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Forward Partners solo-founders office hours – 19th Sept

We are holding our second open office hours for solo founders of ecompanies in the commerce ecosystem on 19th Sept. If that’s you please come along!

Pradeep explained the details last week on the Forward Partners blog, copied below.

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We will be holding Open Office Hours on September 19th to meet solo-founders of ecommerce companies at the idea stage.

To apply please email Pradeep Raman [email protected] with a brief description of your business idea and a link to your website (if you have one).

Are you a solo founder with an idea? We have worked with a number of solo founders to get their ideas off the ground and find a co-founder. When we backed Matt Fox at SnapTrip, a last-minute self catered breaks service, and Daniel Van Binsbergen at Lexoo, a marketplace connecting SMEs and lawyers, they were both solo-founders.

We typically offer £250k over three tranches to these idea stage businesses where our minimum requirement is that the founder has a well formed and well researched idea. We can help develop and validate the idea, build a product and find a co-founder. You can read more about our solo founder hypothesis here and about how we helped Snaptrip here.

What we look for

It’s simple! We’re looking for great entrepreneurs with great ideas that attack big markets. We have a preference for individuals with domain expertise and we love people who obsess over product and understanding their customers.

Our focus

Our sector focus is the ecommerce ecosystem. We define that broadly to include any consumer facing business where there is a clear transaction/purchase and B2B companies that sell to ecommerce companies. We are particularly innovative shopping models, innovative product companies and software and services for small ecommerce businesses.

Three examples from our portfolio:

 

  • Thread.com is a free personal shopping service
  • Lost My Name make beautiful and amazing personalised books
  • Parcelbright helps SMEs save time & money on parcel delivery

 

We are holding our next Office Hours on Friday 19th September, between 1pm and 3.30pm. You can come in for a 15 min chat with a member of our investment team. We’re happy to give advice, we’re happy to discuss your idea and we’re happy to be pitched.

Once again, if you are interested please email Pradeep Raman [email protected] with a brief description of your business idea and a link to your website (if you have one).

Crowdfund and then raise VC – breakdown by sector

One of the things we talk about here at Forward Partners is backing a hardware startup at the idea stage and then helping them launch a crowdfunding campaign. It ‘s nice to think that the crowdfunded dollars could provide leverage for our investment and build a company’s profile so it can raise a Series A.

Kickstarter is five years old now and the data coming from them, Indiegogo and other crowdfunding sites shows that the above strategy can work, although it is highly risky. The chart below shows the money that VCs are putting into crowdfunded companies and which sectors it is falling into:

hardware-crowdfunding-venture1

 

That’s $503m in total that went into 94 hardware projects from a total of 443 that Techcrunch found across the major crowdfunding sites when they looked in June this year (2014). However, the top 10 of those 94 took $336m, leaving the remaining 84 with an average of $2m each. That’s not much for a hardware company.

The takeaway is that only around 10 of 443 hardware projects went on to get significant funding. That’s a hit rate of just 2.3%, which tells me that whilst the theory of using crowd dollars to leverage an early stage investment is attractive it doesn’t work in practice often enough to be an investment strategy.

We will still make hardware investments (arguably Lost My Name falls into that category), but I doubt we will rely on crowdfunding as part of the investment thesis.

Latest Google X project – Project Wing: delivery drones

Delivery drones, aka Project Wing, is the latest project to be announced by Google X, the Google department that houses many of their most exciting projects including self driving cars, Project Loon and Google Glass. As you can see from the video below they are using a hybrid plance/helicopter design that takes off vertically and then rotates to fly like a small plane. The payload is winched down to the ground from a couple of hundred feet. This is very different from the equivalent project at Amazon which uses a quad copter design that lands at the delivery site.

I like the way they are focused on the user experience as well as the technical challenges. This from  The Atlantic:

Sergey [Brin] has been bugging me, asking, ‘What is it like? Is it actually a nice experience to get this?

Apparently the experience is very cool. The delivery drone hovers in the sky above you and then winches down the delivery before gliding away. It’s optimised for rural delivery though, and I’m not sure how the winch down would work in cities with tall buildings and limited outdoor space. The other interesting fact is that the drone is limited to a 1.5kg payload.

Impress investors with your execution of the fundraising process

Semil Shah wrote a good post yesterday with advice for entrepreneurs raising money. He makes a number of good points and the full post is well worth a read, but if I was to summarise it in one sentence it would be ‘impress investors with the way you execute your fundraising process’.

That means:

  • Get a quality introduction
  • Fashion your first email well
  • Have a good deck
  • Follow up quickly
  • Turn the pitch meeting into a conversation
  • Be on top of your numbers and don’t try to embellish or obfuscate – e.g. avoid cumulative graphs

Turning the pitch meeting into a conversation is worth dwelling on. Conversations are more fun for both sides than sales meetings and they give you a better chance to demonstrate your range and flexibility of thinking, and acknowledge the challenges that you will face.

Ice bucket challenge

The ALS Ice Bucket Challenge has been amazing, both as a money raising phenomena and a case study in how quickly memes spread these days.

And so perhaps inevitably my turn came around. I was challenged over the weekend and did it on Tuesday. Watch it below.

I tweeted the video out yesterday to keep the momentum going but I wanted to put it here for posterity.

Big thanks to our Head of Design Jack Oliver for bringing his magic touch to the video.

 

Gandhi on customers: this dude was way ahead of his time

I came across this quote at the weekend:

A customer is the most important visitor on our premises. He is not dependent on us. We are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an outsider in our business. He is part of it. We are not doing him a favor by serving him. He is doing us a favor by giving us an opportunity to do so.

It’s widely attributed to Gandhi and whilst this utterance doesn’t rank amongst his greatest achievements it does show remarkable vision and foresight, given that he died in 1948.

In fact, most companies still haven’t woken up to this reality today, despite the fact we’ve been living with the cliche ‘the customer is always right’ for a couple of decades now.

 

260 customers surveyed, but sloppy customer research

I blogged recently about the difference between quantity and quality when it comes to customer research. My friend Michal Bohanes recently made the same point with a picture in his excellent post mortem on his startup Dinnr (in which I was an angel investor).

batman

Michal was making the point that despite all this work he didn’t ask the questions that would have revealed customers didn’t care enough about his ‘deliver all the ingredients so you can home cook a meal’ service to actually buy. Instead he asked people whether they liked the idea and because people want to be nice and are bad at predicting what they will do in the future took away a bunch of ‘false-positive’ signals.

I know I keep going on about this, but it’s an easy and incredibly damaging mistake to make. Kudos to Michal for having the confidence to tell his story.

 

Avoiding burnout

“Dude. Go the gym!” is what one of my partners told one of our founders recently. He was stressed out closing a funding round and had dropped his usual routine, but the extra time didn’t help. In fact not going to the gym made things worse.

It’s easy for founders to get immersed in their businesses and not look after themselves. I was close to one company where that happened earlier this year and it was terrible. Bad for the founder and bad for the company. Bad enough that we are thinking about how we can add life coaching to the package of support we offer to our portfolio companies.

A couple of days ago Steve Blank wrote about his personal experiences with burn out. He was working hard and doing well, and the praise made him work harder still. And then he crashed. Here are his lessons learned:

  • No one will tell you to work fewer hours
  • You need to be responsible for your own health and happiness
  • Burnout sneaks up on you
  • Burnout is self-induced. You created it and own it.
  • Recovery takes an awareness of what happened and…
  • A plan to change the situation that got you there

Great advice. That said, I think you can find people to tell you when you are frazzled and should slow down a little. Husbands and wives can do that if you bring them into your startup journey. Mentors can also be a great help.

Making money from apps is HARD – some data

Screen Shot 2014-08-20 at 17.44.29

As you can see from the chart above only 3% of mobile app developers are making more than $100k per month/$1.2m per year. Assuming the same power law applies as monthly revenues scale further it’s a fair guess that only 3% of that 3%, i.e. 0.1%, are making $1m+ per month or $12m+ per year. That’s one in a thousand making enough to be interesting as a VC backed startup. Not great odds.

And it’s getting worse. The latest news is that app downloads are decreasing. The average Brit has downloaded 1.8 apps to their phone, down from 2.3 a year ago and 31% of smartphone owners have no third party apps on their phone at all (up from 20% last year).

The trends show that developers are still increasingly favouring apps over web technologies, but I’m thinking that might change soon. Maybe it will become easier to make money on the mobile web than from apps. It doesn’t seem like that’s a high bar.

The chart above came from Vision Mobile State of Nation Q3 2014 which you can download for free here (registration required).

 

 

Snaptrip case study – Solo founder hypothesis in action

My partner Dharmesh Raithatha wrote the post below on the Forward Partners blog earlier this week. I’m reproducing in full here because it’s a great explanation of our solo-founder hypothesis and how we work more generally.

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Screen Shot 2014-08-19 at 10.24.20

Are you a solo founder with an idea? We believe that we can help you create a successful e-commerce company better than anyone else. Here’s a case study of how we’ve helped Snaptrip.

HOW IT STARTED

Snaptrip started as an idea, an excel spreadsheet and a passionate founder called Matt. We met Matt for a casual coffee and the chat quickly turned into a follow up meeting and subsequent investment.

Matt was a second time entrepreneur who had a wealth of experience in the holiday lettings industry. His hypothesis was that consumers were moving towards last minute bookings and there was a gap in the market.

With no team and no technical expertise Matt was planning to find a team and build out some product before starting to raise some seed money. Our unique model allowed him to get started straight away.

USER RESEARCH

We help founders develop a deep understanding of the problem so that they don’t have to rely on gut alone.

We worked with Matt to design interview questionnaires and coached him on interviewing technique. More importantly, the team paired with Matt throughout this understanding phase to share the insight. Talking to customers doesn’t seem very difficult but learning how to intuitively ask open questions, deviate from a script and synthesise the information gathered takes practice.

Our neutrality also provides a nice counterweight to a founders confirmation bias.

THE PROCESS OF GOING OUT AND REALLY UNDERSTANDING THE USERS NEEDS AND PROBLEMS GAVE ME ABSOLUTE CONFIDENCE IN THE CONCEPT AND WAS INVALUABLE FOR THE SHAPING OF THE PRODUCT AND OFFERING. IF I MEET ANYBODY WHO IS STARTING A COMPANY NOW THAT IS NOT UNDERTAKING THE PROPER VALIDATION, I TELL THEM THEY’RE MAD, NO MATTER HOW GOOD THE IDEA IS! – MATT FOX

CONCIERGE MVP

The Concierge MVP means taking care of initial customers with the attention that a personal concierge would provide at a top hotel. It allows you to launch with a minimal product and provide an amazing service to your early customers while learning even more about their needs and wants.

Most of our early seed companies have used the Concierge MVP to accelerate insight which have led to better business and product decisions.

Matt really embraced this and we put his phone number at the top of the site and really encouraged customers to phone or use livechat to get in touch. Snaptrip is a weekend and evening business so the demands on your personal life can be quite high.

The beauty is that you get  real transactions with a minimal product and customers who are ecstatic with the service provided.

MATT AT SNAPTRIP DID AN AMAZING JOB TRYING TO FIND US SOME LAST MINUTE ACCOMMODATION IN NORTH DEVON. THE ACCOMMODATION LOOKS STUNNING, A PERFECT LOCATION OVERLOOKING WOOLACOMBE BEACH, LOOKING FORWARD TO A RELAXING 5 DAYS IN MY FAVOURITE PLACE. THANK YOU SO MUCH MATT, I WILL DEFINITELY BE USING YOU AGAIN AND WILL RECOMMEND TO MY FRIENDS. – TRUSTPILOT REVIEW.

THE DYNAMIC BETWEEN FOUNDER AND TEAM

With our investment studio model we are covering new ground so how we best work with founders is something that we think about everyday.

For example, will the founders rely on us too much and will it impact follow on investment for the companies?

So far we haven’t found this to be an issue. In the early phases the founders soak up as much as they can from the experts in the room and as the business grows they need less and less of our support.

The timing often depends on previous experience, key hires and the growth of the business. But it has happened in every single instance.

In the early phases Snaptrip would often have the whole team working on the company. Whereas as hires come on board and the product develops our involvement has scaled down to more of a mentoring role and for tactical projects.

FINDING A COFOUNDER

Our solo founder hypothesis doesn’t mean we don’t believe that having a strong founding team increases the chances of success. We definitely do, we just think that for solo founders our model leads to better outcomes and opens up a larger talent pool.

Our talent team was able to source a list of potential candidates and Matt approached them directly for a chat. At this stage Matt had funding (albeit tranched), a solid understanding of the problem, a product and early transactions.

This gives massive credibility and opens up a much wider list of interested candidates.

Matt interviewed a number of candidates and the ones he liked we also interviewed to give him a sanity check.

Matt now has a awesome technical co-founder in Dan who has relevant industry experience from 8 years at HomeAway and post IPO left to run his own holiday lettings startup.

When Dan joined as co-founder the dynamic definitely changed for the better. Snaptrip felt more solid as a team of founders who both had sector expertise. It also meant that some members of our team could pull away from the day to day startup work and move to giving strategic advice while we focussed on the newer companies.

Snaptrip works better with 2 founders, with both Matt and Dan fighting for each other 24 hours a day.

PREPARING FOR FOLLOW ON FUNDING

Snaptrip is nearing the end of its 12 months and our investment team is helping Matt prepare his deck and introducing him to potential investors.

We believe that Snaptrip has a really great future ahead of it and we are really excited that we could help Matt get his idea off the ground.