A bunch of great mobile product managers joined us recently at our latest DFJ Teach-In on Mobile Product Management. We were lucky enough to have one of the most talented and experienced mobile product guys in Europe (well, basically in the world) Dash Gopinath, come and lead the session. Dash cut his teeth in product management in the Valley at Yahoo!, Digg and TopProspect before landing here in London at one of the very first iconic mobile product companies - Badoo.
Being a non-conformist, Dash wanted to approach the Teach-in with a slightly different format. He ran a short and hyper-focused workshop in the spirit of experimentation and engagement (two things important in product).
His four different modules covered:
- The direction the mobile industry is going (single function apps, simple design, anonymity in social discovery, media as a communication mechanism and messaging as a platform).
- Mobile user behaviour (differences between tablet, web and mobile; location, type and time of use; and how to target platform behavior by designing specific functionality not present elsewhere).
- Mobile development (a polished first release, internal scrums and demo’s but monthly external releases, early-stage approach ie android vs. iOS, mobile vs. tablet; OS and version support; and how to do more continuous deployment and testing in mobile).
- Mobile UX (focus on simple functionality, flat design, bespoke apps and functions, how mobile has changed social).
We were all blown away by his knowledge and practices that he has developed over time. Most interesting to me was how to approach mobile development - especially the need for a polished first release which is very different from the web where you have continuous deployment which the user doesn’t realise. If your first deployment is 100% perfect, whatever users you are able to acquire will churn and uninstall your app. Dash recommends taking 100% of your idea and chopping it down to 70%. Then build that 70% perfectly and launch it.
Process wise, what has worked well for mobile products he has developed were 2 week sprints with monthly releases. You can have iterative testing on mobile via HTML5, TestFlight (or in some cases I know companies who have built their own internal tools).
Thanks to Dash for coming in and sharing his ideas with all of us, its great to see the ecosystem coming together and entrepreneurs supporting and teaching the next generation of product builders.
No one is born hating another person because of the color of his skin, or his background, or his religion. People must learn to hate, and if they can learn to hate, they can be taught to love, for love comes more naturally to the human heart than its opposite.
Nelson Mandela, Long Walk to Freedom
Nelson Mandela (18 July 1918 − 5 December 2013)
I had a long session last night with a founder I backed personally in an angel round recently. The company is now on their 4th iteration and making tremendous progress towards hitting product market fit. It’s extremely hard to measure the distance you have to go towards hitting PMF, but you can look back at where you began with your initial hypotheses and see how far you have come in refining your product.
This is why is it important when launching a new product that you have strong opinions which are loosely held. I can’t remember where I heard this phrase, but to me this is the perfect quote to keep in mind when you are just getting started with a new product and are facing an uncertain future. You can’t be too attached to what you believe, otherwise you won’t be able to move forward when you collect new evidence proving/disproving your hypotheses. But, it is important to keep your belief in the kernel of the idea very strong and pivot around that idea until you get closer to cracking it.
Most startup founders have a confirmation bias when they are getting started. They had a specific problem which persistently got in their way and they decided to solve it. But they bring with them this confirmation bias which is a tendency of them to favour information that confirms their beliefs or hypotheses. Being mindful of your own cognitive bias and being extremely open to users of your products will allow you to move faster towards your product market fit as you are not trying to put your beliefs off onto your users.
You’re already familiar with product market fit, but what is product vertical fit? Product vertical fit relates to where you are getting early traction in sales within a very specific vertical and where you should allocate the majority of your resources for the next phase of growth.
How do you know if you are getting traction in a specific vertical? With early stage sales teams, there isn’t a lot of focus on target customers because you don’t know what they look like. In most cases, they look like the users who have been giving you feedback during your product market fit phase. After you close your first 10-20 sales, you should analyse them to see if there are certain patterns ie did they come from the result of inbound or outbound marketing activities, do you first make contact with end users or purchasing decision makers, are they constrained to specific geographies, are they small or large companies, are they using the product to solve the same problem, are they from the same sector?
As an example, Conversocial first started gaining traction with very large enterprise customers in two categories - national supermarket chains and large retail stores. Because Conversocial knew exactly what problem they were solving for the likes of Tesco (a global supermarket and retail chain), they decided to target other potential deals in that category. It is much easier to get a meeting set-up with potential customers when you have already closed a sale with one of their competitors and you know how to close that deal (who to speak to, how to sell it, how long it will take, how to show ROI, how to get usage and adoption early on etc.). They now the dominant vendor for customer social service for large supermarket chains and retail companies and are focusing on new verticals to attack from the top down.
In this example, Conversocial allocated a large part of their sales resource targeting customers in verticals where they had the most traction. They still responded to inbound leads from other sectors and experimented selling to customers in other verticals, but the focus and strategy remained to target on 2-3 key verticals to stay focused.
Similarly, one of our other portfolio companies HQ’d in Helsinki, Bitbar (they just recently opened their SF office) noticed that they were getting a lot of traction from both consumer internet facing companies and large banks. They are lucky to generate hundreds of leads from inbound activities per month, but their largest deals to date have been from a dedicated outbound approach to customers in verticals where they have already closed large annual contract values. Their executive and sales management are focused on 2-3 key verticals right now and until they feel as though they dominate them, thats where their focus lies.
Who is in charge of focusing on product vertical fit? Early on, I would argue that it is you, the founders who need to be running this analysis and setting the strategic direction of your sales operation. You probably haven’t hired a VP Sales yet, so it is up to you to analyze where your product is getting traction and to focus on owning that segment of the market before moving on to new verticals
I’m working out of SportPursuit’s office today (a DFJ Esprit investment) and I’m reminded of the importance of bringing your flak jacket to work.The company now has over three floors in a South Clapham office building and I’m on the top floor with the marketing and sales guys. Overhearing some of the sales guys reminds me of the first time that I met Adam Pikett, Victoria Walton and Rhys Jones who told me the story of how they came up with the idea for SportPursuit.
The fundamental problem that SportPursuit is solving for customers, who are avid sportsmen and women who live active lifestyles (cycling, skiing, camping, hiking etc) and brands such as Northface, Spy and Rapha is two-fold:
1. Helping customers find those hard to source brands that they covet at the best prices
2. Helping brands reach customers that typically couldn’t access their stock because they didn’t live close to a retail shop that carried their products
When they first launched the business, only a handful of brands were willing to go to the hassle of working with the team. Everything was very manual - lots of spreadsheets, physical purchase orders, having to set-up new email templates every day, a clunky CMS etc. Aside from getting the IT automated and building a site that could scale to handle hundreds of thousands of orders, their toughest job was convincing iconic brands to work with them. Fast forward to today and SportPursuit has almost every major sport and outdoor brand working with them and dozens of high-end niche brands that consumers in the UK, Australia or the Nordics may have never had access to before.
When you are a small company with a tiny customer base, its almost impossible to get your first sales closed. They tend to be founder led to buyers trying to innovate who buy into your vision. They also tend to pay first-customer prices. In ecommerce/retail, this may mean that you’re making low margins in the early days. For SaaS companies this may mean giving your product away for dirt cheap so you can continue to build useful features, drive user engagement and ultimately up-sell your first customers in 12 months time.
Walking in to your first 50 sales pitches, you better bring your flak jacket with you because you will come across an eclectic mix of buyers. Some potential buyers may express interest if you add x feature to your product, others will run you through an endless trial process, some won’t have any budget, others may turn you away because you can’t calculate a ROI for them. Whatever their reason, this is one of the most useful stages in building your company because you can take all of their feedback and turn it into marketing collateral, feedback into product dev and refine your sales approach.
Firstly, a huge congrats to all of my partners and colleagues here at DFJ Esprit as we won VC firm of the year at the GP Bullhound Investor All Star Awards last night. It makes me super proud to know that I work with some pretty inspirational people that challenge me every day.
We thought it would be useful to disclose some of our stats from the first 3 Quarters of the year. Firstly, we remain one of the most active VC’s in Europe and have made 18 new and follow-on investments so far this year, including SportPursuit, Conversocial, Bitbar (Bitbar was our first Finnish investment of the year), Movidius, M-Files (our second Finnish investment so far this year), StrikeAd, Neul, Getbulb, Lime, Oxford Immunotec, ZBD, Metalysis, Camsemi, Netronome, Aveilant, Tagsys and Horizon Discovery. Our Series A investment into Datahug in October last year also got topped-up earlier this year by Salesforce.com. These companies are spread out with HQ’s or large offices in Helsinki, Dublin, Cambridge, Oxford, London, NYC and SF. Needless to say, we all rack up plenty of air miles every year.
Portfolio wise, we played a key role in the launch of Graze in the US this year. They are on the heels of Lyst, Conversocial and MoviePilot who all launched in the US in the last 18 months - we have a few more we are working closely with to launch in the US over the next few quarters.
The average investment size this year across all rounds from early stage to growth from our fund is $5m and the average round size is $9m but ranges from $1m to $19m. The average revenues of companies we have invested into this year look something like this if you look at their historical revenues: $7.5m in 2011, $13.9m in 2012 and $24m this year. So many of them are progressing nicely.
We have also just closed our 2nd DFJ Esprit Angel EIS fund which brings in former DFJ-backed founders and executives, serial angels, private equity professionals and large corporate tech execs to invest alongside our main fund into EIS qualifying companies (pretty much everything that we invest into). We think of this as a product for founders as they get access to dozens of experienced tech execs who are also hustling on behalf of the companies that we back.
We’ve had a handful of Teach-Ins so far this year including topics on Customer Success and Inbound Marketing and coming up we have invited all of our product managers for a session on mobile product management. In November we will be holding a start-up b2b sales teach-in, a customer acquisition teach-in for our web/mobile companies, and a TV advertising teach-in as four of our existing companies are currently running ads in the UK and several more are looking into whether this could be a scalable channel for them. Feedback has been overwhelming from founders on how much they have learned and put to use in their day to day ops back at their companies. We are always looking for new ways to support our portfolio companies from hiring to product strategy to internationalising.
A colleague from DFJ Growth in SF and I have kicked off work for an International Playbook to help founders when they are thinking about what steps need to be taken when thinking about launching their first office/product outside of your home country. Most of the statistical evidence we have collected are from DFJ-backed companies and we may interview some companies outside of DFJ for a wider sample-size. We hope to publish something soon.
Our new team is up and running - Gil Dibner joined us this month as a Partner looking into saas, big data, IT automation and security software and we can already see the huge impact he is going to have here. We’re looking forward to announcing several more deals before Christmas and a few other exciting announcements that we have up our sleeves. The highlight so far this year for me has been watching the European startup scene continuing to grow, especially in places like Dublin, Stockholm, Copenhagen, Helsinki and Paris.
Marx wrote of Bonapartism, “history repeats itself, first as tragedy, then as farce,” relating to Napoleon and then his nephew’s corrupted revolutions. I was thinking about this quote as I was walking into work today.
When something blows up at a startup - your site goes down, your biggest customer churns, you have a fire in your factory, your international launch fails (all of these have happened in our portfolio over the years) - everyone is devastated. But you pick yourself up, figure out where it all went wrong and get back to the grind. It was the first time, how could you have seen it coming?
The second time a major event impacts your startup, its a farce. You realize that so many things are out of your control.The only constants for startups are competition and chaos. But at least you are aware that it could happen again.
Until you’ve had that first major blow, you won’t understand what I’m talking about. I guess it doesn’t really matter. It’s when horrible things happen at your company that you learn how to overcome it and move on and get ready for the next one.
I’m personally a big fan of the Government’s relaxing of the rules on EIS and the introduction of SEIS (Enterprise Investment Scheme and Seed EIS) as it is attracting new angel investors* into the UK early stage tech market. We are still a few years away from knowing whether or not this will have a positive impact on the ecosystem here, but early signs would suggest that it will.
AngelList is still in its infancy and if you follow disruptive innovation theory, Angel.co’s fairly basic concept has already taken root in simple applications at the very bottom of the startup market - angel and seed investing. What all of this means is that AngelList has the opportunity to relentlessly migrate upmarket, potentially displacing established competitors - VCs and Angel Syndicates.
At the most basic level, what AngelList has achieved to date is allow a whole new set of companies at the bottom of a market access a product that has historically only been accessible to companies in certain geographies. For example, five years ago in Cambridge, UK a startup may have been passed on by the Cambridge Angels (who have traditionally been the largest angel group in town) and the founders didn’t know any London based angels. Maybe they pulled together a little bit of money from family and friends but ultimately they failed. Fast forward to today and the same company can raise money from Cambridge angels, London angels or bypass them both and raise from SF and NYC based angels. And as asset prices in the US continue to remain highly inflated due to the oversupply of VC, many angels and VC’s will continue to look for innovation elsewhere.
At CityMeetsTech, we are making it a pre-requisite for angels who want to attend pitch events to create an Angel.co profile. I know that Seedcamp, Techstars and the other leading accelerators all do this. We are also doing everything we can to get the startups that we select onto the platform so that everything can be coordinated, saved and updated in one location. We do this because we have heard that It makes it so much easier and faster to close a round as the founders are much more in control of the fundraising process.
Investing directly into UK based startups online is not yet possible (it might be in beta but I am unaware of any companies currently raising money directly). But in the not too distant future this will be possible. I think the combination of AngelList and EIS here in the UK will continue to have a major impact on the ecosystem. The timing couldn’t be better because the number of new, high-potential disruptive companies here and across the rest of Europe is bigger than its ever been before. And just imagine if they launched a product that allowed investors and startups to automatically complete those EIS forms and send them to HMRC :)
* Disclaimer: We at DFJ Esprit have also taken advantage of EIS and have raised an Angel co-investment fund which has attracted many former DFJ-backed portfolio executives to invest into the fund. We have made money together in the past and they would like an exposure in their personal portfolios to early stage tech. This is great news for DFJ Esprit and our portfolio companies because this means that we have created a formal network in which our companies are able to draw on the experience of these past founders and execs. This fund co-invests alongside our current main fund into any company that is EIS compliant (when we analysed all of the deals that we have invested into over the past 3 years we found that the majority of them were EIS compliant even if their HQ was in another country like Finland, Germany or Ireland). I should also disclose, I am not an EIS expert and I am not suggesting that EIS works for every company or investor.