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The increasing importance of right first time execution

This Tweet from my friend Nicholas Lovell got me thinking about the changing dynamics of starting companies generally:

Just as it is getting easier to make games so it is getting easier to start companies. Both the amount of money required and the depth of skills required have fallen precipitously, the first driven by open source software and cloud computing and the second by the improving quality of tools, services and advice available to entrepreneurs. (Note building a successful company is still very difficult, it is just the starting that is getting easier.)

As with games the result is that increasing numbers of companies are started each year.

As with games that makes it harder to stand out from the crowd.

The keys to standing out from the crowd are to have a great idea, to execute well and to generate momentum. Early adopters, investors, and the press are always looking for hot new companies that exhibit these characteristics and they have good systems to find them. However, because the number of startups is increasing the bandwidth available to look at each one is declining making it harder for companies to get anyone to take a second look if their execution and/or momentum falters.

Hence it is increasingly important to execute right first time.

(Side note: experimentation and failure are part of good execution in a modern startup so long as the experiments are thoughtful and learning driven.)


Ev Williams’ formula for a billion dollar business

At a recent XOXO conference Ev Williams, founder of Twitter and Medium, gave his formula for a billion dollar business (as reported in Wired):

Here’s the formula if you want to build a billion-dollar internet company. Take a human desire, preferably one that has been around for a really long time…Identify that desire and use modern technology to take out steps

He gave Uber as his example. People have wanted to get from A to B since the beginning of time and Uber has just taken some steps out of the process.

The lesson here is that at the end of the day there is nothing new under the sun. We all still have the same basic needs and high potential consumer startups should be able to make a link between one of those needs and what they do. For my money Maslow’s Hierarchy of Needs is the best framework for understanding those needs. Whilst our basic human needs haven’t changed the extent to which they are sated is definitely evolving. That’s where Maslow’s Hierarchy is powerful. By listing our needs in the order in which we need them to be satisfied it makes it easier to see where the gaps are.

The dominant meme in this area is that our physiological and safety at the bottom of the hierarchy are largely taken care of, and that the opportunities now are in helping people with their needs for ‘love/belonging’, ‘self-esteem’ and, particularly ‘self-actualisation’. What’s interesting about Ev’s formula for a billion dollar business is that it shows how to look for opportunities anywhere in the hierarchy – there are opportunities in needs at the bottom of the pyramid if they can be satisfied with fewer steps. The more efficient delivery of health is one such area that a number of entrepreneurs are working on now.

Drones will impact ecommerce from 2017

Screen Shot 2014-04-08 at 14.30.55This chart is taken from a presentation to DemoLabs by Helen Greiner, founder and CEO of CyPhy works and formerly of iRobot. It’s a capability timeline for drones.

At Forward Partners we invest in the ecommerce ecoystem and one of the sub-areas is innovative product companies building their brands online. I’m interested in the way drones and robots are changing the economics of manufacturing and enabling innovative product companies by enabling greater precision at lower prices, through mass customisation, and through cost effective small batch runs.

According to the timeline above it will be in 2017/18 when drones and robots are “evaluating and managing” that they are having the impact that I describe above. I think we will see the first innovative startups leveraging drones and robots to make amazing products before then. Indeed, I wrote about one example in the bike industry last year.

The ideal length of subject lines, tweets, etc.

If content marketing is your game then Buffer just published some great data for you: The ideal length of everything online. Here’s the short version

  • Tweets: 100 characters
  • Blog post headlines: 6 words (I just chopped three words of the title of this post…)
  • Email subject line: 28-39 characters
  • URLs: 8 characters
  • Youtube videos: 3 minutes
  • Presentation videos: 18 minutes

They also say that blog posts should be 1,600 words/7 minutes, but they draw on data from Medium which has made great long form articles a feature of the site. I suspect that on blogs like this one shorter is better. That’s certainly the feedback I get. I aim for around 400 words (shorter today because no time….).

If you are interested in the ‘why’s’ and ‘wherefore’s’ then check the original post which quotes lots of supporting research.

Here’s a graphic to illustrate, including a few items that didn’t make my summary.


Balancing the short and long term

One of the hardest things for entrepreneurs can be knowing whether to pay more or less attention to the short or the long term. It’s easy to go wrong doing either. I’m thinking about this today following a discussion I had with a portfolio company yesterday and after reading this quote from Index Ventures partner Mike Volpi in his post about why Criteo succeeded (it was the team):

I always say startups shouldn’t think too long term, and just concentrate on the next milestone instead. A little like mountaineering, what you will see at 1,000 metres is very different to what you will see at 3,000 metres, 5,000 and so on. While you need to know the direction of travel, it’s only when you reach the next milestone that you will see how best to take the next step.

I think the key point in here is that so long as  you “know the direction of travel” you should “just concentrate on the next milestone”. The question then is on which to focus at any given moment. At the highest level I would say that if you can talk convincingly to both these points then you probably have the balance about right. Not many startups can though.

If you struggle convincing investors about the size of your market opportunity I would spend more time on “the direction of travel” (and the destination) whilst if you find that people buy into your vision but conversations fall over after that then take a look at the strength of your short term plans.

If you’re still struggling then just make sure you reach your next milestone. Much better to do that and be vague about the long term than to fail to reach that milestone…

Andreessen Horowitz seed investments by sector – ecommerce in front

Yesterday CBInsights published an analysis of Andreessen Horowitz’s investments. From our perspective as ecommerce seed investors the industry split was the most interesting chart because ecommerce was on top.

a16zindustry investment split

The chart above is for all their seed investments since 2010 and is a firm vote for ecommerce, although it would be interesting to see what the trends are within sectors.

The other piece of their analysis that was relevant for Forward Partners is that they are moving away from seed, down from 50% of their investments by number last year to 38% so far this year.



To be human is to be transhuman – Jason Silva

I’m a big fan of Jason Silva. He’s a modern day beat poet with a keen interest in the singularity - the point in the future when the human species transcends it’s biological form by merging with technology. Video is his medium and I’ve posted some of his work here before. His latest short video, embedded below, doesn’t disappoint. It’s titled ‘Shots of Awe’ and describes how to be human is already to be transhuman.

In it he quotes Eduardo da Silva making the great point that the period of natural selection has finished for the human race and that we now control our own evolution. That makes us the species that transforms and transcends itself, i.e. that is transhuman.

Enjoy ;-)

Explaining why TMT M&A deals at highest level since 2006

Over the weekend the FT wrote that the value of TMT M&A deals in Q1 was $174bn, the highest level since 2006 and up 65% on the year ago period.

The market is hot right now. No doubt about it. The $174bn includes a bunch of cable deals that aren’t relevant for the startup community, but even with those stripped out I’m sure the picture is still very healthy.

‘Is this a bubble?’ I hear you say.

I don’t think so. I think there are two reasons why companies are currently paying a lot to acquire startups. One that is hear to stay for the long term and another that is linked to the current low interest rate environment.

As I’ve written many times the pace of change continues to increase and that will be a long term driver of M&A, both big and small deals. Gene Sykes, Head of Global M&A explains why in the FT article (also linked above):

“It is the most interesting and disruptive time in the market I have ever seen. The value of the technology incumbents is more at risk than it has ever been. The best way for the established tech companies to overcome the challenge of new forms of technology is for them to be venturesome, as some of the leading companies have recently demonstrated.”

Facebook’s multi-billion dollar acquisitions of Oculus Rift and Whatsapp, and Google’s $3.2bn acquisition of Nest and string acquisitions in the robotics space are all best understood in this light. Moreover, this is a trend that is only going to increase. So long as there are highly valuable companies out there they will increasingly find their valuations at risk as their markets shift ever faster.

The second driver of high value M&A at the moment is the low interest rate environment. Simply put, when interest rates assets investments which increase in value are harder to find and hence more valuable (Fred Wilson explains the maths here). Hence stock markets reward growth and companies pay more for acquisitions which give them the growth that stock markets desire.

Tech is the main source of disruption and one of a small number of sources of growth. That’s why TMT M&A is breaking records right now, and why I’m optimistic about the future for our sector.

The large cost of telling small lies

I just read an inspiring post about The surprisingly large cost of telling small lies. It tells the story of an angel investor called Peter who warns of the cost of lying. Talking about small lies such as exaggerating metrics or omitting facts he says:

that telling lies is the No. 1 reason entrepreneurs fail. Not because telling lies makes you a bad person but because the act of lying plucks you from the present, preventing you from facing what is really going on in your world. Every time you overreport a metric, underreport a cost, are less than honest with a client or a member of your team, you create a false reality and you start living in it.

I don’t know that telling lies is the No. 1 reason that entrepreneurs fail, I’m with Paul Graham in saying that not building something people want is the No. 1 reason, but I know where Peter is coming from. Telling lies, even small ones,  has two pernicious effects. Most obviously it is then important to live up to the lie, which may mean more and bigger lies down the line and a collapse in trust. The other, more subtle, effect is that people who lie start to believe their own BS, and hence their worldview departs from reality undermining judgement and making success harder to achieve.

In his 2012 book How will you measure your life? Clayton Christenson wrote that in matters like this “100% is easier than 98%” meaning that if you allow yourself even small slips then bigger slips become harder to avoid. That’s a mantra I’ve found myself repeating a lot recently. Returning to lying, I’m not advocating pedantically making sure that any possibility for misunderstanding is eliminated. You meet some people like that and whilst their integrity is beyond doubt they aren’t usually terribly persuasive people. On the other hand, you meet other people who seem to avoid even little lies and make clarifying statements whenever there is the possibility of a misunderstanding that would play to their advantage. They often sacrifice short term gains in the name of truth, but in the long term they are often very effective. That’s the way to be.

The final paragraph of the article carries the warning:

If you are reading this post and thinking, “This doesn’t apply to me — I never lie,” you are probably lying to yourself.

That’s me! I’m going to be watching myself closely over the next few days…


Andreessen Horowitz explain why now is a good time to be a tech investor

The guys at Andreessen Hororwitz are on a hell of a tear. The firm was founded in 2009 and they just announced the closing of their fourth fund at $1.5bn. On top of that they’ve invested in a large number of marquee companies that have had big exits, including this weeks hot story Occulus Rift, and Twitter and AirBnB. They are one of the firms that inspires us here at Forward Partners, particularly for their operational model which we have adapted and extended so it works for early stage in the UK.

One of the other impressive things about Andreessen Horowitz is the quality of their writing and the way they are open with their thinking and investment theses. In the announcement of their new fund they included the following explanation of why now is a good time to be investing in tech, and by extension to be a tech entrepreneur:

We believe this is an incredibly exciting time to be a technology investor. The ultimate market size that this current generation of tech companies can go after dwarfs that of previous ones.

The obvious reason for this is mobile internet penetration: We’ve gone from an internet population of 55 million users to nearly three billion, and smartphone users are expected to grow from 1.5 billion today to five billion in the coming years. The winners in tech today can become massively larger than those of previous decades because the markets they can sell into are enormous, and growing.

Yet as these markets have grown, the technology costs required to support them have fallen dramatically due to developer productivity tools and cloud-based computing.

The ultimate market size that this generation of tech companies can go after dwarfs that of previous ones – that’s a message that can give us all hope going into the weekend.