When to be lean

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.

Continue reading "When to be lean"

Founders: Don’t be too needy

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

Continue reading "Founders: Don’t be too needy"

Investor optics: don’t let the tail wag the dog

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

🙂
Continue reading "Investor optics: don’t let the tail wag the dog"

Metrics: A double edged sword

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

Continue reading "Metrics: A double edged sword"

Structured customer dev – not to be missed.

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

Continue reading "Structured customer dev – not to be missed."

European tech: Which way to the exits?

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

Continue reading "European tech: Which way to the exits?"

A new dawn for European VC

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

Continue reading "A new dawn for European VC"

A new dawn for European VC

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

Continue reading "A new dawn for European VC"

Software startups: Beware ‘magic’ bullets

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
    Continue reading "Software startups: Beware ‘magic’ bullets"

Software startups: Beware ‘magic’ bullets

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
    Continue reading "Software startups: Beware ‘magic’ bullets"

As easy as… AI

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

Continue reading "As easy as… AI"

As easy as… AI

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

Continue reading "As easy as… AI"

Sometimes best practice isn’t best

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

Continue reading "Sometimes best practice isn’t best"

Sometimes best practice isn’t best

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

Continue reading "Sometimes best practice isn’t best"

UK VCs growing faster than European counterparts

One fear I heard expressed a lot post Brexit is that the London will lose it’s place as the dominant startup centre in Europe. These fears were compounded by programmes from France, Germany and other governments to get UK companies to relocate.

It appears these campaigns have had little impact. As you can see from the table above UK based funds had considerably more success fundraising this year than their European counterparts.

It seems that despite Brexit London is growing stronger as a startup ecosystem. I would posit that’s because there are powerful network effects at play. More funds attract better and more ambitious entrepreneurs who generate bigger returns and whose employees found new companies, in turn attracting more funds.

Nice to end the year on a happy note. Happy holidays!

Data compiled by Yannick Roux

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

Continue reading "VCs and our quest to invest in “home runs”"

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

Continue reading "Enjoying the journey"

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

Continue reading "Enjoying the journey"

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 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"