Archive for the “The Equity Kicker” Category

Nic Brisbourne’s view from London on venture capital and exploiting change in technology and media.

See below for a good description of what we like to see in deals at Forward Partners and what makes us different from other VCs.

I gave the interview last year, and it was published this week on the Soldo blog.

An interview with Nic Brisbourne, Forward Partners

Nic Brisbourne is Managing Partner at Forward Partners, the UK’s leading early-stage VC, currently supporting the UK’s next generation of AI, e-commerce and marketplace businesses. He has been personally responsible for over 40 investments including Zeus Technology, Unbound, Conversocial, StrikeAd and Lyst. Nic is also the author of one of Europe’s most popular venture capital blogs –

Let’s start with the obvious question. Like all VCs you see lots of pitches; so what are you looking for?

Every good VC looks for the same three things: a great team, a great product, and a large and attractive market. We like those things in the same way as the rest of the industry. 

I think we differ a little from the rest of the industry, though, particularly with our focus on early stage companies. Other VCs will say that of the three key criteria – team, product and market – at the early stage, team is by far the most important. The logic goes that in the early days, you haven’t really got anything else: the product isn’t ready, the market can change, but the team is what you have. And so you should focus disproportionately on the team. 

Now, we love a great entrepreneur and team as much as anybody else, of course, but over the years we have realised that a great team working on an idea that isn’t convincing is not a recipe for success. Maybe they’ll pivot to something great eventually, but in the interim period, the valuation goes sideways – and that’s not a good place for a VC to be. 

Plus, that’s not even the worst outcome. Sometimes you get great founders with an average idea; but because they’re so good, they make it work to a degree. They find a niche in the market where they can grow some revenues and then they raise some more money. Ultimately, the quality of the idea gets found out, but by that point, that business has raised £5M-£10M. It’s got a big burn rate, it’s too big to pivot, and it goes bust. And everyone’s lost a lot of money. 

So having both a great founder and a great idea at the outset is super important.

And those that do pivot to a new model don’t always make it. I felt a couple of years ago that there was a ‘cult of pivoting’ – successful pivots were in the tech press all the time. But you only hear about the pivots that work – not the ones that failed!

Yes! And even if you succeed, it’s a really painful experience! Your first idea has failed. You don’t know if the second idea is going to work. 

Plus, step one of the pivot is to get your costs really low in order to preserve the runway to give yourself a chance of succeeding – so the team has to go. It’s just horrible. 

We love a great entrepreneur and team as much as anybody else, of course, but over the years we have realised that a great team working on an idea that isn’t convincing is not a recipe for success.

Given your focus on the idea, what makes a great idea?

We’re obsessively focused on customers and use cases. We don’t just ask who is going to use a product, for what and why. We really want to interrogate the customer:

  • What are they doing at the moment that they will be prepared to move away from, to use this idea (unless it’s something new, which of course brings its own problems)?
  • If they’re going to spend money on this product, where is that money coming from? Because everyone’s still got the same amount of cash as before you launched your company, so if they’re going to spend money on your product, understand that it means you’re asking them not to spend their discretionary money on something else.

That must matter more than ever. The average consumer is overloaded with options. We find in fintech particularly that the inertia people have with their existing service providers is huge…

Absolutely. It’s not too much of an overstatement to say that, 20 years ago, at the beginning of the internet, you could put almost any quality of experience online. You could build a decent-sized user base without having a slick product at all, because you were moving people online for the first time. It was better than, say, going to the shops.

That’s still true in some markets. Four years ago, we invested in a company called Patch which is bringing garden centres online, a market which is still 95-99% offline; so there are still odd pockets where you can bring a sector online for the first time.

But for the vast majority, that’s not the case. The customer experience has got to be better. So where we used to talk about Eric Ries’ concept of Minimum Viable Products, we now talk about Minimum Lovable Products: consumers have got to love a product enough to move away from their current alternative.

And what are the metrics for customer love? What are your benchmarks?

The industry classic is NPS – the Net Promoter Score; and we encourage all our companies to track that as soon as they can. But it’s by no means the only option, especially at the startup stage. 

In the very early stages, we work with our companies to conduct customer interviews; exploring how potential customers have thought about the problem space, how frustrated they are with their existing solutions, and how much their eyes light up when we suggest something new. It’s this very low-volume qualitative evidence that gets us over the line for initial investment before a product has been built.

Then, when you’ve got a product and a small number of customers, a great early sign is when your customers are spontaneously writing positive letters to you. One of our investments is in a company called Live Better With; they make and sell products to help people living with chronic conditions or challenging life circumstances.

For example, when you have chemotherapy, if you eat with metal cutlery, then the food will taste horrible and metallic; so Live Better With sells bamboo cutlery, amongst other things. When the business was just two months old, they received an email from one of their customers saying: “You saved our Christmas. My dad has cancer, he’s been having chemotherapy, and you helped him to enjoy his Christmas lunch”. When you get letters like that, it’s a strong sign that you’re resonating with your customers – yes, it’s on a small scale, but it’s a predictor of something you can build on. 

And as you get bigger, NPS and engagement metrics start to become relevant: how frequently people come back to your site, how long they spend there, how much they talk about you on social media etc. 

It’s easier at scale, right? 

Everything is easier to measure at scale. You get plenty of other difficulties building out, but measurement becomes much easier.

Where we used to talk about Eric Ries’ concept of Minimum Viable Products, we now talk about Minimum Lovable Products: consumers have got to love a product enough to move away from their current alternative.

As you operate at the early stage, how do you help a company scale? 

At Forward Partners, we’ve invested massively in a team of people to support our portfolio companies – a bigger investment than any other fund in the UK. We have a studio team – developers, designers etc. – plus recruiters, growth consultants, and brand & communications. 

It’s important to understand why. Fundamentally, the best entrepreneurs now have a choice as to where they get their money from. 25 years ago, capital was scarce and just getting access to capital was a win for founders. Then, around the time of the last internet bubble, capital became more abundant and so individual VC partners began to work much harder for their portfolio companies. 

In the mid-2000s, some forward-thinking VCs began to differentiate by employing specialists within their management companies. First Round Capital was the first to do this, but today well over half of VCs and nearly all of the most successful funds have a handful of people working in-house on delivery for portfolio businesses. 

Forward Partners and perhaps a dozen others globally, including Andreessen Horowitz and Google Ventures, have taken this to the next level, building the team out as comprehensively as possible. We call it “Applied VC”. It offers a richer service for founders and gives them a better chance of success.

Take, for example, Wager, a company we invested in about a year ago. With Wager, you can bet against your friends on football games. The challenge of betting with your friends is that it’s usually a case of evens or nothing: nobody can be bothered working out the official odds. Wager uses odds from bookmakers and handles all the money in the app – so it’s both fair and convenient. But the two founders were both business-oriented. Our team helped them figure out the product vision, we put incredible work into testing prototypes, and then our product developers built it – launching in time for the football season in August 2019. We have been crucial in getting the product to market.

Capital is a commodity; and therefore the winning investors of the future will be the ones that offer the best service. We hope that entrepreneurs will choose to work with us because of the team; and then use the help of the team to accelerate more quickly. More than one founder has told us that our competitors offered more funding, but that with our service layer, their business would be three to six months further forward ahead of the next fundraising round. For a high growth business, that can mean a 100% increase in key metrics and a much bigger valuation next time. And if you believe, ultimately, that entrepreneurship and startups are crucial to the future growth of the economy, and that entrepreneurs can help to solve the world’s problems, then we should all want Applied VCs who are offering better services to entrepreneurs so that they can have a better chance of succeeding: more job creation, more problems solved. 


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I’m a massive believer in the power of meditation and I’m far from alone. These days there’s a lot of talk about how good meditation is for us.

But there isn’t much explanation of how or why.

I’d love to see more, and hat tip to Shinzen Young and John Vevaeke who are thinking and talking about exactly that, and who provided the inspiration for this post.

So for me, there are two reasons why a good meditation practice brings a consistent improvement to our ability to generate insight. That’s certainly something I’ve felt for myself, but until now I didn’t understand the mechanism. (And for the cynics out there, I acknowledge I might be kidding myself ”</p

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A couple of weeks back I did an interview with Abadesi Osunsade from Product Hunt. We discussed a number of themes close to my heart, including the future of venture, Forward Partners culture and the power of mindfulness practice.

Embed here, and more detail of what we discussed below. (Originally published on Product Hunt last week.)

In this episode they talk about…

The future of venture capital and the concept of “applied venture”

“Why stop at having a few people on payroll to help your portfolio companies succeed? Why not find a way to have as many as possible? That allows you to help your portfolio companies with many more things, offer better service, and that should see the companies go on to achieve greater results.”

Nic gives us a history of the waves of venture capital since the early 2000s and explains how firms have evolved over time to better serve founders. He talks about the new trend in the industry — what they call “applied venture.” He explains what it is and how it is having an impact on founders and companies.

The culture at Forward Partners

“When we think about our culture, on the one hand we’re trying to reflect what we have currently so that it feels authentic and on the other, we’re trying to stretch ourselves to what we want to be tomorrow.”

Nic says that at Forward Partners they look up to characters who inspire and inform their work. He explains why they chose Indiana Jones, Yoda, and Leonardo Da Vinci as the three individuals who capture what they want to be at Forward.

Nic’s introduction to mindfulness

“It was totally the wrong time of year to go to India. I arrived at the New Dehli airport and there was a sign up in the airport with the temperature, 44 degrees centigrade at 1 o’clock in the morning.”

Nic explains how he became an advocate for mindfulness after having a hesitant start and shares the funny story of going to India during the hottest months to meditate at an ashram.

The benefits of mindfulness for founders

“There was a biotech company that ran an 8-week mindfulness course for their employees. After eight weeks they did MRI scans and the happiness centres in the people who had been on the mindfulness course were noticeably more active.”

After Nic became a mindfulness convert, he didn’t stop at how it could help him in his work, he looked also to how it could have a positive impact on the founders he works with as well. He explains some of the benefits to the practice and talks about some of the programs they have been putting on for founders to help them get in the habit.

What he’s most excited about in the tech ecosystem

“Really what’s most exciting for me is the way that the startup ecosystem is growing and growing. The world is changing faster and faster and we have bigger and bigger problems to solve and it’s entrepreneurs who are going to be solving those problems for us on a global level.“

He talks about some of the tech trends happening now that he loathes and loves, and explains what they look for when they’re evaluating a potential investment for the impact it would have on the world. 

Nic also shares some of his favorite products and explains why he was initially an Apple skeptic but has since become a fan.

We’ll be back next week so be sure to subscribe on Apple PodcastsGoogle PodcastsSpotifyBreakerOvercast, or wherever you listen to your favorite podcasts. ”</p

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When I started in venture capital in the late 1990s VCs were regularly lambasted for taking long summer holidays and spending too much time on the golf course. I remember one enterprising journalist judging VCs on the basis of how much their handicaps had gone down. Low handicaps weren’t good!

During this time, cash was scarce and VCs were firmly in control. Most investors thought of their job as picking good companies and making sure governance was strong. Decades later, things couldn’t be more different. After about twenty years of different forms of value-added services in VC, it feels like we are approaching a new plateau, to which everyone aspires and few have achieved.

In this post, I want to look at this new plateau, describe how we got here and offer three reasons why this trend has been gathering steam.

It begins

From around 2000, and perhaps coinciding with the need to work harder to win deals as opportunities dried up after the internet bubble burst, individual partners at VC firms began adding ‘helping CEOs win’ to their job descriptions. 

The most visible symptom of this trend was VCs writing blogs to show just how value add they were. Fred Wilson, Brad Feld and Mark Suster stand out as the three best examples of individuals who built their careers this way, and Benchmark stands out as the fund which best embodies this approach.

Then from the mid 2000s, value add began moving beyond the partner to the firm as VCs began employing people who’s full time job was helping their portfolio. 

Building platforms

They called them ‘Platform Teams’ and the value they add varies between funds. The most common strategies are to provide networking services and content to portfolio leaders so they can be more effective in their jobs. 

The output takes the form of events where portfolio execs can meet each other, online communities where they can share knowledge and blog posts and talks from experts to disseminate best practice.

The other most common focus areas for platform teams are to employ talent and PR/marketing experts who give advice to portfolio companies on strategy in these areas and have relationships and discounts with pre-vetted agencies who can deliver the work.

It was perhaps First Round Capital that pioneered the platform VC model, but at this point nearly all the major VCs have platform teams of varying sizes, including KPCB, Accel and Sequoia.

Applied Venture

The most recent development that’s emerging is an extension of the Platform VC model that we call Applied Venture. There are two key differences between Platform and Applied VC. 

Firstly the value add teams at Applied VCs are much larger allowing them to help portfolio companies with execution as well as advice. The services they provide extend to pretty much everything their portfolio needs that it doesn’t make sense for them to have on payroll, and includes talent, growth, design, data science, and development. 

This is what brings us to the second big difference: the cost of Applied Venture is too large to finance from a standard VC management fee. 

Different funds finance the cost of these teams with a differing weighting of asking portfolio companies to pay for services, larger than normal management fees, and reduced compensation for partners.

Other than Forward Partners, notable examples of the Applied VC model include Andreessen Horowitz, Google Ventures, OpenView and Project A in Berlin. Our value add team is 10 people rising to 15 (servicing a £60m fund), Project A has 130 people on their value add team, Andreessen Horowitz has around 100, Google Ventures has 25-30, and OpenView has 10.

Sidenote: There are a number of great funds that have strategies that are very close to Applied Venture and arguably should have been included in the list above. First Round Capital and Atomico spring to mind. I excluded them because they still focus more on advising portfolio companies rather than supporting with execution and I wanted to be a purist, but the line between Platform VC and Applied Venture is certainly fuzzy and you could argue it either way.

What’s driving this change?

The next interesting question is why the strategy of VC funds is evolving in this way. I believe there are three reasons:


Capital is a commodity, a truism that the VC industry was largely able to ignore in the early days due to lack of capital in the market and scarcity of information for entrepreneurs. Over the last twenty years both of these features of the startup financing world have changed dramatically flipping the balance of power from investor to entrepreneur. 

As a result VCs who didn’t want to only compete on price began looking for ways to differentiate their money from the money of other investors and started deploying the strategies listed above.

Entrepreneurship is becoming more science and less art

As the number of startups has exploded over the last 30-40 years best practices have been developed that can be shared from one early stage company to the next. This trend accelerated through the emergence of VC and operator blogging in the early 2000s. 

The emergence of these best practices created an opportunity for VCs to become a channel for these best practices, simultaneously improving their service to entrepreneurs and accelerating value creation at their portfolio companies.

The watershed moment in entrepreneurship becoming more science than art as probably Eric Ries’s publication of The Lean Startup in 2011 (although some would argue for Steve Blank’s Four Steps to the Epiphany in 2005).

In addition to Platform and Applied Venture strategies, the trend towards hiring ex-operators into partner roles at VC firms can be seen in this light.

Value add strategies make partners at VC firms more personally effective

Partners at Applied Venture firms can focus their time and energy where it has the most impact, and they can turn to their value add teams to support the portfolio in all other areas. 

When it comes to supporting portfolio companies, for most partners that will be advising on strategy and fundraising, helping keep other directors focused on the right things, and supporting founders at a personal level. 

The value add teams should be better placed to advice on areas of more detailed execution, including things like employee recognition frameworks, merits of one marketing channel over another, and the best choice of analytics package. 

Partners who don’t have the support of a value add team but still want to add value have to allocate a portion of their precious hours to having sensible high level opinions on these sorts of things and building networks of people who can provide support at the more detailed level.

At Forward Partners we believe that these three reasons are becoming stronger over time. Competition is increasing as more capital flows into the market and transparency improves. Best practices continue to develop apace. All the while the best VCs continue to look for ways to leverage their talents. 

That can only mean that VCs will continue to find ways to add more value to their capital and that more and more fund managers will adopt the Applied Venture model.

And what’s holding it back?

There are two reasons why the trend towards Applied Venture isn’t playing out more quickly. 

Business model

When we ask other VCs whether they would like to employ (more) people to help their portfolio the most common response is that they would love to but their management fee won’t stretch that far. 

Moreover, most LPs are wary of larger than average management fees, fearing that the extra money won’t be deployed in a way that improves returns, and in particular that the Partners at the funds will simply use the money to increase their drawings. 

The GP-LP structure used by most funds is a brake on innovation here too. Because LPs don’t typically have any ownership of the GP they don’t benefit directly when GPs build value into their management companies. This lack of alignment makes conversations about fund managers investing to build value add capabilities harder than they could be.

It’s hard and requires a different mindset

The second reason is that Applied Venture is difficult to execute on from an operational perspective. As well as being great investors, Applied VCs need to run a high value services business. Moreover, if the VC is high quality, the portfolio companies will be high quality and hence very demanding of the value add team. 

Executing well on this opportunity requires building a deep understanding of the support entrepreneurs need, developing a suite of services that match those needs and then hiring and maintaining a team that can deliver those services. The people in that team will have very different needs to investment professionals.

The Applied VCs listed above have tackled these challenges and developed solutions that are making a big difference to the success of our portfolio companies and are starting to show that our approach will generate superior returns for our investors. 

Although it is early days, we’re starting to see some positive data for our own portfolio. Our companies are 4x more likely to reach Series A, with a 55% higher valuation, 26% faster and with founder equity 2.3x more valuable than their peers. 

The success we’re seeing coupled with the experience at other VC firms and the logic outlined above has convinced us that Applied VC is the logical next step for the venture industry.


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Between 2006 and 2016, I wrote something on this blog almost every working day. It was a huge effort but I loved it. People often asked me how I found the time, but when you see value in something, you almost always simply make the time. That value for me has been not only in distilling and consolidating my thoughts – but also reaching and engaging with a much broader audience than I would be able to otherwise. 

But by 2016 things had changed a lot, which meant blogging slowly but surely taking a back seat. We were now three years in at Forward Partners and it was increasingly obvious that the team here should be writing rather than me. As of last summer, I stopped blogging all together. 

Well we’re on the cusp of yet another big change here at Forward Partners, one which has given me the energy and will to get back into it, and so today I’m relaunching the Equity Kicker – with a fresh design update for good measure (a big thanks to Lewis for his help here!).

That big change? Well, I’ve been working on the long term future for Forward Partners and continuing to build on our ambitions to revolutionise the world of venture capital. Continuing to share more of how we see the ‘Applied Venture’ model becoming commonplace is one thing, but another part of that is how servicing founders will evolve more broadly. I’ve personally been exploring how a mindfulness-meditation based service for founders will not only contribute to their personal wellbeing but in turn improve performance. 

So this blog will ongoing be dedicated to these two passions – the future of venture capital and how mindfulness/meditation can support the founder journey. As usual, for all things Forward Partners you can check out our own blog, or for insights, tips and tools for company building from our team, The Path Forward continues to go strong. 

If you’ve read this far, I say thank you and a big welcome back! It feels a bit retro to still be blogging on my own domain but I’m reluctant to lose my archive of posts. So please pass the word on to any friends you have who are interested in mindfulness and/or the future of venture capital, and I hope to see you back here soon!


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Ben Horowitz, founder of leading venture firm Andreessen Horowitz and a successful entrepreneur prior to that published a post over the weekend: The Case for the Fat Start-Up.

In it he argues that lean thinking has been overdone and that startup CEOs should be more aggressive raising capital and investing in building value in their companies. His reasoning is that being number one in a market is the only thing that counts, and that it therefore makes sense to go all out to achieve that goal. Running lean means going slower, increasing the chances that another company takes that coveted number one spot.

I have a ton of respect for Ben. He was produced large volumes of beautifully written guidance for startups that I have enjoyed reading and quote frequently. I’ve also agreed with pretty much all of it.

Until now.

Even this time I think he is partially right. But his advice needs a major qualification, because whilst it is right for some companies to go all out to secure the number one slot, there are plenty of others for whom raising a ton of cash and investing heavily is the wrong answer. For some it’s because they haven’t reached that point yet, and for others it will never be the right answer.

Let me start by defining the group of companies for whom a ‘Fat start-up’ strategy is the right strategy. I think they have the following characteristics:

  • They operate in a very large market
  • They know how investing heavily will drive growth – i.e. have some form of product market fit
  • They have a path to profitability or confidence they can raise future funds

It is likely all the companies that a large fund like Andreessen Horowitz wants to invest in have all three of these characteristics, making Ben’s advice appropriate for his universe.

However, for earlier stage funds like Forward Partners the picture is a little different.

Some of our portfolio companies have these three characteristics, and most of those are raising as much as they can to maximise their chances of being number one in their market. We love and support that firstly because it’s what the founders want and we are behind them, but also because we are shareholders and know that in nearly all markets the number one company is much more valuable than the number two.

But a lot of our portfolio don’t have all three of those characteristics, and for them it makes sense to run lean, at least for a while. Most of those companies fall into one of these two categories:

  • They don’t yet know for sure how big their truly addressable market is. We invest in lots of companies that are playing early in emerging new markets. We believe the markets have a good chance of being large, but at the outset we don’t know for sure. For those companies it is important to make sure they don’t over-fund for their truly addressable market size. If a company’s market ends up being small relative to the amount of capital they have raised then the outcome won’t be good. The exit will likely be similar to or smaller than the amount of capital they raised, meaning investors will be unhappy because they lost money or only just made their investment back, whilst management and founders will only make what they can negotiate out of a side deal.In his post Ben talks about a startup purgatory where under-investment leads to coming second in the market and low returns after years of effort. This is the other type of startup purgatory, where over-investment leads to low returns despite winning the market, again after years of effort. There are few things more annoying than working hard, building a successful business, exiting for a decent, but not huge, amount, and having all the stakeholders be disappointed with the outcome.

    Companies in this group should start raising relatively small amounts and then scale up as it becomes clear the opportunity size merits it. Putting that in fat startup vs lean startup terms, these businesses should start lean and only move to fat once they are sure they are in a big market.

  • They are in a big market but haven’t found product market fit yet. Most of our investments are pre-product market fit. Many are pre-product entirely – no product, no code, no team, just a great founder and an amazing idea. For these pre-product market fit companies raising a lot of money early is occasionally the right thing to do – mostly when the competition is, or is likely to be, fierce – but for most of them it makes sense to keep things lean until the unit economics are established and it’s clear how more cash will drive growth and enable the next round. Raising a lot of money before this point – which you can consider a working definition of product market fit – is dangerous because of the increased expectations that come with a big round.Getting investors to back you in a big round generally requires showing them a big plan, i.e. one that has rapid revenue growth to make them excited and rapid expense growth to justify the fundraise. Most founders who raise a round like this follow the expense side of the plan, but if they are pre-product market fit they don’t know if the revenues will follow. If those revenues don’t come then the company quickly falls into a precarious position, with a big burn, a big valuation to live up to and little progress to show to potential investors in the next round.

    Companies in this group should generally stay lean until they have found product market fit.

I’m as excited about being part of massive companies as everyone else in this industry, but it’s important to recognise that there are lots of great companies that don’t reach $1bn in value, but do make a meaningful contribution to society and deliver great outcomes for their founders and early investors. The overarching point of this post is to note that these sub $1bn companies need to be funded appropriately. Generally speaking, and to simplify, that means staying lean unless or until it’s clear the outcome can be very big, or, in more detail, start lean and become progressively less lean only as the scale of the opportunity becomes clear.


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We all know that things get difficult when someone wants something too much. You might have had a needy boyfriend or girlfriend whose constant need for reaffirmation and over-reaction to perceived signs of problems undermined your relationship. Or you might have experience of a co-worker who wanted promotion so much they got obsessed on one thing and lost sight of the big picture.

The same thing happens to founders. A lot.

It’s easy to see why. Starting a company is a big risk and founders invest a lot of themselves into their companies – a lot of time, a lot of emotion and a lot of money (whether by way of direct investment of opportunity cost of a higher salary that could be earned elsewhere). Then they hire people and raise money by promising success.

By this point failure feels unimaginable, an embarrassing waste of time and money, a horrible process of laying people off and a litany of broken promises to people they care about. And then the negative voices can start, I’ve wasted my career, I’m a failure, nobody will ever want me, I won’t be able to keep up the payments on my house etc. etc.

I have had some of these feelings at Forward Partners.

Here are the three most common ways I see needing it too much hurt founders:

  • They are less authentic when they pitch. Every startup is an experiment and is best understood as a learning journey, yet when they pitch founders are asked to project into the future with confidence. It’s important that they feel conviction – investors are most definitely looking for that – but it’s also important that they show an understanding that their assumptions might be wrong. Founders who need it too much have a hard time countenancing that idea, making them look brittle and unconvincing.
  • They don’t push potential customers and partners to a ‘yes’ or a ‘no’, preferring to let time pass and have more meetings rather than take the chance of getting a ‘no’ that might be too hard to hear. The result is spending a lot of time and effort with companies that don’t come through, time that could have been spent building new pipeline, thus increasing the chances of the business succeeding.
  • They are chronically slow to ship product, always wanting to add another feature or add a bit more polish rather than release it to the world who might not like it. As Eric Ries taught us, if some customers don’t love the essence of your product you are doomed anyway and unless you are a most uncommon genius at least some, if not most, of the additional work you do pre launch will turn out to be a waste of time. So much better to release early. There’s a balance of course, and the game has become harder since Ries published The Lean Startup in 2011. Nowadays there’s an existing online alternative for just about every new product, so it’s no longer sufficient to ship a bare bones MVP, if you want people to even think about switching you also have to achieve a minimum level of usability across the whole product. But that doesn’t change the need to ship at the earliest feasible moment.

The first line of defence is self-awareness. If you catch yourself doing anything I’ve described above, or more generally, departing from your normal standards of objectivity then stop and ask yourself if you’re needing it too much. Then, maybe the tougher part is to try and change how you feel. Remember that, as important as it might seem at the time, no one conversation is going to make or break your company. There are always more customers and investors to talk to, so you can afford to relax a little. And if you get good at relaxing you will do better anyway.

The second thing is to take time to think through your Plan B. If you have an acceptable fall-back then it will be that much easier to relax and you should avoid the really negative thought spirals. Our big bet when we started Forward Partners was that we could get better results by investing heavily in an operational team to support our partner companies. Providing a platform that would make it easier for founders to succeed would let us win the best deals and help them reach even higher heights. That’s panning out, but our Plan B was a calculation that if all the extra investment turned out to be a waste of money then the fund would still make OK profits so long as the investments performed as well as companies I had backed in the past.

Finally, find someone to talk to. Best is a coach, if you can afford one. They will help you see when your need for success is getting in the way of clear thinking.


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Earlier this week a friend was asking me whether her fundraising chances would be improved if she started generating revenues. She’s a natural salesperson and she’s wondering if having small revenues would make it harder for her to sell a big growth story than if she has no revenues at all. When we unpicked it, the logic behind the question is that if there is a small amount of revenue, maybe with small month on month increases, then projections of much larger month on month increases going forward might look less credible than if there were no revenues at all.

In short, she was wondering if she was in danger of letting numbers get in the way of a good story.

Firstly, note that this is backwards thinking. Letting investor optics determine strategy rarely works out well. I get that fundraising is a nerve-wracking process, that investors can be unpredictable and irrational and how that makes optics important. But delaying monetisation to optimise for fundraising almost always falls into the category of letting the tail wag the dog. I say almost always because the caveat (and this applies to all fundraising advice, and isn’t said enough) is that fundraising success often comes down to just one new person falling in love with your idea, and that generalisations like the one I’m making here might apply to the majority of investors, but they will never apply to all of them.

Then the second thing to say is that projections which involve a step change are always harder to believe than projections which are based on an extrapolation of existing trends. That’s not surprising when you think about it, because in the step change case you have to believe that something new will happen whereas in the extrapolation case you only have to believe that things will continue as they are. That’s why companies that have been stuck in a rut of low or no growth often find it hard to raise cash, even when it’s reasonable to argue that a low level of investment is the reason growth has been lacklustre. I’ve heard many founders in this situation say that it’s very unfair when companies that are similar to their’s, but newer, find it much easier to get investors excited, even though they’ve often got less experience. Hopefully this explains why.

Returning to the case in hand – if there are small revenues and small increases, an extrapolation of existing trends won’t look very exciting. However, the same can be said for if there are no revenues at all. So in both these scenarios, my friend will be asking investors to believe in a step change. Following the logic through it makes sense for her to start monetising as soon as possible because that gives the chance that revenues will grow fast, the step change will have happened, and the fundraising will be easy.

Happily, this brings us away from investor optics determining strategy and back to doing the right thing ”</p

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Let me start by saying that I’m a massive believer in the power of metrics. There’s an old adage that if you don’t measure something it doesn’t happen and I think there’s a tonne of truth in that. As a result we advise our companies to build KPI trees so employees in each department know what to do and there can be confidence that if everyone delivers the company will hit its overall growth and profitability targets.

However, it’s also true that metrics are not a panacea, with difficulties typically arising when a focus on metrics eclipses the big picture. This happens for two related reasons:

  • Bad implementation
  • Over focus on metrics at the expense of meaning, culture and innovation

Bad implementation is a surprisingly easy trap to fall into. In startups things move fast, and once you get beyond the high level metrics like sales it is often difficult to get good data, particularly at the very early stages. Calculating an accurate CPA by channel is a good example of something that sounds simple, but is notoriously difficult in practice. So entrepreneurs do the best they can, and develop proxy metrics. That works great whilst everyone remembers that they are proxies. The problem is that they forget quickly, particularly when the team grows and the people managing to the proxy weren’t there when the conversation about it being a proxy was had in the first place. If you’re not careful you can end up with a company that is working very precisely to a set of metrics that are slightly off target and everything isn’t working as well as it could.

Or worse, the proxy metrics are only directionally right and when managed to with precision they result in bad outcomes. Arguably that’s what’s happening in the UK and US education systems right now, where schools have been measured on standardised test scores for some time and teachers are now ‘teaching to the test’ at the expense of a more rounded general education. The NHS in contrast has a more comprehensive set of targets comprising waiting lists for operations, wait time in A&E, commitments for cancer patients, maternity patients and many more items. Whilst the NHS is definitely creaking under the pressure of increasing patient numbers and increasing cost-per-patient, it’s my belief that these targets have helped managers to focus on what’s important and improve the quality of the health service provided to us all here in the UK.

The solution to bad implementation, of course, is to improve the implementation rather than ditch the metrics. In education that might mean smaller more regular tests or adding additional measures, maybe of pupil happiness. Some of these might be impossible or prohibitively expensive to measure, but you get the point.

The second thing that can go awry with metrics is much more subtle, and tends to afflict good companies with well defined KPIs. The value of metrics is that they make it simple for people to know what to do. The associated challenge is that people cleve to that simplicity and lose sight of the nuances, particularly if they are comped on the metrics.

Last night, I was talking with one of our portfolio companies which is particularly well run. They make exceptionally good use of metrics and have enjoyed great success as a result. However, growth is now slowing and that’s at least in part because they have been over-focused on what they can measure and neglected brand and some of the more qualitative aspects of customer experience that might have improved retention. Culture and innovation are two other areas that aren’t measurable and can suffer in metrics driven businesses.

The remedy is for the CEO to stay brave and maintain a clear vision for where she or he wants the company to go in the areas which aren’t measurable as well as the areas that are. That requires clarity of thought, constant communication, and allowing for objectives that aren’t fully SMART. Perhaps more challenging, it requires creating an environment where people work effectively toward soft targets as well as delivering KPIs. By soft targets I mostly mean areas where there is no firm definition of quality so gut feel rules – branding is an obvious example, as are mission and vision statements, innovation more generally, and managing to company values.


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In our experience, structured customer development work is right up there amongst the most valuable things a founder can do in the early days of their startup. Once you have an idea that feels strong, it’s imperative to speak with customers about it. But good customer development is tough to do. It takes a long time, think 10-20 hours of interviews plus preparation and digest time, and conducting structured interviews with strangers is outside the comfort zone of many founders. So lots of entrepreneurs skimp on this vital piece of work. That’s a bad decision. It leaves you flying blind when with a little hard work you can be seeing clearly.

Let me use the Jobs To Be Done (JTBD) framework for product development to explain why.

Reams have been written about the JTBD framework. I will give you a high-level summary here, but if you are building products then I recommend spending some time with Google to find out a bit more.

The core idea of the JTBD framework is that customers use products or services to do a job for them (in the US many people say they “hire” the product or service to do the job, but that doesn’t translate too well into UK English so I prefer “use”).

For example, I used my bike to do the job of getting from home to work this morning. I could have used a bus or a tube, but I used a bike.

That job breaks down into component parts. I have to access the mode of transport, pay for it, travel, dispose of the mode of transport at the other end and maybe get from the disposal point to my final destination. With my bike that breaks down to getting it out of the bikeshed in my front garden, no payment, cycle for 15 mins, put it in the bike rack in our office garden, and then walk five metres to my desk. If I was getting the bus the breakdown would be walking to the bus stop, paying with my iPhone, sitting on the bus for 30 mins, getting off the bus, and walking 200 metres to my desk.

Each of those component parts has associated outcomes that I’m looking for. Some of those are functional and others are emotional. Taking the travel component of the job, the functional outcomes I’m looking for include speed, comfort, exercise and predictability whilst the emotional ones include safety, anxiety, and consistency with my identity as an active person.

Those component jobs could be broken down further and then there would be outcomes associated with each job at the next level of detail down the stack. Part of the art of using the JBTD framework well is picking the right level of detail to work at.

The work I’ve described so far is a desk exercise. That’s valuable, but the real insight comes from talking with customers to discover what’s important to them, how satisfied they are with their existing provider, what needs to change and how much they would be willing to pay. The focus should be on the outcomes they want and their answers will tell you what features you need to build and where the opportunities for differentiation lie.

Before you start you will probably have a gut feel for the answers customers will give you to these questions. I originally titled this post “Two compelling reasons to do structured customer dev” because unless you do it you won’t know whether you are right or wrong until you’ve invested the time and money it takes to design your MVP, build it, release it and find some customers. Now that we all follow lean development methodologies mistakes are much cheaper than they used to be, but they are still a hell of a lot more expensive than 10-20 hours of customer dev.

Common mistakes which lead to wasted effort include building a feature to drive an outcome that isn’t important to customers and not realising that an outcome provided by competitors is important for customers. This second one is particularly dangerous as it will result in low conversion and might lead you to the erroneous conclusion that your point of differentiation isn’t resonating (a false negative).

The second reason to do structured customer dev is that the interviews can yield insights which drive marketing. An example from Photobox. They sell personalised photo gifts, photo books, mugs, calendars etc. Using the JTBD framework they established that one of the jobs they do for their customers is help them remember when a birthday or anniversary is coming up and they need to give a gift. Through the customer interviews they discovered that remembering and not forgetting had very different emotions associated with them. Remembering something is nice, but not remarkable, whereas not forgetting means avoiding all the anxiety associated with forgetting something important and letting someone down. They used this insight to change the subject line in some of their reminder emails. The message moved from “remember XYZ” to “don’t forget XYZ” and the response rate was much improved.

I could go on for ever about the importance of customer dev work. It really does make a huge difference. The reason many founders skimp on it is that the benefits often seem a bit nebulous. I hope they seem less nebulous now.

A quick shout out to Dave Wascha from Photobox who was kind enough to spend time with the Forward Partners team on Monday educating us about the JTBD framework. His talk was the inspiration for this post.


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Max Niederhofer recently published this chart showing European exits. As you can see there’s been impressive growth in sub $100m exits, but the story with larger M&A exits and IPOs is less compelling. As I wrote last week our ecosystem is making great progress, but clearly, if we are to keep growing then at some point we need to see an increase in large exits.

The good news is that we can reconcile the facts that we have an increasing number of great companies with the fact that the number of large exits isn’t going up: great companies are staying private for longer. Witness mega rounds by companies like Transferwise and Deliveroo that in years gone past would have had to IPO to raise that kind of cash or, as was more often the case, sell to a larger company that could finance their growth.

This ‘staying private longer’ phenomenon isn’t just a European thing. In the US companies are raising amounts of capital previously only possible through IPO with much greater frequency than they are here. Whether that’s a good or a bad thing is debatable (private companies have less scrutiny and therefore lower costs, but arguably the scrutiny makes them more disciplined) but the important point here is that it’s skewing the exit data. That said, if LPs are to keep making new commitments to fund, they need to get cash back soon, so this trend can’t continue forever.


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This week I’ve been at the SuperReturn/SuperVenture conference in Berlin. It’s the biggest European gathering of venture capital fund managers, private equity fund managers and LPs, the institutions that invest in both types of funds. I’ve been going off and on for the last ten years and the good news is that the tide is definitely turning in favour of European venture.

That said, we’re coming from a place where there was very little interest amongst LPs in European funds. For many years our asset class, which is “European venture” was at the bottom of their priority lists. I remember vividly one year, I think it was 2012, when a placement agent (industry jargon for a broker that helps raise private equity and venture funds) had surveyed 83 LPs. He had given them each three votes to cast across about 15 different asset classes. Of the 249 available votes, only 5 were put against European venture. European VCs fundraising at that time were fishing in a very small pond…

As I say though, things have been getting better for a while. The logic in favour of European venture was always strong. VC investment per capita is lower than the US (it’s now 33% lower) and enterprise spend on technology here is much higher as a ratio to VC investment than it is elsewhere in the world. Efficient market theory has it that money should flow into that void.

The problem has been that many LPs lost money in European venture in the 1999-2000, were nervous about making the same mistake again, and wondered if there was a structural reason why venture capitalists seemed to be less successful here than in the US. Structural reasons mooted included an absence of serial entrepreneurs, insufficient venture capital to scale businesses properly, lack of ambition and the fear of failure.

However, whilst money didn’t flood into the void, it did trickle. Governments around Europe played their part, funding the EIF and domestically here in the UK the British Business Bank, and a few brave LPs were prepared to walk where others feared to tread.

And with that capital, a few entrepreneurs succeeded against odds that were much tougher than they would have faced in the Valley. They became serial entrepreneurs, attracting more venture capital into the market, enabling us to fund businesses more aggressively, which in turn drove returns higher. We entered a virtuous spiral and if there was ever a lack of ambition or too high a fear of failure nobody is talking about it anymore.

That virtuous spiral has been turning slowly for a while now and the result has encouraging growth in capital invested into European startups and raised by European venture funds. Different data sources vary, but I think the Dealroom data you see in the chart below is pretty close to the truth.


However, what most of us in the industry would like is for the virtuous spiral to turn faster. I think we could comfortably deploy more capital into more companies and grow them more aggressively and reach bigger outcomes without the market getting overheated.

As I wrote recently to an active investor in venture, the input metrics of funds raised and dollars deployed are very healthy, but we don’t yet have published written evidence that all this activity is translating into great returns for LPs. The fact that commitments to venture funds are rising implies that the returns are there, or at least that LPs believe they are coming, but we haven’t yet seen that in industry stats.

What we do have now is active venture LPs saying publicly that they are making good returns from European venture and that those returns are getting better every year. We heard that at SuperVenture this week, and that’s a first for me in 18 years in this game.

We also had LPs who have historically invested in private equity but not venture questioning whether it was time for them to make a change.

So I think the chances are good that the growth in our ecosystem will accelerate. I can’t remember feeling this optimistic about our collective prospects.


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I just read ‘Need More Time’? Guideposts For Tech Founders Going To Market When No Market Exists which is full of great tips for what they call ‘pre-chasm’ enterprise startups. The term ‘pre-chasm’ is a nod to Geoffrey Moore’s 1998 classic Crossing the Chasm and refers to companies that may have sold to early adopters, but haven’t yet found a way to sell to the mainstream. Getting sales going in those early years is terrifically challenging and requires great product and great sales. There are lots of common pitfalls that founders fall into and the whole post is well worth a read, but I want to highlight two sections which cover mistakes that in my experience many founders are prone to making.

  1. Over-value conversations and even deals with large enterprise customers. Here’s how they put it:Surely people paying you money for expertise is a strong signal you’re heading towards product-market fit? The twist is: In much-hyped new technology areas, before there’s a big market, it’s not uncommon for startups to close high dollar PoCs and even some large contracts simply because companies are happy to be educated by startups.This practice is particularly common in fintech.
  2. Believe that channel partners will accelerate sales. Here’s how they put it:I see this play out in new markets again and again: Pre-chasm enterprise startups throw time and resources at indirect sales channels (including OEMs, etc.) in the hopes that someone else’s sales team can do a better job than your own. Or, assuming it will accelerate sales, they will spend a lot of time with technical or channel partners … [but] rarely will indirect channels for enterprise devote real resources to help push someone else’s product to market. As for VARs, they typically only provide fulfillment in the early days (and if you’re really lucky, deal registration for qualified leads) because they aren’t structured to carry pre-chasm products — i.e., pitching, educating, hiring the right sales force. They’re good at distributing things where there’s already an educated customer base.Nine times out of ten (or more) direct sales is the only way for early stage startups.


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Google is pushing hard to make artificial intelligence as easy to access as cloud computing, building services that reduce both costs and the technical skill required from users. To my mind, there is a strong parallel with how Amazon Web Services made it easier and cheaper for companies to build web apps.

Throughout 2017 they made steady advances, releasing Google Cloud Machine Learning Engine and grew Kaggle, their community of data scientists and ML researchers, to more than one million members. They now have more than 10,000 businesses using Google Cloud AI services, including companies BoxRolls Royce MarineKewpie and Ocado.

And now they are introducing Cloud AutoML, which promises to:

Help businesses with limited ML expertise start building their own high-quality custom models by using advanced techniques like learning2learn and transfer learning

Google seems to be in the vanguard, but Amazon and Microsoft are pursuing similar agendas. For AI startups this means that machine learning expertise will become relatively less important whilst access to data and customer understanding will rise in significance. Given that ML expertise has been in short supply we can expect to see a sharp rise in the number of high-quality startups using machine learning to make better products (as distinct from low-quality startups that claim to use machine learning but don’t really). It also means that the opportunity space will tip towards applications and away from infrastructure.

At Forward Partners we’ve had “Applied AI” as one of our two focus areas for investments for around six months now. We define Applied AI as anything that mimics human cognition (that’s the AI bit) in an application applied to real-world problems using well-understood technologies. We insist on ‘well-understood technologies’ because as an early stage investor we want to be funding companies that can get products to market in predictable time-frames rather than what I sometimes unkindly refer to as research projects. From our perspective, services like Cloud AutoML are great because they add to the available suite of well-understood technologies and therefore increase the range of startups we can back. This is a trend we can expect to continue as Google, Amazon and Microsoft offer more services in this area as they compete to keep people inside their ecosystems.


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The blogosphere has transformed entrepreneurship. Twenty years ago there were precious few resources available for founders and most either had to find an advisor who had done it before or rely on trial and error. That increased the power of the network effects at the heart of startup hubs where it was easier to find those conversations – especially Silicon Valley. These days it’s all different and a decent guide to doing just about anything is only a few clicks away. Here at Forward Partners we’ve contributed our fair share of such guides at The Path Forward.

However, whilst all this great content is amazingly valuable for entrepreneurs it gives them a new problem. If they try to follow the best practice advised for fundraisingrecruitmentbrand, writing code, product management, and growth then they will quickly run out of hours in their day, at least in the early days when resources are scarce. Moreover, this advice isn’t only coming from the blogosphere, it is coming from investors, board members, mentors, accelerator programmes and friends at other startups, making it harder to deal with than it should be.

I’m not criticising here. Much of the advice is highly-insightful and well-intentioned, and I’ve doled out my fair share (including on this blog). What I am saying is that founders need something more. They need to work out where in their companies they should apply best practice and where they should not.

For most startups these days the first answer is product. If we look at the three biggest startup successes of recent years, Google, Amazon and Facebook, then it’s clear their early success was underpinned by true excellence in product. However, this hasn’t always been the case and isn’t the always the case now. To go back a generation of startups, the success of Oracle and Microsoft came more from being great at sales and partnerships than from being great at product.

Still, for most startups today best practice in product, including customer development and lean development principles, will be critically important. But great product is rarely sufficient on its own, and most successful companies will have an additional spike or two in the other areas listed above.

The task for founders, then, is to first identify the areas where they will excel. That will be determined in part by the market they are in and in part by the experience and capabilities the founding team brings to the table (but don’t make the mistake of focusing where founders are strong if it isn’t right for the market). The second task is to work out the minimum requirement in all the other areas. That’s complicated, and will change as the business matures and standards rise across the board. It’s also something that the blogosphere doesn’t help with.

A simple ‘where we will excel and where we will do just enough’ framework will also be helpful when founders are talking with mentors and advisors. Too often I see mentors frustrated when their advice isn’t actioned and entrepreneurs avoiding mentor conversations for fear of leaving with a list of recommendations they won’t have time to implement. When a startup is just a handful of people it’s ok to be great where it counts and average where it doesn’t matter so much.


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