VCs and our quest to invest in “home runs”

This chart (taken from a recent post by First Republic’s Samir Kaji, data from leading venture investor Horseley Bridge) shows that to get the 3-5x return that most venture capitalists target 10% of their portfolio need to return 10x+. That explains why we are so focused on market size and other upside indicators when we invest. Getting a 10x result is hard and if 10% of our portfolio is to reach those dizzy heights then all of our investments must have that potential.

Of course, a 10x return on an individual investment doesn’t necessarily return the whole fund and many venture funds go a step further and stipulate that every deal must be a potential fund returner. That’s the way that we work at Forward Partners, so for us every investment in our second fund must have the potential to return £60m back to our investor. That means if we have a

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Enjoying the journey

Two weeks ago I wrote about our Skill and Pace value. Another of our four values is Enjoy The Journey. This one is more axiomatic for me than the others. Everyone at Forward Partners is devoting a significant part of their life to the cause and if it’s not enjoyable, what’s the point? The journey is the destination.

But what does it mean to live the value “Enjoy The Journey”?

First and foremost, it’s about finding meaning in our work.

Straight up fun is also important of course and we go out regularly as a team and with our partner companies to do crazy things and have a few drinks together, but I liken that stuff to the role of an important supporting actor. You need it, and the film wouldn’t work without it, but it’s not enough on its own. The lead actor, the rest of the cast, the

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The Dawn of ConstrucTech

You might have seen that the week before last Balfour Beatty (here) and Mace (here) weighed in on the future of construction. Both are quite radical in the breadth and depth of impact they predict, whilst the technologies they choose are perhaps unsurprising to anyone immersed in the startup ecosystem. The Balfour Beatty piece is more detailed and they predict humanless construction sites by 2050 (which is admittedly a long way off – broadband is less than twenty years old) saying that drones, robots and 3D and 4D modelling will get us there.

Construction is a massive industry with low productivity that hasn’t seen much penetration of tech. Balfour Beatty and Mace clearly see that changing and towards the end of the Balfour Beatty article they herald the arrival of a “constructech” market. Fintech, and more recently proptech and insurtech are startup categories that many VCs Continue reading "The Dawn of ConstrucTech"

The pursuit of skill and pace

Here at Forward Partners we are going through a process of rethinking our values. We have historically had seven, but found that was too many to consistently remember and action, so we recently consolidated it down to four:

  • We execute with skill and pace
  • We get better every time
  • We play the game differently
  • We enjoy the journey

The next step in our process is to flesh out what these mean in a bit more detail. I’ve been thinking about our ‘skill and pace’ value in particular. This is one that was part of the seven, so we’ve had it for a while. We adopted the value originally because we were having problems balancing speed and quality. We were getting conflict between team members who wanted to move fast and those who were concerned that we were compromising too much on quality. Most often this was when we were deciding

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When did tech become a dirty word?

The world is turning against tech. Silicon Valley is in danger of becoming the new Wall Street – public enemy number one. And it’s easy to see why. Facebook is being used to influence elections and promote hate speech. Google is pressuring think tanks to fire people they don’t like. And meanwhile Uber has grown into one of the most obnoxious companies on the planet. That’s just the news in 2017. To that, you can add enduring concerns over privacy, the dangers of AI, losing our children to their devices, and perhaps most dangerous of all, a growing sense that tech is a leading cause of the growing inequality of wealth. Meanwhile, we are easy to ridicule.

All this has come as a bit of a shock to much of the tech ecosystem. Collectively we’ve been happily beavering away, content that our work is driving innovation, economic growth and job

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Satya Nadella owns his mistakes – impressive

From a recent Fast Company article about Satya:

Invited to participate in a Q&A at the Grace Hopper Celebration of Women in Computing, a major annual event, he told the largely female audience that women in the tech industry should forgo asking for raises and instead trust that the system would reward them appropriately. The negative reaction was swift, with attendees quickly tweeting out their pushback.

Nadella realized his mistake, and the next day issued an apology. “I answered that question completely wrong,” he wrote in an email to Microsoft employees. Today, he describes his onstage comments as “a nonsense answer from this privileged guy.”

But Nadella did more than deliver a mea culpa; he explored his own biases—and pushed his executive team to follow suit. “I became more committed to Satya, not less,” says Microsoft chief people officer Kathleen Hogan, the former COO of worldwide sales, whom

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US and UK entrepreneurs suffer equally from ‘fear of failure’

This chart is from the UK government’s recently published Patient Capital Review.

I’m publishing it here because I often hear it said that the US startup ecosystem has a significant advantage over the UK and Europe because on this side of the Atlantic we are hobbled by a greater fear of failure. This has always annoyed me because a) I didn’t see it in practice, b) a certain amount of fear of failure is rational, and c) people used our supposed fear of failure to talk down the local startup ecosystem.

As you can see from the graph on the far right it turns out that fear of failure is roughly the same in the UK, the US, France and Germany.

It’s so good to finally have data on this topic!

Forward Partners Code of Ethics Regarding Sexual Harassment

Earlier in the year, there were a significant number of victims who came forward to share stories of sexual harassment by investors. Some of those investors were prominent VCs.

At Forward Partners we were really saddened by the reports – clearly, any abuse of an asymmetrical power relationship for sexual gain is wrong. Doctors have been held to a high standard in this regard for as long as I can remember and investors should be no different.

So a couple of weeks ago we adopted a new Code of Ethics for Sexual Harassment, with a link at the bottom of our homepage and a new question in our FAQ. The code identifies four different levels of sexual harassment and is based on a template that TechCrunch published in July.
We don’t want to make a big deal of this announcement, but it is important that people know our code of ethics
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Board meetings: Avoiding triviality

Getting value out of board meetings is tough. Lots of VCs have written posts with great tips – this recent one by Mark Suster is a very high quality example.

There are lots of reasons why value can be hard to extract – mostly to do with the fact that often board members don’t pay enough attention and CEOs don’t prepare as well as they could. However, today I’m going to write about a lesser known reason: the law of triviality.

From Nir Eyal’s What to do when someone steals your idea:

The British author C. Northcote Parkinson is famed for his “law of triviality,” first elucidated in a satirical article published in 1957. Parkinson writes of a committee assembled to approve plans for a nuclear power plant that instead spends most of its time arguing about a bike shed. The fictional committee wastes so much time on the

Continue reading "Board meetings: Avoiding triviality"

Board meetings: Avoiding triviality

Getting value out of board meetings is tough. Lots of VCs have written posts with great tips – this recent one by Mark Suster is a very high quality example.

There are lots of reasons why value can be hard to extract – mostly to do with the fact that often board members don’t pay enough attention and CEOs don’t prepare as well as they could. However, today I’m going to write about a lesser known reason: the law of triviality.

From Nir Eyal’s What to do when someone steals your idea:

The British author C. Northcote Parkinson is famed for his “law of triviality,” first elucidated in a satirical article published in 1957. Parkinson writes of a committee assembled to approve plans for a nuclear power plant that instead spends most of its time arguing about a bike shed. The fictional committee wastes so much time on the

Continue reading "Board meetings: Avoiding triviality"

Evolving our investment strategy

This is a long post (1,900 words). For those of you who are time poor here’s the tltr:

  • Forward Partners operates a focused investment strategy because it helps us make better investment decisions and provide better support to our companies
  • A good focus area for us is one that can generate 50+ deals and where we can build some generalised expertise that helps with our decision making and value add
  • Until now we have focused on marketplaces and next generation ecommerce
  • Recently we evaluated lots of options and did a deep dive on Applied AI before selecting it as our next area of focus

For the three and a half years that we’ve been going, Forward Partners has operated a focused investment strategy. We observed that small transactions of all types are increasingly moving online and backed the companies that were helping to accelerate that trend. That meant lots of

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🙂
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Google’s 5 Traits of Great Teams

As you may know Google has done an almost obsessive amount of research into what makes a high performing team. This post from Michael Schneider summarises what they found, into five traits that are easy to understand and easy to identify. Very powerful.
  1. Dependability.
    Team members get things done on time and meet expectations.

  2. Structure and clarity.
    High-performing teams have clear goals, and have well-defined roles within the group.

  3. Meaning.
    The work has personal significance to each member.

  4. Impact.
    The group believes their work is purposeful and positively impacts the greater good.

  5. Psychological Safety.
    When everyone is safe to take risks, voice their opinions, and ask judgment-free questions.

I love this for it’s simplicity and completeness. Unfortunately implementation sometimes remains challenging.  

Ten minutes mindfulness a day makes you a better leader

Want to see the confirmation bias at work? Then read on. I just read Spending 10 Minutes a Day on Mindfulness Subtly Changes the Way You React to Everything and loved it. I meditate for 15 minutes first thing every morning and feel that it makes a big difference to me. As I meditate I can feel stress dissipate and my mind feels somehow less taut. In the same way a flexible muscle is able to absorb more shock than a taut one I feel I’m more able to control my response to things that go wrong or might otherwise instigate a knee jerk reaction. The article tells me that my experience is common and this excerpt goes a little way to explaining why.
Leaders across the globe feel that the unprecedented busyness of modern-day leadership makes them more reactive and less proactive. There is a solution to this hardwired, Continue reading "Ten minutes mindfulness a day makes you a better leader"

The growth equation

This growth equation is brilliant in it’s simplicity. I love that it forces the focus on a magic moment and core product value. Both are essential. Read more about this in First Round Capital’s latest article.

How to beat the behemoths

I just read Andrew Chen’s Growth is getting hard from intensive competition, consolidation, and saturation. His argument is that we are at a point in the cycle where distribution is controlled by a small number of companies who limit the opportunities for differentiation via marketing. He mentions Google, Apple, and Facebook, and I agree wholeheartedly. Facebook’s growth in revenue per use shows just how successful they’ve been in extracting value from the system and I’m sure we could find similar charts for the other two. Amazon is the other company that is dominating distribution, and for me most impressive and therefore ultimately the most scary of the lot. All four of these businesses have monopolistic tendencies that make it hard for startups to compete and get noticed. Chen identifies six trends which continue to make life more difficult:

Authenticity cannot be achieved solo

I’ve been thinking a lot about authenticity recently. The first thing to say is that it’s a woolly concept. As an individual I am clearly me, and therefore of undisputed origin and not a copy. In common parlance then to be authentic is to be genuine, to be truly what we say we are. The problem with this is that most of us are, in fact, many different people. The person we are with our kids might be different from the person we are with our partner, which might again be different to who we are at work, and we might even be a different person depending on which group of friends we are with. There’s a tempting notion that the true person sits somehow at the middle of these different external facing people, but if you subscribe to the view, as I do, that we are no more than Continue reading "Authenticity cannot be achieved solo"

Entrepreneur to scale-up CEO: two very different skill sets

Growing from a founder to a scale-up CEO is challenging. Thinking up game changing ideas couldn’t be more different to running a large business. Many transitions are required along that journey but the one that I’ve been thinking about recently comes when the first product starts to take off. To simplify, before then success comes from trying lots of things, but after that success comes from making one thing work. Creativity is the main skill required in the first phase. It’s all about coming up with lots of ideas and seeing which ones have merit. It’s a time when the options seem limitless and new ones are opening up all the time. Conversations with customers and other industry players frequently go off on tangents revealing new opportunities and adding to the sense of upside. It’s all about getting a few irons in the fire and founders often have a growing belief that Continue reading "Entrepreneur to scale-up CEO: two very different skill sets"

The devil in the detail…

A common mistake founders make at the early stages of a company is to put too much detail into their business plan. Sometimes we see a level of detail which amounts to spurious accuracy given the stage the company is at and the attendant uncertainty. Two concerns follow:
  1. The founder doesn’t understand how much things change in startups (or, worse, are trying to project a greater level of certainty than they feel)
  2. They may not be flexible enough to ride with the punches
This happens most often with projections about how products will work and with financial models. I won’t name companies but one we spoke with recently was building a three sided marketplace. They were pre-launch but had developed a complicated six step transaction flow they thought their customers would go through which included commission splits and transaction timelines. They had taken users through the potential flow and got positive feedback Continue reading "The devil in the detail…"

Change: The beguiling nature of exponential curves

Consider the three charts above. They are all representations of the same exponential function where the Y value is equal to two times it’s previous value. The first chart shows the data series for the first twenty values, the second chart shows the data series for values on through ten, and the third chart shows the data series for values eleven through twenty. Notice that all the charts look similar and that the second and third charts are virtually identical. The takeaway: when you are on an exponential curve the trajectory looking forward is the same at any point on the curve. For me, at least, this is highly counter-intuitive. I think that’s because the mind sees change in absolute rather than relative terms. I know that things like processing power, storage, bandwidth (fixed and wireless), solar, and genome sequencing have been improving exponentially for some time so I expect to feel
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The importance of being an expert-generalist

I am in the Elon Musk fan club. It’s hard not to be in awe of what he’s achieved – four multi-billion dollar companies and he’s only in his forties. I’ve even read his biography, not something I’ve done for many people. Lots has been written about why he is successful, mostly focused on his drive, vision, tenacity, resilience and intelligence, but I happened on a post morning which highlighted something that was new for me. Forbes columnist Michael Sims was seeking to understand how he has been successful across a wide range of very different industries – auto, space travel, energy and software. The answer, he believes, is that Elon Musk is an expert-generalist:

Expert-generalists study widely in many different fields, understand deeper principles that connect those fields, and then apply the principles to their core specialty.

That struck a chord with me because that is what good venture Continue reading "The importance of being an expert-generalist"