Nic Brisbourne's view from London on technology and startups

Matching product solutions with problem spaces

By | Startup general interest, Uncategorized | One Comment

We held our monthly office hours yesterday morning, meeting with twenty idea stage founders over a period of two hours. It’s a a high octane set of fast paced meetings that I look forward to very much. It’s great meeting lots of great people and learning about lots of great ideas so quickly.

The last one I met had identified a large and fast growing market riven with inefficiency. The more we delved into it the more excited I got. Big markets with lots of opportunities for improving things are great places to start new companies. Then, when we got to discussing his company’s product/service, I knew that he wasn’t yet at the point where we could have a serious investment discussion. He knew that existing products in his market were of inconsistent quality and that consumers go to extreme lengths to buy them anyway (often gathering in groups to buy wholesale on AliExpress), but was only just coming to the conclusion he wanted to build a product company and had a feeling that the best opportunity lay at the premium end of the market but couldn’t articulate what his product differentiation would be or how he would price it.

That’s fine. We will keep talking and help him through that process, but right now he has identified a great problem space but hasn’t matched it with a compelling product solution.

That contrasts with another company we are talking with where the founder started selling a product to his friends and family because he loves delivering it and they love buying it. In this case the product solution is already defined in great detail and we have been working with him to work out how big the opportunity is.

In other words he has built a compelling product solution and it’s unclear whether it’s in a great problem space.

The best business opportunities match great problem spaces with compelling product solutions. Most businesses start with one and then work to find the other. “Technology looking for a problem to solve” is a cliched way of describing interesting solutions with poor problem spaces, and perhaps more common but lacking a common descriptor is companies in interesting problem spaces constantly ideating in search of a product people want.

Entrepreneurs who know their problem space but not their solution should, with discipline, be able to ideate, research and iterate their way to a compelling product. Entrepreneurs with a compelling solution are in a more binary situation – either their problem space is interesting enough or it isn’t.


Ecommerce companies’ team requirements in the first six months

By | Uncategorized, Venture Capital | No Comments

What follows is a generalised model for startup team building. Every company is, of course, different, but using this model as a starting point will, I hope, be helpful.

Team structure in early stage ecommerce and marketplace companies is a function of manpower and skills necessary to build the company and the founder(s)’ skillset(s). Companies with lots of cash sometimes add people more quickly, but that drives the burn rate up, often without a compensating increase in the chance of success..

In the first couple of months the focus should be on making sure the idea is valid, requiring the following activities:

  1. Development of the company vision and strategy
  2. Search for a point of deep emotional resonance with customers – research work
  3. First iteration of the product vision
  4. First iteration of company messaging
  5. Design and development of landing pages and prototypes
  6. Finding the first few customers

Items 1 and 2 should be done by founders and require generic business skills. Items 3-6 are more specialised and can be done by founders if they have the necessary product, development and marketing experience, otherwise they need outside help. The development requirement might be full time, or approaching full time, but the product, design and marketing requirements are part time. As a guide, the companies that we work with at this early stage generally need around 10 hours per week of product work, 20 hours per week of design and 5 hours of marketing, but there’s a lot of week on week volatility.

The minimum team to move quickly for these first couple of months is a full time founder, a full time developer (or FTE), and part time product, design and marketing support. Bigger teams move faster but overall efficiency can suffer.

The next few months should then be about the product – proving that the idea can captured in a product that resonates with customers. The key activities at this point are:

  1. Develop version one of the product – strong enough to scale
  2. Build deep understanding of early adopters
  3. Develop brand values and core messaging
  4. Build version one of the visual identity
  5. Get into the habit of month on month growth
  6. Start tracking key metrics and build a company dashboard
  7. Operational activities to support growth

The man hour requirements for this product step will be the same as for the idea step, but with another 0.5-1 developers, double the marketing time (now circa 10 hours per week), and then sufficient interns and customer service people to cover the operations. A lot of the operational activities will fall to the founder, but it’s common to have 1-2 interns or early hires at this time. It’s important by this point to have someone numerate on the team. Also, early hires should be capable of dealing with ambiguity and fuzzy role definitions.

I’m writing this post in part to get my thoughts straight ahead of a conversation with a founder we’d like to back who is weighing up the pros and cons of working with Forward Partners vs building her own team. As a reminder, we bundle talent and office space with cash when we invest in companies, allowing the founder to spend more time working on the company and less time hiring. One of the other benefits is that companies can dial up and down the time they need from us more easily than they can with freelancers or employees. And the quality of our team is awesome.

A company should, of course, get it’s own team pretty quickly. We help with the tough problems of finding developers on day zero and resourcing part time roles with varying time requirements. And then we help with talent acquisition too (recruiting is difficult!), so companies get started fast and become self sufficient within six months. We’ve also seen our companies able to save money by hiring for talent over experience and leveraging the experience in our team to bring people quickly up to speed.


Shout out to Matt Buckland, Head of Talent at Lyst for his comments on an earlier draft.

Facebook gets to $250bn valuation in record time – respect

By | Facebook | No Comments

Facebook’s share price was up 2.4% on Monday taking its market cap above $250bn just three years after its IPO and eleven years after it was founded. Bloomberg and other sites are lauding Zuckerberg and co for beating current record holder Google’s eight years from IPO to $250bn valuation. Those with long memories will know that Facebook went public with a much larger valuation than Google ($104bn vs $23bn) so the more apt comparison is Facebook’s eleven years from founding to $250bn with Google’s fourteen years. Still great though.

What impresses me most about Facebook is the way they’ve done it. As you might have read in the Lefsetz letter today

Once upon a time Facebook was a place to connect with your friends.

Now it’s where you go for information…news, video, even music video.


What’s amazing about Zuckerberg is he’s willing to admit he’s wrong and change course and constantly improve his product.

And there’s the amazing shift from desktop to mobile too.


Change is, of course, happening faster and faster all the time, so it’s likely the next record holder for time to $250bn has already been founded. What’s also likely is that the founder will have an even greater appetite for radical change and experimentation than Zuckerberg, who in turn is proving to be more radical than his slightly older counterparts at Google and Amazon. And Bezos and Page are in turn more radical than Gates and Ellison. There’s a lesson here….


Market size determines funding strategy, not vice versa

By | Venture Capital | 2 Comments

Market size – or more accurately addressable margin opportunity – determines how valuable a company can be, and the size of the exit in turn determines how much a company should raise. Alex Iskold, MD of Techstars New York put it like this in a recent post:

Venture Capitalists are looking to deploy millions of dollars, and they are looking for multiple times return on that capital. That is why, in addition to founders, VCs focus heavily on the size of the market. If they don’t believe the market is large enough, they won’t invest.

There is nothing wrong with starting a business in a smaller market. You can still get capital, but not necessarily via VCs. Understanding the size of your market before going out to raise money is an important thing to do for every single business.

Simply put, if the exit is £100m and you want to keep £50m for yourself then the investors will get £50m, so if they are going to make 10x+ then the company can have raised a maximum of £5m.

Investors at every stage are doing this maths, and the exit size is a function of the market. That’s why investors with large funds obsess so much over market size. Investments in small or medium sized markets won’t move the needle for them.

A lot of entrepreneurs approach this subject the wrong way round. They figure out how much they want to raise and then they write a deck and writing the market becomes an exercise in selling the investor and justifying the amount of money they are seeking. When the market is genuinely huge that works fine, but often times it isn’t, and investors will walk away if they don’t feel it’s big enough for them to make a meaningful return. Worse, market size can be a difficult topic to give feedback on. If an entrepreneur has claimed the market is worth billions and the investor feels it is worth much less then feeding that back can invite confrontation, particularly if the founder has made a big play about the size of the opportunity. Good investors want to give feedback when they say ‘no’ to investments, but they say ‘no’ a lot and unless they have had meetings they will want to minimise the amount of time they spend giving it – and that means avoiding back and forth debate on questions like market size.

There are plenty of entrepreneurs who have used their sales skills to raise money this way even when the market is small, but that usually doesn’t work out so well in the medium term when the burn rate is high and everyone is disappointed because the market has limited growth.

It’s much better to have a firm view on the opportunity size and build the fundraising strategy from that.

The shrinking digital divide

By | Uncategorized | No Comments

Screen Shot 2015-07-13 at 10.41.59

A certain amount of inequality is essential to the functioning of the capitalist system under which we all toil, and which is, for now at least, the best system available for organising the world’s resources. However, when there’s too much inequality a strong sense of unfairness kicks in and markets stop functioning well, as those who feel a strong sense of injustice vote for politicians with radical policies or turn to violence. Examples in history abound, with the French and Russian Revolutions being best understood as resulting from unsustainable levels of inequality.

More recently we’ve seen this play out with riots and public disturbances within advanced economies like the US, the UK and France and arguably on a global scale with widespread anti-American feelings in parts of Asia and Africa. This points to the relatively new development that extreme inter-national inequality is emerging as a problem in the same way that extreme intra-national inequality has been for some time. It’s a new development, but one that’s perhaps unsurprising given the massive increases in international trade and travel (including migration) and the way technology is shrinking distance.

The digital divide contributes to the economic divide and so it’s great to see the pace at which mobile internet penetration is growing. 94% of the world’s population now have access to a mobile signal, 48% can access the mobile internet and 28% are subscribed to a mobile internet service, and you can see from the chart above that penetration is growing fast. Barriers still remain and there’s plenty of work to be done, not least in bringing costs down and bringing local language content online, but those with internet connections have a better chance of rising out of poverty than those who don’t.

Designer babies and other moral dilemmas

By | Startup general interest | No Comments

People have talked about designer babies for a long time, but I just read for the first time about a clinic openly offering genetic screening of embryos. You can pay $18,400 to screen for gender and they plan to soon offer eye colour, hair colour and other traits.

That’s illegal in most countries, but (somewhat surprisingly) it’s allowed in the US.

Genetic screening has reached this point now because technology developments are improving capabilities and driving prices down. That’s a phenomena that’s happening across a broad swathe of areas at an accelerating rate that will throw up moral dilemmas we have to grapple with.

  • Designer babies
  • Human augmentation with robotics
  • Human genetic enhancement
  • Cloning
  • Autonomous robots taking jobs (self-driving cars will be the first)
  • Autonomous robots making ethical decisions – e.g. a self-driving car choosing between hurting it’s passenger and a pedestrian in a crash situation
  • Artificial intelligence advising on legal matters, and eventually de facto making decisions
  • Artificial intelligence advising on policy matters, and eventually making de facto decisions

Coming to the right answers on these questions will require solid thinking and strong, far-sighted leadership. The default reaction of many people, politicians included, will be to reject, suppress and deny. That risks pushing developments and scientists underground and/or to less restrictive geographies where they will still flourish, but in a less controlled manner. And then they will come back.

And this isn’t far away now. In the next 10-15 years most of these technologies will reach a price point that makes them widely affordable.

We have interesting times ahead.

Spreadsheets in legal documents

By | Startup general interest | One Comment

I have spent a considerable part of today translating the equalisation clauses in our Limited Partnership Agreement into formulas in a spreadsheet. Equalisation payments are made when new investors join a Limited Partnership and they pass from new investors to old investors to compensate the old investors for the additional risk they took by investing first and/or to adjust for changes in the value of the fund’s investments in the period between when the old and new investors invested. They are dependent on a number of inter-related variables which makes them hard to calculate.

That was time I didn’t expect to spend on this task and time I didn’t have. And we still have to get all parties to understand and buy into our spreadsheet so it isn’t over yet.

I’ve been here before too, when implementing anti-dilution clauses after down-rounds.

It shouldn’t be necessary.

Rather than imperfectly describe formulas in legal documents we should be able to capture them precisely in a Google Sheet or Excel and append the file to the legal document. Then we would have definitive reference calculations that everybody could use saving time and eliminating scope for disagreement over interpretation.

I believe my former employer Operis have started doing this in the project finance arena, attaching complex models of entire projects to legal contracts which are referred to in clauses determining how payments change under different circumstances.

In time the Blockchain might be a better solution to this problem, but spreadsheets would work today without further development of software.

Why we like investor decks

By | Forward Partners | One Comment

When we are introduced to promising entrepreneurs and ideas our first response is to ask for information about the company or project, usually an investor deck. The extra information helps us to know whether there’s enough chance of an investment happening for a meeting to make sense. I like to think that’s beneficial to us and the founder because it saves time, although I recognise there can be value in getting feedback even if there’s no chance of investment.

A deck helps in the following ways:

  • Shows the entrepreneur is serious about their company and raising money. We invest at the earliest stages and some founders try and raise money before they are fully committed to their projects and/or to raising finance. Not for us.
  • Shows us the founder can craft a story and sell their idea/company. Key skills for any entrepreneur. Most of the best entrepreneurs are great story tellers.
  • Allows us to evaluate fit with our investment strategy – we are laser focused on idea and seed stage businesses in ecommerce, marketplace and related software, and have a number of other criteria too.
  • Writing the story forces completeness of thought. A good investor deck covers all areas of the business and requires the entrepreneur to have good solutions for everything that needs to be done. That’s a good discipline.

A good deck is also super helpful in investor meetings, so it’s best to have one anyway. Bill Gurley explains why here.

And this One Match Ventures guide to writing a good deck is amongst the best I’ve seen.


“Sharing economy” is running its course as a useful term

By | Startup general interest | 8 Comments

The meaning of the term ‘sharing economy’ has always been a bit vague for me. On the one hand it includes genuine sharing ideas like Airbnb whilst on the other it includes labour markets like TaskRabbit and Homejoy, and then more recently Venturebeat lumped in companies like Wework and Transferwise (although they called it the ‘collaborative economy’).

Still, the label was useful for PR purposes, and for building a positive company image with investors, regulators and the public.

That may now be changing. I’ve just read Sarah Lacy’s Let’s face it: Uber IS the sharing economy which makes the point that Uber dominates the sector, and The “Sharing Economy” is the Problem which argues that Uber and other sharing economy labour marketplaces are using a novel corporate structure to exploit workers.

Being labelled as ‘sharing economy’ is starting to carry more negative connotations than positive. Hopefully we can move to something clearer.

UPDATE: Alan Patrick pointed me to a Grist article which makes a more emotive claims against Uber and others:

The sharing economy is a nice way for rapacious capitalists to monetize the desperation of people in the post-crisis economy while sounding generous, and to evoke a fantasy of community in an atomized population. …

[I]t sees us all as micro-entrepreneurs fending for ourselves in a hostile world. … You may lack health insurance, sick days, and a pension plan, but you’re in control.

399 scale-ups in UK, 208 in Germany, 205 in France

By | Venture Capital | 2 Comments

Screen Shot 2015-07-06 at 14.05.27

The Startup Europe Partnership (SEP) just published their SEP Monitor: From Unicorns to Reality. There’s a wealth of good data there on fundraising in different categories split by geography. “Scaleups”, companies that have raised $1m-10m, are where we focus and are shown in the picture above. The report also covers companies that have raised over $100m, termed “Scalers”, M&A, and IPOs.

Focusing on amounts raised is an improvement to focusing on valuations but is still a far from perfect measure of startup activity/progress, largely because some great companies raise little or no money. That said, this new analysis largely confirms the geographic picture we’ve been seeing for a while, namely that approaching half of Europe’s startup/venture activity happens in the UK.

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