20 VC 097 Betting Big on Consumer Fintech with Matthew Bradley, Investor @ Forward Partners



Harry Stebings hosts Matthew Bradley from Forward Partners on the 20 minutes VC podcast, discussing the London-based fund's focus on early-stage ecommerce investments, including their unique 'idea stage' approach. Bradley shares his journey from investment banking to VC, emphasizing the importance of both small business experience and financial skills for those entering the industry. Forward Partners sets itself apart by offering significant early-stage investment and support services to startups. Key advice for entrepreneurs includes validating product ideas with early customers and building towards scalable business models for Series A readiness. The conversation also touches on the evolving landscape of London's funding environment, the potential of crowdfunding, and the strategic considerations for startups choosing a geographical base.

Summary Notes

Introduction to the Episode

  • Harry Stebings introduces the 20 Minute VC podcast episode.
  • The week's focus is on Ford Partners, a London fund specializing in ecommerce.
  • Portfolio companies of Ford Partners are mentioned: Halo, Zopa, and Appear Here.
  • Guest Matthew Bradley is introduced with a background in trading, structuring, and sales, followed by an MBA.
  • Sponsors and resources for startup information are mentioned: Matamark, Thinker on Twitter, and Loyalty Bay.

"Hello and welcome to the 20 minutes VC. I am your host, Harry Stebings, and if you listen to Monday's episode with Dharmesh, you will know that this week we are featuring the incredible Ford partners, a London fund specializing in ecommerce."

This quote is Harry Stebings' introduction to the podcast episode, highlighting the focus on Ford Partners.

"I'm so thrilled to welcome a good friend and fellow mojito enthusiast, Matthew Bradley."

Harry Stebings expresses enthusiasm for having Matthew Bradley on the show, indicating a friendly rapport between the host and the guest.

"But before we jump into the show today, would you like more of your website visitors to convert into a sale sign up or referral?"

This quote introduces the episode's sponsor, Loyalty Bay, which is relevant to listeners interested in increasing website conversion rates.

Matthew Bradley's Background

  • Matthew Bradley followed his father into investment banking, specifically in sales and trading.
  • He had an epiphany that led him to pursue an MBA and engage with startups.
  • His journey into venture capital was non-linear, involving an unpaid internship at Ford Partners.

"At undergraduate university, I was much like many other people just kind of wondering what I wanted to do."

Matthew Bradley shares his initial uncertainty about his career path during his undergraduate years.

"And then I think in kind of 2006, when I got into it, it was still kind of a legit career or the gold plates have changed a little bit since then."

Matthew Bradley reflects on the changing reputation and legitimacy of investment banking as a career over time.

"I packed up almost immediately, did an MBA, did a couple of startups, mostly catastrophic failures."

This quote outlines Matthew Bradley's pivot from investment banking to pursuing an MBA and his experience with startups, highlighting the reality of entrepreneurial challenges.

Advice for Aspiring Venture Capitalists

  • Gaining expertise and experience with small businesses is beneficial before entering venture capital.
  • Financial skills are essential for a venture capital career.
  • A direct path to becoming a venture capitalist is not necessary or advised.

"I think it's funny about people looking to enter the industry. I mean, wanting to be a VC is no bad thing, of course, but definitely I think some kind of expertise and working with, for, or starting your own small business is really helpful to understand the sort of the mechanics, the challenges, the important variables going on, challenging small businesses and small teams and solo founders and things like that."

Matthew Bradley emphasizes the importance of understanding the dynamics of small businesses for those aspiring to enter venture capital.

"But then again, there's no real substitute for financial skills. They're clearly requisite for this kind of job."

The quote underscores the necessity of financial skills in the venture capital industry.

Ford Partners' Differentiation in Seed Funding

  • The discussion has not yet covered how Ford Partners differentiates itself in the seed funding environment.

"Now, Ford operates in the seed funding environment in London and there's a plethora of new seed funds rising and that have come about in the last few years. So how does forward partners differentiate itself from the rest of the field in terms of seed funds?"

Harry Stebings sets the stage for a discussion on Ford Partners' unique position among seed funds in London, but Matthew Bradley's response is not included in the transcript provided.

Investment Landscape in London

  • London is experiencing a proliferation of investment money across various stages, including seed, Series A, and beyond.
  • Forward Partners operates at the "idea stage," which is even earlier than seed stage.
  • Solo founders with a well-substantiated idea and credibility can secure investment from Forward Partners.

"It's interesting, there is a kind of proliferation of money at seed and Series A, particularly here in London at the moment, as well as series B and beyond, actually."

This quote highlights the current investment climate in London, indicating a significant amount of capital available for early-stage companies.

"But forward partners operate at an even earlier stage, at a stage which we call the idea stage."

Forward Partners is distinguished by its focus on very early-stage investments, which is unique compared to typical seed and Series A investors.

Support Provided by Forward Partners

  • Forward Partners offers a comprehensive team to support startups, including developers, digital marketers, and product experts.
  • The firm provides office space in their warehouse at Old Street, London, offering cost savings to the startups they invest in.

"And it's perfectly possible for solo founders to come in with, admittedly, a well substantiated idea. And if they're credible, we might well invest in them."

Solo founders with credible and substantiated ideas are potential investment targets for Forward Partners, emphasizing the importance of founder credibility.

"And the reason why we can go so early is that we have a team of full stack, multilanguage developers, front end developers, digital marketers, graphic designers, recruiter and product people to give the startups that we invest in the greatest chance of success."

The quote explains that Forward Partners can invest in companies at the idea stage because they have the resources and team to support startups and increase their chances of success.

Criteria for Idea Stage Founders

  • Founders must be credible and have a deep understanding of their market.
  • Forward Partners assesses the quality of the idea, competitive analysis, vision, and potential for long-term competitive advantages.
  • Investment readiness is evaluated through meetings and workshops.

"So insofar as a founder or a founding team are concerned, you need to be credible."

Credibility is a crucial factor for founders seeking investment from Forward Partners, especially at the idea stage.

"And furthermore, we'll be able to assess the quality of people's work, whether they've come up with a great product idea, whether they've sort of analyzed the competitive environment properly, whether they've got a vision, whether it's a product vision for future profitability."

This quote outlines the aspects Forward Partners evaluates when considering an investment in a founder or team, such as the quality of their work, product idea, market analysis, and vision for profitability.

Investment Deals at the Idea Stage

  • Forward Partners offers significant investment amounts, around £250,000, even at the idea stage.
  • The firm is not an incubator or accelerator; it provides larger checks than those entities typically offer.
  • Deal structures may vary, including staged investments based on the founder and idea.

"We're offering much, much larger checks. So around 250,000 even at that idea stage."

Forward Partners provides substantial financial support to startups at the idea stage, which is notably higher than the funding amounts typically provided by incubators or accelerators.

"And depending on the deal, it might be structured in a different way. So it might be staged, depending on the founder, depending on the idea, and when indeed a business might well need extra slug cash."

Investment deals at Forward Partners are flexible and tailored to the specific needs of the startup, which may include staged financing arrangements.

Building a Successful Business for Future Funding

  • Entrepreneurs should focus on developing a valid idea, resonating with early customers, and refining their product.
  • Building a team and achieving scalable economics are critical for preparing for a Series A round.
  • Forward Partners has an operator framework called "the path forward" to guide startups through these stages.

"So that's definitely something which we concentrate on a great deal because we take founders both at idea and seed stage and clearly we want them to be going out and raising good series ace as soon as possible."

Forward Partners emphasizes the importance of preparing founders for successful Series A fundraising by providing guidance and support through their operator framework.

"So scalable economics, or at least the way to convergence really growth, which is ramping up and perhaps even plugging even more gaps in your team, because you don't want to go out there to series A investors without co founders, without technical talent and investable people either."

This quote emphasizes the need for startups to demonstrate scalable economics and a strong team when seeking Series A investment, as these are key factors that investors consider.

Customer Feedback and Product Testing

  • The approach to customer feedback and product testing may vary depending on the business type.
  • Ecommerce allows for cheaper testing and immediate customer feedback, which is preferred over large-scale launches.

"Good question. I mean, I suppose it depends a lot on the kind of business, but one of the great things, actually I should have mentioned that we're an ecommerce fund and one of the great things about ecommerce is that you can test relatively cheaply and get immediate feedback from customers."

The quote suggests that the nature of ecommerce facilitates cost-effective testing and quick feedback, which is advantageous for startups in this sector.

Series A Funding Landscape

  • There is currently more money available at the Series A stage than in the past.
  • Round sizes are increasing due to the emergence of new funds.

"So a good series A. I mean, there's more money at series A now than perhaps there ever has been."

The quote indicates that the Series A funding environment is robust, with more capital available for startups looking to raise a Series A round.

Early Stage Financing and Seed Stage Dynamics

  • Startups are spending more time in the seed stage, often raising multiple seed rounds.
  • Late seed rounds are comparable in value to Series A rounds from a few years ago.
  • The best companies can move quickly from idea to series A; others may need alternative funding sources.
  • Founders should target investors with expertise relevant to their company.

"g bigger, and so perhaps more startups are spending longer in the seed stage, having to raise an early seed, or a late seed, and late seeds certainly in terms of value raised, looking a little bit like series A did maybe three, four years ago."

This quote emphasizes the trend of startups remaining in the seed stage longer and the increasing size of late seed rounds, which are now similar to what Series A rounds used to be.

"Clearly, only the best companies can move quickly from idea through c to series a. Otherwise you're sort of looking at crowdfunding, perhaps, or angel rounds, or indeed more money from us."

This highlights the challenge for startups to progress quickly from idea to series A, with less successful companies needing to consider crowdfunding, angel investors, or additional seed funding.

"In terms of Series A investors that you want to work with. I mean, I'd encourage founders to obviously look to choose the best ones for them."

The speaker advises founders to carefully select Series A investors that best align with their company's needs and goals.

E-commerce Investment and Sector-Specific Considerations

  • Founders should seek investors with sector-specific knowledge or those who can help achieve specific goals, such as market expansion.
  • Google Ventures' investment in 'Lost My Name' is cited as an example of a transatlantic investor aiding in market expansion.

"Google ventures, for example, just took on lost my name, which is one of ours, and they were looking for a transatlantic investor because they want to sort of move into other markets, perhaps."

This quote provides an example of a startup seeking an investor with the capability to help them expand into new markets, demonstrating the importance of aligning investor strengths with startup objectives.

Nuances and Complexities of Early Stage Financing

  • Early stage financing is extremely risky, and thorough research and pressing questions are crucial.
  • Investors often meet with entrepreneurs multiple times to address various aspects of the business.
  • Open-ended questions can reveal important information that may not come up in structured discussions.

"Fundamentally, it's really risky. It's even more risky at the earlier stages than it is at the later stages."

This quote underscores the inherent risk involved in early stage financing, highlighting the increased risk compared to later stages.

"We meet entrepreneurs probably three or four times before we might make an investment."

The speaker details the rigorous process of meeting with entrepreneurs multiple times before deciding to invest, indicating the depth of evaluation required in early stage financing.

"One of my favorites is asking people at the end of meetings, is there anything which I should have asked, which I haven't asked."

The speaker shares a favorite open-ended question that can elicit critical information that might have been overlooked during the meeting.

Startup Attractiveness: US vs. UK

  • There is a trend of UK startups cloning successful US startups.
  • Market dynamics differ by sector, affecting the viability of certain startups in different geographies.
  • Consumer behavior, such as credit appetite, influences the success of finance startups in the US versus the UK.
  • Understanding market structures and dynamics is key for consumer-facing e-commerce startups.

"Quite a complicated one, actually. So it almost seems, for example, when a new YC class gets announced, it almost seems as though there's like a spate of UK clones, like a UK pill pack or a UK willing."

This quote discusses the phenomenon of UK startups imitating successful US startups, which reflects on the influence of US innovation on the UK market.

"For consumers, I think capital markets probably play a little bit more of a role in the average american's daily life, and they have a bigger appetite for consumer credit, so it lends itself more to certain kinds of finance startups."

The speaker compares consumer behavior in the US and UK, noting the impact on the types of finance startups that can thrive in each market.

Advice for Founders on Startup Location

  • Founders should consider the availability of venture money, government funding, and tax breaks when deciding where to start their company.
  • The choice of geography should be based on potential customers and market dynamics.
  • Top-tier accelerators like Y Combinator (YC) can be beneficial regardless of geography.

"Good question. I suppose I'm just thinking in terms of the US and the UK here, there's a big difference between there being a huge, much more venture money available in America, but conversely, here in the UK, there's more government money and tax breaks here as well as in Europe."

The speaker contrasts the availability of venture capital in the US with government incentives in the UK and Europe, suggesting that founders should consider these factors when choosing a startup location.

"But that being said, if you're looking at going down the accelerator route, getting gold standard of a top tier operation like YC is rarely a poor choice."

This quote suggests that participating in a prestigious accelerator program like Y Combinator is generally a good decision for founders, regardless of their geographic preferences.

Growth Areas in Consumer-Facing Startups

  • Y Combinator's recent intake shows significant funding increase in finance and product commerce startups.
  • Steady growth is seen in education and health sectors.
  • On-demand startups maintain a stable level of demand and funding.
  • Decreasing investment in gaming and social media.
  • Consumer-facing financial services and healthcare are seen as hot opportunities.
  • A report on the next 50 unicorns suggests being underweight in health, finance, and education may indicate future opportunities.

Yeah, well, YC's recent intake was very interesting. Tom Tungus did a great blog post analyzing some of the most recent intakes.

This quote indicates that Y Combinator's (YC) recent intake and Tom Tungus's analysis are good resources for identifying growth areas in consumer-facing startups.

There's growth in education and health, stable level of demand, a stable level of funding in on-demand startups, and a decreasing amount into gaming and social media.

The quote summarizes the current trends in startup funding, highlighting growth in certain sectors and a decline in others.

I delved into a report the other day on the 50 next unicorns, and in that report they were overweight in on demand commerce and consumer services and underweight in health, finance and education.

Here, the speaker suggests that the distribution of startups in a report on potential unicorns can serve as an indicator of where future opportunities may lie.

London's Funding Landscape

  • London's funding landscape is evolving with more money and smarter investments at every stage.
  • An increase in startups and experienced founders is noted.
  • Founders and VCs from successful hubs like Silicon Valley are moving to London.

And yes, yeah, absolutely. There are more chickens and more money.

This metaphor suggests an increase in both the number of startups (chickens) and available capital (money) in London's funding landscape.

There's more money and more smart money at every stage. There are more startups. There are an increasing number of second and third time founders, and I see founders and vcs coming over from the valley and other successful hubs so evolving and developing quickly.

The quote provides details on the evolution of London's funding landscape, including the quality of investments and the experience level of founders.

Reading Habits and Resources

  • Matthew Bradley reads about 1.5 to 2 hours a day.
  • He recommends several blogs and newsletters for early-stage startups, including Mattermark Daily, Dan Primack's Term Sheet, and First Round Review.
  • Reading widely and being willing to change one's mind is important for making good investment decisions.

I read a lot, maybe about one and a half, 2 hours a day. So Mattermark daily's Dan Primax term sheet. Nick, my boss's blog, tell him Tom Tungitz. Mahesh Falanki.

This quote lists several resources that Matthew Bradley reads regularly, emphasizing the importance of staying informed in the venture capital industry.

It's important that you read a lot and you change your mind a little bit often. That's very important to sort of make good investment decisions.

Here, the speaker highlights the importance of being open to new information and perspectives in order to make well-informed investment decisions.

Successful Venture Capitalists

  • Peter Thiel is mentioned as an inspirational figure in venture capital.
  • Thiel's investment in Facebook and his ongoing involvement are particularly noted.

Probably Peter Thiel, actually, even though he's been bashing the lean methodology recently, that investment in Facebook and the stories of his ongoing involvement there are pretty inspirational.

The quote identifies Peter Thiel as a successful venture capitalist, despite his criticism of certain methodologies.

Crowdfunding vs. Venture Capital

  • Crowdfunding is not seen as a replacement for venture capital.
  • It is, however, considered a durable part of the funding landscape.

I don't think it's got the potential to replace VC, but as a part of the funding landscape, I think it will be around and can endure.

This quote expresses the belief that crowdfunding will continue to exist alongside traditional venture capital but will not replace it.

Recent Investment Decision

  • Matthew Bradley's most recent investment is in a company called Live Better With.
  • The company is an aggregator for non-medical products for chronic diseases.
  • The founder's qualities and negotiation skills were key factors in the investment decision.

It's in a super early stage company called Live Better with, which is an aggregator for mostly non medical products that help people, unsurprisingly live better with chronic diseases.

The quote describes the nature of the startup Live Better With and its focus on improving the lives of people with chronic diseases.

She's a top quality founder, great person and a very hard negotiator.

This highlights the importance of the founder's personal qualities and business acumen in the investment decision-making process.

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