Nic Brisbourne's view from London on technology and startups

Marketing platforms for startups

By | Advertising | One Comment

US internet audience

This chart shows where audiences are accumulating by number of users and average amount of time spent. Multiply the two together and you have total number of hours spent by property, which is a rough proxy for the size of the advertising opportunity.

New advertising platforms are best for startups when they are growing from big to very big. When they become huge traditional brands move in driving prices up and they become less useful.

For most startups these days Facebook is best whilst it’s harder to make the customer acquisition costs vs life time value equation work on Google. CPCs have held steady at Facebook over the last year, and even declined in ecommerce, but it’s only a matter of time before they go up from their current average of $0.53 (ecommerce $0.43).

Looking at the chart above you’d expect Whatsapp, Snapchat, YouTube and Gmail to be the next places for startups to go, but none of these has really opened up their platforms well yet. Amongst the smaller players Twitter is perhaps the most advanced with it’s ad platform, but as you can see the product of their audience size and time spent is not that significant.

Thanks to Tom MacThomas, our Head of Marketing, who helped with this post.

Old brands weren’t built for trust

By | Startup general interest | 3 Comments

Americans Trust

This chart has me wondering if the nature of what makes a good brand has changed. Nowadays consumers want authentic brands that they trust have their back. Younger and tech savvy brands like Paypal, Amazon, Google and Apple have the culture and the understanding to give consumers what they want, whilst older brands like the banks shown above find it much more difficult.

We see a similar phenomenon in UK politics where followers of newer parties like the SNP and UKiP trust their politicians and are seemingly more loyal than followers of the Conservative and Labour parties.

Going back 30-40 years or more brands were built by buying media and controlling the airwaves, but the social media revolution has revealed the brittleness of this approach. The billion dollar question now is whether these old brands can adapt to live in the new world. Change like that is tricky, especially in regulated industries.

In politics I hope that the old brands can adapt. In business I hope not.

Advice on writing from the original “Mad Man”

By | Startup general interest | 2 Comments

The best writing is clear and concise. Easily said, but difficult to do – which is why it’s popular to say “If I had more time I’d have written a shorter letter”. Practice helps, but only if you concentrate on writing high quality prose.

David Ogilvy, founder of Ogilvy and Mather had this to say on the subject in an internal memo sent to all Ogilvy staff:

Good writing is not a natural gift. You have to learn to write well. Here are 10 hints:

  1. Read the Roman-Raphaelson book on writing. Read it three times.
  2. Write the way you talk. Naturally.
  3. Use short words, short sentences and short paragraphs.
  4. Never use jargon words like reconceptualize,demassification, attitudinally, judgmentally. They are hallmarks of a pretentious ass.
  5. Never write more than two pages on any subject.
  6. Check your quotations.
  7. Never send a letter or a memo on the day you write it. Read it aloud the next morning — and then edit it.
  8. If it is something important, get a colleague to improve it.
  9. Before you send your letter or your memo, make sure it is crystal clear what you want the recipient to do.
  10. If you want ACTION, don’t write. Go and tell the guy what you want.

I’m not sure that waiting a day before sending (no. 7) or favouring in person conversations when action is required (no. 10) stand the test of time, but the others do. I especially like 2. Write the way you talk. Naturally. I see so many people afraid of not writing “properly” that end up not writing at all, or at least not for wide consumption. That’s BS. In my opinion good writing is writing that communicates effectively, and natural writing generally achieves that far better than writing which is formally correct according to some ageing standard. Much better to let the spirit shine through.

Thoughts on curated marketplaces and perfect competition

By | Startup general interest, Uncategorized | One Comment

Jeff Jordan, now a partner at Andressen Horowitz, and previously CEO of OpenTable and senior exec at Paypal and eBay, has a post up on the A16Z blog about online marketplaces. He argues that all online marketplaces are fundamentally the same and hence should be managed by the same principle of “nurturing and managing perfect competition”.

Jeff offers a full definition of perfect competition in his post that’s worth reading. …. If you want the quick version, perfect competition is when the market is totally open, with full price transparency, full information for buyers and no concentration of either supply or demand.

I agree with Jeff, but only about half the time. For marketplaces like eBay, Craigslist and Etsy he is right. The more they can nurture perfect competition the stronger the proposition will be for consumers and the easier it will be for high quality sellers to rise to the top.

But there are plenty of marketplaces where pursuing perfect competition isn’t the best answer.

Uber is perhaps the most visible example of such a marketplace right now. If they were promoting perfect competition they would allow drivers to set their own prices, but they found that consumers prefer consistency and convenience over price transparency and went for a different model.

Another example is Lexoo, one of our portfolio companies. They are a marketplace connecting businesses with legal services. Perfect competition isn’t the best model for Lexoo because the services from different lawyers aren’t equivalent and buyers prefer to be connected to pre-screened quality lawyers than go through the difficult process of working out for themselves which lawyers are best.

Lexoo and Uber are both curated marketplaces – i.e. marketplaces where the marketplace does some work on behalf of the buyer and doesn’t just rely on market forces to optimise the user experience. There are lots of markets where this is the best model.

Half of browsing and a third of purchases on mobile

By | Mobile | One Comment

Screen Shot 2015-06-22 at 09.54.27

This slide is from Benedict Evans’ presentation Mobile is eating the world. The subtitle reads “Smartphones and tablets taking half of browsing and a third of purchasing”. Pause to take that in for a second. A massive and growing share of the market is on iOS and Android. The growth in these market share figures continues to surprise me.

Lots of mobile usage is in the home of course, and to a very large extent mobile means smartphones. Hence the smartphone user experience is key to growth. Riding with the tide of change is almost always the right call, especially for those with limited resources. Like startups.

We’ve been talking about mobile for years now, long enough for several mobile first companies to achieve massive scale, not least Uber. The massive shift to mobile is not the new news, then. What’s new is how far that trend has gone. One third of purchasing and one half of browsing. Mobile first is moving from an innovative strategy to the new normal.

UK startup job creation growing 80% per year

By | Startup general interest | One Comment

Screen Shot 2015-06-19 at 15.48.07

CityAM reported today that UK tech startups are expected to created 20,000 jobs this year and that tech startup vacancies are up 80% on last year. The data from Adzuna.

It’s great to see the startup scene making a real and growing impact on job creation and the economy.

To put that into context, 202,000 jobs were created over Q1 in the UK economy as a whole (see ONS). Over the year then 20,000 jobs would be about 2.5% of total jobs created, albeit they will be amongst the best jobs.

Why writing makes you smarter

By | Startup general interest, Uncategorized | 3 Comments

I started writing this blog back in 2006 when Twitter was only three months old and long form content user generated content was all the rage. Back then lots of people wrote blogs whereas today most folk rely on Twitter to share their views and news with the world. Periodically I revisit whether I should change from my pattern of daily blogging in favour of more tweeting, which would give me more reach for less effort, but I haven’t made the switch in part because of the feeling that blogging helps with my thinking.

I’ve historically explained how it works by saying that blogging forces me to complete my thoughts, but reading this Business Insider article titled Learning hacks that will maximise your memory I’m now thinking it is more accurate to say that writing makes me smarter. I always love a good listicle, and this one lists seven ways to make yourself smarter by improving your memory. It turns out that writing long form content forces you to do five of them.

  • Retrieval – remembering things before writing them creates new neural connections and strengthens the memory
  • Elaboration – connecting ideas to other ideas also creates new neural connections
  • Generation – creating hypotheses on directions of markets and startup best practice enhances learning and memory
  • Reflection – reading posts back before publishing them is a powerful tool for self-improvement
  • Calibration – feedback from blog posts and on Twitter helps immensely with learning (especially when it’s tough feedback)

The logic of this extends to all long form contemplative writing, whether on blogs or private memos. The nice thing for me about blogging is that the public scrutiny makes it easier to keep the habit of daily posting. If I was writing in a private journal I would find it more tempting to miss a day, or write notes instead of complete sentences.

Andreessen Horowitz: No bubble but rebalancing from IPO to late stage venture

By | Venture Capital | No Comments

Earlier this week Benedict Evans/Andreessen Horowitz published a great deck with their thoughts on whether we are in a bubble or not. The whole thing is well worth a read, but two slides stood out for me.

Firstly this table comparing 1999 and 2014 on key bubble-related metrics. As you can see this time round the funding is both smaller in scale and more conservative, and we are operating in a much, much bigger market. Hence from a high-level macro perspective current funding levels look sustainable.Screen Shot 2015-06-16 at 09.11.16

 

But second there has been a big shift from IPOs to late stage private rounds.

Screen Shot 2015-06-16 at 09.16.00

Investors in these late stage rounds are traditionally public market investors who have moved to the private markets because companies are going public later and the returns are now pre-IPO. That makes sense, but it looks to me as if they have less valuation discipline than we normally see in either the public markets or in smaller venture rounds.

So definite signs of a bubble in late stage private rounds.

However, Andreessen Horowitz conclude that so far the frothy late stage activity isn’t moving down the chain to smaller or earlier stage rounds, pointing out that the rise in the number of seed deals is a result of declining costs to start a company. I think that’s largely true. Here in the UK, we’ve seen some examples of heady activity in the early stages, but nothing widespread.

 

A new unicorn in the UK every six weeks

By | Forward Partners, Venture Capital | 4 Comments

 

 

 

Companies in Europe worth over $1bn
Screen Shot 2015-06-15 at 18.17.38

The above chart is lifted from a recent GP Bullhound report European Unicorns: Do They Have Legs?. It paints a pretty picture, for the UK and for Europe. In the last twelve months there were 8 new unicorns in the UK and 13 in Europe. That compares with 22 new unicorns in the US over the same period.

The fact that we’re creating larger numbers of big companies gives confidence to investors and provides fertile training grounds for the next generation of entrepreneurs and angels. It’s great to see.

That said, I’m going to finish with a caveat. For the reasons I gave above it’s critical that we create huge companies, but I think the pendulum has swung too far and the unicorn thing is now overdone. There are lots of great companies created which don’t get to $1bn value and at the earliest stages of investment the market opportunity generally isn’t clear enough to make investing in unicorns a viable strategy. The key discipline for every investor should be to ensure that every deal can be a fund returner, and with small funds that doesn’t require $1bn+ valuations. The real skill is putting yourself in a place to get lucky.

For Forward Partners that means investing in companies that can return the fund with exits in the £100-300m range but have a chance of going on to be much bigger. 60% of European unicorns are in the sectors on which we focus: ecommerce, marketplaces and software.

Will we persist with two mobile app ecosystems?

By | Apple, Google, Mobile, Uncategorized | 5 Comments

In the Apple App Store and the Google Play Store we currently have two vibrant mobile app ecosystems. Going back a few years the prevailing wisdom was that network effects would ultimately make this a winner takes all markets and that over time users and developers would eventually coalesce on a single platform. That was the lesson we all learned from Windows in the 1990s.

Then more recently people have been saying that both the ecosystems are large enough to be self-sustaining and that Google and Apple have both ‘won’.

That view made sense to me. Both ecosystems were growing and Apple’s dominance at the high end meant that developers mostly built for iOS first giving them sustainability in the face of Android’s faster growth. That’s part of the reason I ditched my long term allegiance to Android and bought an iPhone earlier this year.

Now new data from Apple and Google compiled by Benedict Evans is an early indication that the duopoly might not be stable after all (caveat: this analysis is based on a small number of datapoints and may be subject to large rounding errors).

IOS Growth Slow

The news is that iOS growth looks like it has stopped – Apple App Store revenue has flatlined at $10bn. Meanwhile Google Play Store revenues are continuing to grow fast. Extrapolating the trend lines for the last year suggests that Play Store revenues could overtake App Store Revenues this year.

There are many more Android devices out there and hence the revenue per device is significantly lower on Android, but there too the gap is closing.

For developers gross revenue on the platform and average revenue per device are key numbers and if/when the Play Store passes the App Store on these metrics I expect increasing numbers of developers will choose to go Android first, which will bring users across and further accelerate the growth of Play Store revenues. That in turn will encourage more developers to switch and we may see a repeat of the Windows movie from the 1990s when the winner takes all.

And I will have to switch back to Android.

 

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