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Improving engagement with ecommerce apps

Commerce is moving mobile and mobile is moving towards apps. M-commerce apps are, therefore, the way forward. We have investments in a couple (Top10 for hotels and Stylect for shoes) and I expect we will do more going forward. We are taking a serious look at another one right now.

However, maintaining user engagement can be challenging in m-commerce. Becoming part of their users’ daily routine, one of their ‘home screen apps’, if you will, is difficult because the customers of most m-commerce apps don’t purchase that often. Top10 and Stylect have lots of engaged users, but nobody is booking hotels or buying shoes every day.

Notifications are one of the most obvious tools for improving engagement, but they need to be used carefully. New research from Kahuna published on Andrew Chen’s blog found that only 12% of users engage with “ecommerce and retail” notifications, implying that up to 88% of users find them annoying. “Utility and financial services” notifications top the chart with 40% engagement, perhaps reflecting their daily usage patterns.

The trick for m-commerce apps is to use notifications sparingly and doing the work to make sure they are timely and relevant to the user. Unfortunately that means work – there’s no quick and easy way to use notifications to drive a sustained improvement in engagement.

The Kahuna research makes three recommendations:

Find the appropriate cadence: Users may not want to hear about shoes every day, but once a week might be the sweet spot. Look at the stats and see what works.

Make it personal: Don’t send the same notifications to every user. It’s much better to send users personalised sale notifications for shoes on their wish lists than to send everybody a 10% off coupon for a retailer who wants to do a blanket promotion.

Get the timing right: users engage more with notifications at times when they use the app, so figure out when that is and send notifications then. Urgent notifications are different. If a pair of shoes from my wishlist has gone on sale then I should know about it now, before they sell out. Don’t make the mistake of waking people up though (see below).

The best practice book for m-commerce is still being written. A small number of companies are making it work, e.g. Amazon and Uber, but e-tailers with less frequent purchase patterns are still figuring it out. I’m excited for Forward Partners to watch and help them do that.

Below this are some examples of well and badly executed notifications along with customer responses on social media. They are from Andrew Chen’s post. If you are involved with m-commerce you should go read it…


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33m users to zero: Lessons from the Branchout flameout

Social recruitment business Branchout raised $49m and grew to 33m users. Today Techrunch is reporting that they are in a firesale situation.

I think there are two lessons here:

  1. Growth without engagement is fragile. Branchout did an amazing job of attracting users to the service, but they used spammy tactics and too few of those users became active. Rapid growth without a user story that resonates widely spells danger for investors, particularly when acquisition methods are on the edge.
  2. Platform dependency is a killer. Branchout collapsed when Facebook banned the Wall Post method they were using and many other companies which depended on a single platform have suffered the same fate (Google’s algorithm changes have claimed many casualties). Caveat: dependency can be ok when there is a clear alignment of interests between the platform and the startup. In this case there was no alignment. Branchout was hurting the Facebook experience rather than helping it.

Of these two lessons avoiding platform dependency is the easier for investors to observe. Growth’s intoxicating promise is that the business can be MUCH MUCH bigger tomorrow and that makes it easy to suspend disbelief when areas of the business aren’t working (yet…). Fortune generally favours the brave. In venture capital that usually means those that make risky investments, but in cases like this it means having the courage to stand aside.

A cambrian explosion in AI – but how will new services surface?

Dag Kittlaus, founder of Siri, wrote on Techcrunch yesterday to predict that A Cambrian explosion in AI is coming. He notes that there has been “massive uptake of assistant services spurred by Apple’s Siri, Google’s Now and Microsoft’s Cortana” but says these services are still in their infancy. The missing piece is an ecosystem of services that work with these assistants. That would enable the Holy Grail of an assistant that intelligently finds and uses whatever apps or services we need for a given task – just like in the movie Her from earlier this year.

Need a babysitter for tomorrow night in a new location? The assistant should know the age of your kids, find a service that matches your price profile and then make a reservation, maybe asking you to confirm first.

I have just been looking for a babysitting service in a new location, and it wasn’t easy, so that that sounds very exciting, and I very much look forward to it becoming a reality.

However, it’s not clear to me how the discovery process will work. Healthy ecosystems have some way for quality to float to the top. Examples include ranking or voting systems as we see in Product Hunt and Stack Overflow, algorithms that incorporate user signals e.g. Page Rank, and manual system that takes user feedback as a core input e.g. the app stores.

The whole point of assistant services is that they choose services for us. In the babysitting example above I don’t want the assistant to come back with three options and make me choose, I want one option that I’m happy with. Before I trust the assistant I might want to hear about second and third options to make sure I’m getting the best, but I imagine I would stop bothering with that pretty quickly.

However, if assistant systems make the choice for us then user signals are limited to feedback given on the service. New services, by definition have little if any feedback, making it unlikely that assistants will recommend them and that innovation would suffer. That’s one nightmare scenario. The other is that the assistants only recommend services which have a relationship with whoever wrote the assistant – i.e. Siri only recommends services that have built a relationship with Apple.

In my view app store owners already have too much influence over which apps we use, and that runs counter to the original promise of an open internet. My fear is that assistants, wonderful though they will be, will worsen this problem.

More on UK ecommerce penetration

One of the reasons we like backing ecommerce companies is that here in the UK we spend more online that all other major countries bar Sweden and we punch above our weight when it comes to ecommerce leaders.

Here’s some of the supporting data:

OnlineRetailing2 OnlineRetailing1

The importance of reading

I’ve just come from a presentation Seedcamp from Richard Reed, one of the founders of Innocent Drinks. For those that don’t know Innocent is a 15 year old startup that makes smoothies and veggie pots. They are now 90% owned by Coca Cola and the company has been valued at ‘over $0.5bn’.

Richard gave us his ten top tips for being a successful entrepreneur. They were all good, but I’m going to highlight #8 “Read, listen, ask and steal”. It’s perhaps less important than some of the others (e.g. #1 Keep the main thing the main thing) but it is more often overlooked, particularly the reading part. There’s a lot of stuff written for entrepreneurs these days advising them to seek mentors and listen to advice from experts, but we could all definitely do more of that. Stealing ideas from other companies is also a great idea – although it’s not really stealing as they still have the idea afterwards. You haven’t taken it from them.

But reading is something that many entrepreneurs struggle to find the time for and doesn’t get mentioned much. That’s kind of strange to me because reading is actually easier to do than getting out and meeting people and is at least as powerful (although not a substitute). I’m talking about reading blogs and business books which help to understand and dissect the world. Great examples abound, including Erik Reis’ Lean Startup and our own favourite Rob Fitzpatrick’s The Mom Test. These books help you look at aspects of your business in a new way and find creative solutions to move you forward.

Isaac Newton famously said “If I have seen further it is by standing on the shoulders of giants”. The best way to do that is by reading.

Trend in mobile – towards big screen phones

Mobile analytics firm Flurry released some interesting data yesterday showing a clear trend towards bigger screen phones. They define phablets as devices with 5-7″ screens, and that includes devices like the Nexus 5 (that I own) Samsung Galaxy S4 and now the iPhone 6 Plus. Tablets are flat to down.

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These bigger screen devices are much easier to use – e.g. for reading, email and shopping – and that comes through in the app usage stats below. Note there are no iPhones in the phablet group.

app_sessions_blog_v1

 

Andreessen Horowitz and the disruption of Silicon Valley

The Andreessen-Horowitz (A16Z) story is little short of amazing. In the traditionally slow moving world of venture capital they have gone from standing start to raising $4bn across three funds in 5 years – Summit Partners, an older highly successful later stage VC took 15 years to achieve the same feat. In addition to raising money A16Z have done an awesome job of building their brand and investing in great companies. Their high value add model is one of the inspirations for Forward Partners so when I saw that former Summit Partners VC  Peter Sims had written an analysis of how they are disrupting Silicon Valley I clicked straight through.

I will shortly get to the reasons Peter gives for their success. But in case you still need convincing that they are onto something here’s a quote from his piece which underlines the success they are enjoying:

In a very short time, A.H. has become one of the hottest Silicon Valley venture capital firms with investments in Facebook, Twitter, Pinterest, Airbnb, Box, Foursquare, and Skype, a deal that earned A.H. investors a 4x return on the firm’s $50 million investment in 2009.

Picking the bones out of Peter’s piece I think A16Zs success comes down to three strategies and their positioning as entrepreneur friendly. These are the strategies:

  1. Content marketing – post the blogging revolution an increasing number of VCs have marketed themselves through content (including me), but A16Z have taken VC content marketing to a new level. If you take even a passing interest in the startup ecosystem you will have noticed that high quality content from the firm is everywhere. I’m going to give three examples, firstly, it seems that everybody has read The Hard Thing About Hard Things, Ben Horowitz’s excellent book about being an entrepreneur, secondly, Marc Andreessen’s ownership of futurism generally, most clearly seen in his oft-repeated prediction that “Software will eat the world”, and finally Andreessen’s prolific tweet storms (he has averaged 50-200 Tweets per day this year).
  2. They work their network with technology – all good VCs have good networks and introduce their portfolio companies to potential customers, investors and employees, but A16Z have taken networking to a new level. They have built a CRM software which tracks the people which can help their portfolio companies and who at A16Z knows them and they employ people to work the system on behalf of their portfolio companies. Peter tells the story of when he was at a GE hosted conference talking to the CEO of A16Z backed Mixpanel when two A16Z employees came up to make sure he was meeting the people from GE that he wanted to meet.
  3. They work incredibly hard to support their portfolio – this is as much a philosophy as a strategy – there are more people at A16Z whose job it is to help the portfolio than are making investments. This very unlike traditional VC funds where the job of the Principals and Associates is to help the Partners get deals done and everybody kowtows to the investment hierarchy. The end result is that A16Z backed companies have an advantage in the marketplace which is a huge draw for entrepreneurs.

The ‘entrepreneur friendly’ positioning is the icing on the cake. Just about every VC these days positions themselves as entrepreneur friendly, but Andreessen carries it off better than most. That’s in part because Andreessen and Horowitz are both former entrepreneurs, but more importantly it’s because they show it in what they do every day. That starts with a big non-cash investment in helping their portfolio succeed (point 3 in the strategy list above) but extends to their philosophy on supporting founders and the way they deal with entrepreneurs day to day (e.g. A16Z employees are fined if they are late to meetings with entrepreneurs – Ben Horowitz describes how that works in the The Hard Thing About Hard Things).

These three strategies are hard for the incumbents to copy effectively.  It’s nigh on impossible for a senior VC partner to go from doing little content marketing to being as effective as Andreessen and Horowitz, building an effective CRM software requires partners’ to open up their networks in ways they have traditionally resisted, and building a big team to support the portfolio requires a radical transformation of VC economics supported by the VCs themselves and the LPs who invest in their funds. It’s this hard to copy factor which makes A16Z disruptive.

Supercomputer AIs are progressing science faster than scientists

From New Scientist a week or so back (apologies for the long quote, but it’s worth it):

IN MAY last year, a supercomputer in San Jose, California, read 100,000 research papers in 2 hours. It found completely new biology hidden in the data. Called KnIT, the computer is one of a handful of systems pushing back the frontiers of knowledge without human help.

KnIT didn’t read the papers like a scientist – that would have taken a lifetime. Instead, it scanned for information on a protein called p53, and a class of enzymes that can interact with it, called kinases. Also known as “the guardian of the genome”, p53 suppresses tumours in humans. KnIT trawled the literature searching for links that imply undiscovered p53 kinases, which could provide routes to new cancer drugs.

Having analysed papers up until 2003, KnIT identified seven of the nine kinases discovered over the subsequent 10 years. More importantly, it also found what appeared to be two p53 kinases unknown to science. Initial lab tests confirmed the findings, although the team wants to repeat the experiment to be sure.

First off, it’s great that KnIT is contributing to cancer research like this. Great for everybody.

Perhaps equally interesting though, is what this indicates about the future. The key to KnIT’s success is that computers can ingest information much faster than humans, and as the body of published research grows over time that’s becoming an increasingly important advantage. KnIT operates in a niche area of cancer research, but fields of research like nano-computing, quantum-computing and even artificial inteligence itself are, I think, similar enough that we can expect to see similar developments. Then, once computers become better at designing computers than humans the rate of improvement will explode.

This unlocks a whole range of ethical and political issues, but like it or not, it’s coming. KnIT is the tip of the iceberg.

A brief history of founders and co-founders

At some point in the last few years it became conventional wisdom that co-founding teams are better, so much so in fact that when Paul Graham stepped down as president of YC recently his number one tip to entrepreneurs was ‘get a co-founder‘. Similarly Dave McClure talks about the ideal founding team comprising a ‘a hacker, a hustler and a designer‘.

Today I got to thinking why that might be, and I think it is down to the fact that startups are now hugely capital efficient.

To be clear I’m a big believer in the power of teams, but we’ve had some success here backing solo-founders and then helping them find a co-founder shortly after that. Having had some success we are looking to rinse and repeat, and that has led us to think about the whole co-founder question in more detail.

It seems to me that having a technical co-founder is critical now for startups because they have to release product and prove traction before they can raise enough money to hire a team. Having a technical co-founder is the most reliable way to quickly and cheaply build and iterate a product. The alternatives open to most entrepreneurs are unattractive – hiring a full time developer is expensive and requires taking on employment commitments and outsourcing to an agency typically doesn’t allow for fast iterations.

Back in the days when companies would raise £2-5m before releasing a product they would hire a team of developers and didn’t face these problems.

I think that’s why having co-founders has become more important recently.

Accelerators have sprung to prominence since Y C was founded in 2005 because for the first time companies can do something meaningful with the small amounts of money they invest. The whole point of accelerators is that companies get advice and iterate multiple times within a three month programme. However, that simply isn’t possible without a developer on the founding team. That’s why Paul Graham and Dave McClure have observed that having a co-founder is so important and why accelerators around the world have contributed strongly to the co-founder meme.

I’ve written about this before, so apologies for repeating myself, but Forward Partners offers another way. Entrepreneurs we back pair with our developers to quickly launch product and iterate cheaply, and then find a co-founder.

Mark Suster wrote a good post on this topic back in 2011. He talks about the importance of having a partner in your business, but cautions against the risks of equal partnerships. In his view it’s better to start a company and then look for a partner. Lots of great people will join a startup for 20-30% equity, or even less.

The ALS Ice Bucket Challenge meme – nothing to peak in 16 days

ALSMeme

Techcrunch has a good write up of how the ALS Ice Bucket Challenge meme started in Boston and spread around the globe. Speed with which it moved is incredible. As you can see from the chart above hits on the ALS.org website went from nothing to their 2.5m peak in sixteen days. The internet is making our world small. More controversially, I think it is also reducing cultural differences, at least in some quarters.