A quarter has passed since my last missive and I’ve again been seeing concentrations of ideas* in my and the wider Forward Partners dealflow. Anecdotally, nothing slowed down in August which is great news: either founders are working harder or perhaps there are just more of them.
In the last couple of articles I took some time to dive into (a little bit of) the detail of my thoughts and decision-making on topics from labour marketplaces to online art investment. This time I’ll cover recruitment tech, UK FanDuels and beauty startups.
Not so much a trend as a movement, we see a lot of Recruitment Tech come through. As a (broadly) consumer focused eCommerce investor, this is a difficult sell to us, nevertheless the huge market sizes involved here are tantalising. We’re often quoted market sizes of over £50bn. That’s not even including wider HR Tech (applicant tracking, HR platforms) and software to unlocking non-cash time-savings. It’s a huge task and the problems are difficult to solve – not least because it’s a human business at its core and as humans we’re often not very good at articulating and expressing ourselves, let alone tailoring that to the person or people that we are marketing to. Solving the most complex problems requires a healthy risk appetite from founders and investors alike, but often promises great rewards. A couple interesting approaches that I’ve seen recently are concentrated in skills verticals and/or explicitly get closer to a customised, tailored experience within specific industries and segments. Hackajob and Workshape.io are good examples.
There’s also a lot of “UK FanDuels” around. It’s an interesting one. FanDuel is, of course, a Scottish company with a Scottish Founder. There are many theories as to why FanDuel (and Draftkings) have been such wild successes in the US and the same thing hasn’t happened here. A Vox article that I read recently gives some good context: fantasy sports are pretty much the only way in which people can gamble online in the US. The same can’t be said for the UK, not by a long shot. We have a huge range of options from which to choose from in order to satisfy our fluttering urges. This certainly has impacts for market sizing but also for consumer behaviours and product development. That being said there are clearly attractive aspects to the proposition from an investment perspective. It is, at best, sticky and, at worst, addictive. Fantasy sports competitions have good viral characteristics: I was asked 3 times to participate in a Fantasy Rugby tournament for the current world cup. I didn’t bite and in retrospect, given the home nation’s form, I’m happy with my decision. Suffice to say that there’s probably something in this, but it’s so difficult that even FanDuel haven’t had a proper run at it yet. You can be sure that they’d be in an acquisitive mood if someone looked as though they might be on the way to cracking the market and product.
Beauty. Hairdressing, blow-dry, make-up: lots of use-cases and lots of founders building businesses and products to fulfil them. Similar to ‘food’, this is a passionate subject for many people and so there is what seems to be an overweight level of founders and start ups in the space. This, of course, makes it very competitive and therefore success is likely to be predicated on having a significantly differentiated offering, or one which is an order of magnitude better than what is currently out there. There is a question of market size here too. In order to drive a venture scale exit (£100m+ and preferably far larger!) you need to be operating in huge markets, especially if there are high levels of competition and/or have attractive looking margins. One can point to the recent successes of Mayvenn or Glamsquad as a positive indicator, though we’ve yet to be convinced that a sufficiently sized exit can be achieved here in the UK.
That’s a key thing to note though, we’re yet to be convinced – but always open to having someone help to change our mind.
* This had me thinking of the collective noun for ideas. I canvassed some opinions in the office and the best/most reasonable one that came up was an ‘illumination of ideas’. More suggestions, answers and general thoughts on a postcard @mattyjam or LinkedIn