Nic Brisbourne's view from London on technology and startups

UK second only to US amongst large countries for ‘Digital Evolution’

By | Startup general interest | No Comments

W150210_CHAKRAVORTI_COUNTRIESBUILDINGDIGITAL1

The chart is from a Fletcher School study of how different countries are succeeding in embracing the digital revolution. You can see that the UK is doing very well on the Y-axis, showing that we are very “digitally evolved” and that we are doing OK in terms of progress – neither falling back or accelerating.

It’s easier for smaller countries to substantially re-orient themselves, as Singapore in particular has done, so the real point of comparison here are the other large developed countries: the USA, Germany, France, Italy, Spain and Japan. Our position amongst that group is strong, particularly given we’re part way through a period of lower state investment generally, but the message to the new Cameron government should be that there’s no room for complacency.

The measure of digital evolution is derived from four broad drivers:

  • supply-side factors (including access, fulfillment, and transactions infrastructure);
  • demand-side factors(including consumer behaviors and trends, financial and Internet and social media savviness);
  • innovations (including the entrepreneurial, technological and funding ecosystems, presence and extent of disruptive forces and the presence of a start-up culture and mindset); and
  • institutions (including government effectiveness and its role in business, laws and regulations and promoting the digital ecosystem)

Together these are the necessary pre-conditions for a fertile startup community. If any one is missing life gets much tougher for entrepreneurs. Policy makers wanting to improve our digital economy and attract the best entrepreneurs from around the world to these shores should target the detail behind each of the four drivers.

There’s more detail in the full report here. Much more…

Lean startup methodology is brilliant but confusing

By | Forward Partners, Startup general interest, Uncategorized | 21 Comments

I just read two articles which beautifully illustrate the brilliance and challenges with the Lean Startup methodology.

First up was the story of Blue River Technology an agriculture robotics company whose first product is called LettuceBot. They were part of Steve Blanks Launchpad class at Stanford and followed lean principles to great effect. Their first idea was an autonomous lawn mower. In conversations with customers they discovered that was a bad idea, but also learned that farmers have a problem with weeding fields of carrots. Through more customer development they found that thinning lettuces is a bigger problem, and LettuceBot was born. They then sold their first LettuceBots off Powerpoint and had huge validation before they started building product. Brilliant.

Second up was Dan Kaplan’s critique of Peter Thiel’s critique of lean. I’m with Kaplan in thinking that Thiel is wrong in his critique of lean, but the interesting thing is that the problem stems from Thiel’s understanding, not from any fundamental issues with lean:

  • Misunderstanding 1: Lean is only good for making small changes to things that already exist
  • Misunderstanding 2: Customer development is nothing more than listening to what customers say they want
  • Misunderstanding 3: Identifying and testing hypotheses isn’t a planned process
  • Misunderstanding 4: MVPs are half baked products

Those are Thiel’s confusions as described by Kaplan. Then as a bonus Kaplan also points out that most people misunderstand the word pivot, mistakenly defining a pivot as when a company switches from one product or business idea to another (e.g. when Stuart Buttefield switched from the failed flash game Glitch to Slack) whereas Steve Blank defines a pivot as a smaller iteration of a business model or idea (e.g. a change of channel or customer segment).

To be fair Thiel’s critique of lean is bound up in a wider critique of incrementalism and a desire to see more step change thinking, but these points illustrate that lean methodologies are hard to understand and implement. It’s interesting to note that Steve Blank was in the classroom with Blue River Technology to help them with any misunderstandings and to stay disciplined. Most entrepreneurs don’t have direct access to Blank, and maybe that’s why they struggle. At one point Kaplan says:

if more entrepreneurs understood it [Lean] and applied it rigorously then fewer startups would fail

I agree with this. The high failure rate for startups is an unnecessary source of misery and loss. The opportunity now is to do something about it by helping entrepreneurs understand and apply lean. That means making it simpler and more practical.

You will see more on this subject from Forward Partners over the coming weeks.

Five practical tips for happiness

By | Startup general interest | 2 Comments
  1. Buy experiences instead of things – a US study found that 54% of people reported greater happiness from an experiential purchase vs 37% from a material purchase
  2. Help others instead of yourself – a study of 600 Canadian and Ugandan students found that people spending on others reported more happiness than people spending on themselves
  3. Buy many small pleasures rather than a few big ones – overall happiness is more strongly associated with the frequency of feeling happy than the intensity (Diener, Sandvik, & Pavot, 1991)
  4. Pay now and consume later – anticipation is a source of happiness (whilst consuming now and paying later is like a sugar rush…)
  5. Read product reviews – knowing what made other people happy and why improves purchase decisions

These points are taken from a 2011 paper in the Journal of Human Psychology, which has a controversial subtitle “If money doesn’t make you happy you probably aren’t spending it right”. As well as the above tips they make the point that whilst money may not buy you love, most of the things that contribute to happiness are available for purchase:

Wealthy people don’t just have better toys; they have better nutrition and better medical care, more free time and more meaningful labor—more of just about every ingredient in the recipe for a happy life

Despite that, wealthy people don’t report themselves as being any happier than the less wealthy. The authors believe that’s because people are bad at predicting what will make them happy and spend money on the wrong things. The explanation for this poor forecasting is that most people don’t know the basic scientific facts about happiness.

That sounds like a solvable problem.

Interesting stuff.

Posit: A startup’s first goal shouldn’t be to search for a repeatable business model

By | Forward Partners, Startup general interest | 3 Comments

Steve Blank gave us this now famous definition of a startup:

A startup is a temporary organization designed to search for a repeatable and scalable business model

At Forward Partners we are in full agreement with this definition (although we spell organisation with an s…) but have found that it is a bit confusing for startups in their first weeks and months.

I’m writing this post today having just read a Venturebeat post by Blank, which talks to one of the points of confusion. He titled it ‘Build, measure, learn’ doesn’t mean throwing things against the wall to see if they stick.

If you read the post above or Blank’s books (The Startup Owner’s Manual or The Four Steps to the Epiphany) he does write about what entrepreneurs should do at the very beginning of their startups. He advises to start by generating hypotheses using Ostevald’s Business Model Canvas and then build the minimum amount of product necessary to test the most important assumptions.

We have gone a step further.

Like Blank we advise entrepreneurs to be explicit about their assumptions and their hypotheses and we use the Business Model Canvas as a tool (part of our idea stage due diligence is to thoroughly analyse the Business Model Canvas in a workshop format), but then we insert a new stage.

We think the best next step is to find a point of emotional connection with customers.

The beauty of this step is that it’s simple to understand and easily actionable via a good customer development process. Lean aficionados will know that ‘Customer development’ is a Steve Blank concept, so credit where credit is due. What we’re doing differently is making it more prominent and defining the objective as finding that point of emotional connection.

The reason for the difference is that we are laser focused on early stage ecommerce companies and that’s where our thinking is targeted and where emotional resonance and the authentic relationships that follow are key to building a great brand and a large, sustainable business. Blank is writing for all sectors and across more stages, and his advice is necessarily more general.

Once a point of emotional connection is found then it’s time to jump onto the build-measure-learn loop and begin the search for a repeatable and scalable business model (i.e. we re-join Blank).

How great VCs add value

By | Forward Partners, Startup general interest, Uncategorized | No Comments

Vinod Khosla and others have said that 70% of VCs add negative value. I wouldn’t want to be one of those (although I probably was at one point…). How then, should VCs add value?

This is from Founder’s Notebook:

  1. provide concrete help with hiring, fundraising, and intros;
  2. encourage you to figure things out without pressuring you to expand prematurely;
  3. share what’s working from their other startups;
  4. ask great questions that you wouldn’t otherwise have thought about; and
  5. focus on real metrics rather than buzz among other VCs and the media.

We try to do all five of these at Forward Partners, whilst avoiding mistakes like these. Numbers 1 and 3 are where we are strongest.

Re 1.: Our startup team are often the first team members for our idea stage companies (albeit part-time), and then after a month or two of working faster because of our support they typically start recruiting their own full time team members. Matt Buckland, our Head of Talent, plays a key role in helping them do that.

And re 3.: Because we are tightly focused on early stage ecommerce we have a lot of relevant learnings to share with our partners. So much so that we are writing them down. So far we’ve captured them ad hoc on our blog but going forward we will start to publish them under a framework we are calling The Path Forward. More of that soon…

The future of food production – reasons to be hopeful

By | Startup general interest | One Comment

Last week I was on a run of hopeful posts inspired by folks from the Singularity University and this is another, although today’s topic is food rather than energy. As you can tell, I’m very optimistic about the future. We have big challenges ahead sustaining the world’s growing population (on an exponential curve and forecast to grow from today’s 7bn to nearly 10bn by 2050) but technologies under development give us a strong chance of solving them. That said, I’m nervous about the social repercussions of all the change that’s going on, as growing wealth inequality and automation of great swathes of jobs are undermining our social contract. Without strong government the next 20 years we could see a lot more social disruption in the developed and developing world alike.

Back to the good news on food, courtesy of Peter Diamandis.

First consider this chart:

FoodSupplyAmazingly, food production per capital has increased by around 30% over the last fifty years despite a near doubling of the population. (Caveat: not all calories are created equal, and it would be interesting to see fast food broken out in this chart.)

Going forward here are three new technologies that should help maintain this trend:

  • Genetically engineered crops: In 1996 there were 1.7 million hectares of biotech crops in the world; by 2010, the number had jumped to 148 million hectares. This 87-fold increase in hectares makes genetically engineered seeds the fastest-adopted crop technology in the history of modern agriculture. And not a single case of a GE induced illness.
  • Bioprinting meat: firms like Modern Meadow are developing meat manufacturing techniques which require 99% less land, 96% less water, 96% fewer greenhouse gases, and 45% less energy than land animals (of which there were 60bn in 2012 to feed our 7bn population)
  • Vertical farming: companies like Aerofarms are growing crops in tall buildings where one acre of skyscraper floor yields the same as 10-20 acres of soil based acres. Moreover, they employ cleanroom technologies meaning no herbicides or pesticides and no agricultural run-off, and the fossil fuels now used for plowing, fertilizing, seeding, weeding, harvesting, and delivery are gone as well.

I don’t know what all this modern food will taste like, but if we can keep up the pace of innovation we should, at least,  have enough of it.

Electricity storage costs on the cusp of a precipitous fall

By | Startup general interest, Uncategorized | No Comments

Elon Musk’s announcement of Tesla Energy and the Tesla Powercell (combined solar cell and battery) is the big news today, but it’s best understood in the context of longer term changes in the electricity industry. Two days ago I wrote about exponential increases in the use of solar energy, but solar energy only gets you so far without efficient storage to keep the lights on when the sun isn’t shining.

This ‘storage problem’ has long looked like the thing that would hold solar energy back. The cost of solar cells has been falling exponentially for some time and that has driven increased production, but if solar is ever to be more than a small percentage of the grid then storage needs to be solved, and battery technology has been advancing more slowly than solar cells (improvements have been linear rather than exponential).

The Tesla Powercell is a big step in the right direction. Ramez Naam compared the cost of electricity from the Powercell with the grid and found it to be roughly twice the price. Given that battery costs are halving every 2-3 years it won’t be long before it reaches grid parity. Meanwhile, early adopters, customers who suffer badly with outages, and countries where there’s a lot of sunshine and electricity costs are high will drive demand in the short term.

Exciting stuff. We could be on the cusp of a virtuous cycle that heralds a new era of cheap energy. This is from another Ramez Naam post from last month:

Energy storage is hitting an inflection point sooner than I expected, going from being a novelty, to being suddenly economically extremely sensible. That, in turn, is kicking off a virtuous cycle of new markets opening, new scale, further declining costs, and additional markets opening.

To elaborate: Three things are happening which feed off of each other.

  1. The Price of Energy Storage Technology is Plummeting. Indeed, while high compared to grid electricity, the price of energy storage has been plummeting for twenty years. And it looks likely to continue.

  2. Cheaper Storage is on the Verge of Massively Expanding the Market.  Battery storage and next-generation compressed air are right on the edge of the prices where it becomes profitable to arbitrage shifting electricity prices – filling up batteries with cheap power (from night time sources, abundant wind or solar, or other), and using that stored energy rather than peak priced electricity from natural gas peakers.This arbitrage can happen at either the grid edge (the home or business) or as part of the grid itself. Either way, it taps into a market of potentially 100s of thousands of MWh in the US alone.

  3. A Larger Market Drives Down the Cost of Energy Storage. Batteries and other storage technologies have learning curves. Increased production leads to lower prices. Expanding the scale of the storage industry pushes forward on these curves, dropping the price. Which in turn taps into yet larger markets.

 

 

 

Don’t be in denial

By | Startup general interest | 2 Comments

I’ve just read YC Partner Jessica Livingston’s Subtle Mid-Stage Startup Pitfalls. The whole post is a great cautionary read, but I want to elaborate on one of her pieces of advice:

Don’t for a second be in denial if things are going badly or growth is flat. If you’re vigilant about diagnosing problems like these, you’ll be more likely to nip them in the bud. The sooner you acknowledge that growth is flat, for example, the more time you’ll have left to fix it.

This advice is easy to give in the abstract general case, but harder when you see it happening in practice – nobody likes to be told they’re in denial. Much better to catch yourself first then, because it happens to all of us from time to time.

The key is to be paranoid. Look for signs that things might not be working and acknowledge them. That doesn’t necessarily mean react to them or change anything. It means think about them and have an explanation and a plan. Often that explanation will be short term volatility driven by something out of your control and the plan will be to wait, but look at it, acknowledge that it’s a concern, and then keep an eye on it. Have a position on when it will bounce back and be wary of giving yourself more time if the bounce back doesn’t come as expected. Have this discipline for everything from metrics (revenues, engagement, etc.) to progress in deal and partnership discussions to hiring and employee issues.

As an investor I love it when entrepreneurs have great data and a great feel for their business and they point out the issues to me, including little ones, with an explanation of whether they have taken action or are waiting to see if a trend develops. Then we can have a discussion. If I have to point out the little slips and downturns then it niggles at the relationship and I wonder why the entrepreneur isn’t bringing it up – have they noticed? or, are they in denial? Neither of these are good.

 

Solar might save the world – encouraging data

By | Startup general interest | 2 Comments

Top_5_Solar_StatesLook at that rapid increase in solar power capacity in five US states!

These increases are great news for two reasons Firstly, as we all know, solar is much better for the environment. Secondly as capacity rises, production rises, and with production increases come R&D increases which will continue to drive down the cost of solar energy. The cost of producing a gigawatt hour using solar has been declining exponentially for 20 years now, and with this sort of growth in production and R&D spend that trend is sure to continue or even accelerate (as a point of comparison, increased investment caused the cost of sequencing the human genome from an exponential decline to a faster than exponential decline).

All of this is super important because cheap solar energy is one of the best shots we have of surviving on this planet with increasing population and declining food and water stocks. Cheap enough energy unlocks large scale water desalination and hydroponic farming techniques.

Now I’m wishing even more that the UK had better weather…

 

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