Nic Brisbourne's view from London on technology and startups

Big markets are spinning up and disappearing faster and faster

By | Venture Capital | No Comments

The idea for this post came this morning when I saw these two tweets from Benedict Evans. One shows the newspaper industry growing steadily for fifty years and then declining for ten and the other shows the Japanese fixed lens digital camera market growing from nothing to 120m unit sales in ten years and then dropping by 80% in the seven years after that.

The market for the Japanese cameras spun up and disappeared more quickly than for newspapers. There’s a hypothesis that’s a phenomenon we are seeing over and over again. New markets, especially digital markets, grow big very fast, but don’t have legs. Other examples I can think of include

  • Word processing software – the market took off in the 1980s and is now in substantial decline due to Google Docs and Evernote. Evernote (arguably itself a new market) grew very fast but is now threatened by Quip.
  • Video cassette recorders took off in the 1980s, were replaced by DVD players in the 2000s, which are now being replaced by streaming services
  • Vinyl records were around for decades before being replaced by CDs in the 1980s, which were replaced by music downloads in the 2000s which are now being replaced by streaming services
  • Walkmans were replaced by MP3 Players which were then usurped by phones on a similar timetable
  • PDAs and satnavs were usurped by mobile phones in about 15 years
  • Blogging got going in about 2005 before Twitter and a collection of other sites took the wind out of it’s sales over the last three years or so

A few too many of these examples are linked to smartphones for my liking, but I do think there’s something in the idea that new markets have shorter and shorter durations. It fits with my worldview that the pace of change is accelerating. If the duration of markets is shortening it has implications for venture capital, because if companies take 7+ years to reach a big exit then increasingly their markets will have started to decline before they get big enough to sell or IPO and the model will break.

[Apologies for not posting the images from the two Benedict Evans tweets. WordPress won’t let me upload anything today…]

The state of now – new Adobe data shows mobile almost matching desktop

By | Ecommerce | No Comments


With all the talk about mobile taking over the world it’s easy to forget that there’s still more traffic on the desktop. This holiday season just released by Adobe shows that on some days there was more traffic on mobile than desktop, but that mostly the desktop is ahead. If you turn to sales rather than visits then the desktop remains totally dominant with 73% of transactions.

Some of our companies see as much as 90% of their traffic on mobile I’m sure we will see more of that as devices and networks continue to improve, but this data shows us that having a well functioning website is still important for most ecommerce and marketplace businesses.

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.

Musings on attracting autonomous vehicle research to the UK

By | Startup general interest | No Comments

When I read The Federal Government Must Act To Ensure That The Autonomous Vehicle Revolution Takes Place In The U.S. on Techcrunch this morning my first reaction was to be happy that the UK government is making concerted efforts to attract Google’s self-driving car research to the UK. If they succeed then high value jobs will be created here, opportunities in related areas are more likely to be pursued here (e.g. car security) and the UK could become the home of the autonomous car industry. Indeed, the point of the Techcrunch article is to say the US government should act to make sure all those wonderful things happen in the US.

The problem with the article, and with my first reaction, is that it only thinks about the benefits of having an indigenous autonomous car industry and not the costs.

The benefits are all money related, and that’s important, but it’s not everything. This line of thought is challenging though. If you ask ask me what I want for my kids when they grow up I will tell you that I want them to be happy. I know they will need a certain amount of money to be happy, but beyond a certain level other things become more important – love, safety, meaningful work, etc. The problem is that money is just about the only metric countries use to keep score. Gross Domestic Product (GDP) is a money measure, and we watch it like a hawk. Growth figures are reported widely and governments are judged first and foremost on the increase they have delivered.

My friend Nic Marks has long been campaigning for governments to start measuring and targeting themselves on happiness. That makes sense to me, just like it makes sense that happiness is the goal for my kids. However, getting widespread agreement on what constitutes happiness is tricky, which is why GDP is still the focus and why the merits or otherwise of attracting autonomous car research to the UK are debated on financial grounds with safety considerations considered on a binary basis, often with analysis that is emotionally rather than rationally driven. If we had a measure for happiness that combined GDP growth with other factors we would be in a much better place to trade off the economic impact against safety and make this decision properly.

Venture investment was down in Q4 but may have further to go

By | Venture Capital | No Comments

Screen Shot 2016-01-15 at 14.33.21

Yesterday I wrote that there are clouds on the horizon in the world of startup finance, but it was unclear whether valuations will continue to drop, level off, or even go back up. Today the new data from PWC shows that investment dropped sharply in Q4 but is still at historically high levels. As you can see from the chart above even though the $11.3bn invested in Q4 was 32% less than the $16.6bn invested in Q3 it was still higher than all bar five quarters since the 2000 bubble burst.

Moreover, the shape of the decline in venture investment after the NASDAQ peaked in Q1 2000 suggests that the current decline will go on for more than the 1-2 quarters we’ve seen so far. As I said yesterday, private markets react slowly.

However, on Mattermark this morning we had a post from Calacanis arguing that market deflation is almost complete and a post from Tunguz which concluded by saying he thought it likely that VCs will continue to pay high valuations for premium SaaS startups. For me the jury is still out on which way the markets will move next, although I do think that a further downwards move is likely at some point in the next year or so.

Clouds on the horizon

By | Venture Capital | One Comment

Through much of last year there was talk of a bubble in venture capital, particularly in late stage investments. Valuations were stretched, both on a fundamentals basis and compared with the public markets, and there were even whispers of a ‘new paradigm’ for valuing companies now that businesses can expand around the world so fast. It was inevitable that the heat was going to come out of the market at some point and my hope was that it would come out sooner rather than later, and that the down-rating would be more correction than crash and the collateral damage would be limited.

That process started quietly after the summer last year. Whilst valuations in the UK at the very early stages at which Forward Partners invests haven’t moved much (yet) friends here who invest at later stages are telling me stories of companies slashing their expectations by 40-50%. On the other side of the Atlantic the sentiment was even more negative, not helped by Fidelity (and others) writing down the value of their holdings in previously high-flying unicorns.

A bit of context is important. Information flows slowly in the venture world, at least compared with public markets, and changes like this take time to play out. That’s partly because investors look at returns over 5-10 years and are less concerned about their position at the end of the quarter, partly because transaction data is private and it takes time for people to find out what’s going on, and partly because deals are often put together over many months and people don’t like to radically change course. The last point is related to the first two.

The interesting question now of course is how far it goes and recent weakness in the public markets won’t help. NASDAQ is off about 10% since it’s Christmas peak and fears about rising interest rates, falling oil prices, weakness in China, and falling corporate earnings generally are contributing heavily to negative sentiment. Worse from a venture perspective is that GoPro and Fitbit have both seen huge falls in their share prices recently, adding concerns about exit potential in specific categories to fears about the market generally.

The good news is that innovation continues to happen faster and faster each year, so the fundamentals for startups are strong, and that this correction is happening now rather than after another couple of years of irrational exuberance. That said, we could bounce back to heady times quite quickly, particularly if central banks react to the current situation by deciding to keep interest rates low. The more likely, and to my mind healthier, scenario is that we see a few months of continued weakness in the venture markets and then things level off. I think it’s unlikely we will crash as hard as did in 2000 or 2008. Given the paucity of information and pace at which changes happen we will be left guessing which of these scenarios we are in for a good few weeks yet.

Measuring prosperity

By | Startup general interest | No Comments

A month or so ago I wrote about that Mismeasurement may be at the heart of the productivity paradox. The paradox is that despite AI and robots replacing jobs productivity doesn’t seem to be rising and my post drew on data showing that microprocessor prices may have been incorrectly calculated in productivity indices to argue that mismeasurement of productivity may be at the heart of the paradox.

My colleague Matt Bradley subsequently passed me a paper titled Moore’s Law at 50 by Bret Swanson which has some additional data points which give credence to this argument:

  • In The Mumbo-Jumbo of ‘Middle-Class Economics’ Alan Reynolds argues that whilst real incomes have stagnated since 1968 real consumption has tripled. The major differences between the consumption and income measures come from realised capital gains, dramatic increases in public and private benefits (e.g. health insurance and food stamps), the reduction in middle class taxes or the impact of retirement savings. There is a related point that income is often calculated on a household basis but because average households now have fewer people in them a decline in household income doesn’t imply a decline in per capital income.
  • We get a similar picture if we use the personal consumption expenditures (PCE) deflator rather than the consumer price index (CPI) deflator to adjust for inflation. Using CPI median incomes rose just 4.2% from 1967 to 2014, whilst using PCE they rose 33.0%. (Neither of these indices takes account of the impact of benefits, taxes and savings mentioned in the previous paragraph.
  • New inventions have brought significant benefit to society but are impossible to capture in comparative income measures – e.g. life saving drugs, new surgeries or sites like Wikipedia.

The evidence is mounting…

Magic moment + core product value = great business idea

By | Startup general interest | No Comments

I’ve just been reading First Round’s The 30 Best Pieces of Advice for Entrepreneurs in 2015. I love what those guys are doing and it’s a great read. A must read really.

I want to take one of their ideas and expand on it a little. In number 20 they say:

Screen Shot 2016-01-12 at 13.20.54

That’s true for growth companies, but companies at the idea stage aren’t yet looking for sustainable growth, they should be looking to make sure their idea is valid. As per The Path Forward, startups should focus first on their idea, then their product, and only then on scaling their business.

Idea stage companies, then, should be making sure they have Core Product Value and be working hard to find a Magic Moment. In an ideal world the Core Product Value is strong enough that it’s easy to find features that create a magic moment.

Take our portfolio company Lexoo – they’re a marketplace connecting businesses with legal services. Their core product benefits are speed, quality, and price. Customers find more appropriate lawyers, more quickly, and get more competitive quotes than when they are introduced to a friend’s solicitor (which is still the way most people find lawyers). Their magic moment is when customers get four competitive quotes in their inbox within 24 hours. They didn’t spend hours in brainstorming sessions coming up with this idea because it grew organically from two of the three core product benefits – speed and price.

Removing unconscious bias from hiring decisions – focus on awareness

By | Startup general interest | No Comments

There’s a post on Founders Notebook today with advice on avoiding unconscious bias in hiring decisions. Information as simple as a person’s name or where they went to school can unconsciously bias hiring decisions and the advice is to redact all information from CVs other than that which pertains to the person’s work. If the hirer doesn’t have the information they can’t be biased by it.

That’s fine, but it slows things down. In most if not all the startups I know the pressure is on to execute fast and the way to do things quickly is to use all the available information. Rather than removing data from the equation the better approach is to be aware of potential bias and take steps to counteract.

Founder’s Notebook gives a good example of a counteracting tactic in How to avoid hiring someone just because you like them. If you have a personal affinity for a candidate a good trick is to deliberately not  make a decision in the first 30 minutes of an interview. That way you will be more likely to ask them the tough questions you would of a candidate you didn’t like so much and any unconscious bias will be limited.

I’ve been thinking a lot about cognitive/unconscious bias recently and I’m increasingly of the view that in the fast moving world of startups awareness is a better way to deal with it than handicapping processes by stripping out data or forcing decisions to be made on objective measures.


Is the ‘winner takes all’ era for marketplaces coming to an end?

By | Startup general interest | One Comment

On Monday this week taxi app Lyft raising a new $1bn round which included $500m from General Motors. Twelve months ago the received wisdom was that Uber was on a tear and it’s competitors would fail and in response to this  funding news LA Times wrote a piece questioning whether the ‘winner takes all phenomenon’ that characterises so much of the internet doesn’t apply in transportation.

I’m wondering whether the ‘winner takes all phenomenon’ is disappearing more broadly.

In mobile we now have two ecosystems – iOS and Android – that look like they’re self-sustaining. According to observers like Benedict Evans the answer to whether Google or Apple won the mobile internet wars is that ‘both have’.

It could well be that now that in many industries the global market now operates as one massive market with space for multiple large ecosystems to co-exist next to one another.

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