater population than 4bn (we are at 7bn today).
There’s plenty there for young scientists and entrepreneurs to aim at.
Check out this brilliant video from the TGIF restaurant in Manchester where they hung mistletoe from a drone to get their customers kissing. The ‘Kisscam’ at 0.55 is my favourite moment. That’s quite put me in the mood for Christmas, and it’s not even December yet