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

Matthew is an Investor at Forward Partners: a super-early stage London VC. Forward Partners invests in solo-founders, idea stage and seed stage eCommerce, marketplace and related software businesses providing them with funding, office space and the support of an expert in-house engineering, product and growth team. Before becoming a VC, Matthew had varying degrees of success (!) with retail and security tech start-ups. He began his career in Sales, Structuring and Trading at investment banks. He holds a BA in Economics and Politics and an MBA from SDA Bocconi. A huge thank you to Mattermark for all the data discussed in today's show and you can find them here! CLICK TO PLAY In Today's Episode You Will Learn: 1.) How did Matt make his way into the world of VC? What would he advise someone wanting to get into the industry? 2.) How does Forward Partners differentiate themselves in such a sea of seed funds? What is unique about their model? 3.) What are the key activities that entrepreneurs can do to build a successful business, ready for Series A? What would Matt advise someone who has an idea but no technical skills? 4.) What are the nuances and complexities of the early stage funding environment? How do Forward approach and overcome them? Are there any common misconceptions? 5.) What are the similarities and differences between the US and the UK with regards to start-up attractiveness? Where would Matt choose to found his startup if he were a founder? 6.) Considering YC’s recent intake, where does Matt see growth areas in consumer facing startups? Items Mentioned In Today's Show: Matthew's Fave Book: Mikhail Bulgakov: The Master & Margarita Matthew's Fave Newsletter: Mattermark Daily, The Equity Kicker, First Round Review Matthew's Most Recent Investment: Live Better With As always you can follow Harry, The Twenty Minute VC and Matthew on Twitter here! If you would like to see a more colourful side to Harry with many a mojito session, you can follow him on Instagram here!

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  Hello and welcome to the 20 Minute VC. I am your host, Harry Stebbings, and if you listened to Monday's episode with Dharmesh, you will know that this week we are featuring the incredible Ford Partners, a London fund specialising in e-commerce. Some of their portfolio companies include taxi hailing app Halo, one of the most promising fintech startups from the last decade coming out of Europe in the form of Zopa, and appear here, started by Ross Bailey, who was only 19 at the time of creating the incredible company. From Ford today, I'm so thrilled to welcome a good friend and fellow Mojito enthusiast, Matthew Bradley. Now, Matt's background is in trading, structuring and sales at Barclays Capital and Lloyds for five years, where he developed a deep understanding

• 0:45Harry Stebbings?

  of risk before doing an MBA at Bocconi. But don't hold any of that against him, he's still an absolutely fantastic chap despite the investment banking. And he's such an awesome investor and an individual in London's ecosystem, and a real pleasure to have Matt on the show today. And I'd like to thank Matamark, who've provided all the data and analytics for the show today. You can check them out at www.mattermark.com. And for anyone looking for more startup resources and articles, then head over to @thinker on Twitter for more great resources. 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? That sounds like

• 1:27Harry Stebbings?

  a familiar problem. If so, you do need Loyalty Bay. Their SaaS conversion optimizer tool increases any conversion metric by offering potential customers a choice of personalised rewards, incentivising them to convert. And Will Roberts, Loyalty Bay CEO, has also written an amazing ebook, which you can download for free, all about how you can increase your conversion rates. And you can find the download at www.loyaltybay.co.uk. And you can also find it in the show notes on iTunes, on the website at www.the20minvc.com and in our newsletter. But now it's time to welcome the man himself. So without further ado, ladies

• 2:10Harry Stebbings?

  and gents, I would like to welcome Matthew Bradley, investor at Ford Partners.

• 2:21Speaker 01

  You have now arrived at your destination.

• 2:24Harry Stebbings?

  Matthew, absolutely awesome to have you on the show. Thanks so much for joining us today.

• 2:28Speaker 02

  Thanks very much, Harry. Great to be here.

• 2:29Harry Stebbings?

  Now, we always like to start off the show with a little background. So can you kick us off today with a quick snapshot of your background and how you got into the industry?

• 2:39Speaker 02

  Uh, yeah, sure. At undergraduate university, I was, you know, much like many other people, just kind of wondering what I wanted to do and more or less I followed my father into investment banking, but not much in acquisitions. I joined sales and trading and because I liked all this sort of technical equipment, the fast pace, um, you know, all that kind of stuff.

• 2:58Harry Stebbings?

  Absolutely.

• 2:59Speaker 02

  And then in, you know, I think in kind of 2006, when, when I got into it, it was still kind of a legit career. You know, I think things or the goal place have changed a little bit since then. Um, but one day I think I had an epiphany when I was structuring a long dated interest rate derivative for a mid-market UK pension fund.

• 3:21Harry Stebbings?

  Fascinating.

• 3:23Speaker 02

  Exactly, exactly. And I thought, you know, what on earth am I doing? So, uh, so I packed up, uh, I packed up almost immediately, uh, did an MBA, uh, did a couple of startups, um, mostly catastrophic failures. Um, I also invested the last bit of saved money I had in a couple of other startups, which, um, isn't it an investment strategy that I would advise anyone follow? Uh, but a couple of, well, one of them has, uh, has done quite well. They're out raising a series B at the moment. Um, and, and as part of the series A around a private VC company invested and, uh, got a Harvard MBA into run the, uh, run the show. And I thought,

• 4:02Speaker 02

  you know, my work here is done. What should I do? Um, you know, I like finance stuff. I really like small businesses. I like investing in small businesses. So I looked at venture capital and, and I actually took, uh, what was effectively an unpaid internship at, uh, Forward Partners and, uh, and I've been here since. So not quite the straight line, which, which a lot of young folk getting into VC, uh, now follow, but. But it's been a good journey.

• 4:30Harry Stebbings?

  And so you kind of did the array of banking, startup work and then MBA. What would you advise people looking to enter the industry?

• 4:39Speaker 02

  I think it's funny about people looking to enter the industry. I mean, wanting to be a VC is is is no bad thing, of course. Um, but definitely, I think some kind of expertise and and working with for um or starting your own small businesses. It's really helpful to to understand the sort of the mechanics, the challenges, um the important variables going on. Uh challenging small businesses and small teams and solo founders and things like that. That definitely sort of equips you well for a for a step into uh for a step into venture capital. But I mean, then again, there's there's no real substitute for um for financial skills. And they're clearly requisite for this kind of job.

• 5:24Speaker 02

  I mean, the one thing which I would say is I I wouldn't treat as a straight line. Uh if if if you end up as a venture capitalist, um that's great. Um but but being a VC um as as a sort of be all and end all, thinking that you want to be there from sort of age eighteen, I think. Um is perhaps not necessarily the right way to go about it.

• 5:45Harry Stebbings?

  Now, Forward 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 the rest of the field in terms of seed funds?

• 6:00Speaker 02

  Sure, um so it's interesting, there is there is a kind of proliferation of money at seed and in Series A, particularly here in London at the moment. Um as well as as Series B and beyond, actually. Um but Forward Partners operates at an even earlier stage, uh at a stage which we call the idea stage. Um and it's perfectly possible for solo founders to come in with a admittedly a well substantiated idea. And if they're credible, um we we might well invest in them. Um and the reason why we can go so early is that we have a team of full stack, uh multi-language developers, front-end developers, digital marketers, graphic designers, recruiter and product people to give to give the startups that we invest in the greatest chance of success.

• 6:46Speaker 02

  Um, and for the earlier stage ones, we offer space in our warehouse here in Ald Street, um, which is clearly quite a big cost saving for them.

• 6:54Harry Stebbings?

  And you say about impressive and well qualified founders. So what do you guys really look for at the idea stage in terms of the founding team?

• 7:02Speaker 02

  Yeah, sure. Um, well, because you're, because you're operating at such an early stage, it's extremely risky. So, um, we're, we're not looking to, um, to take on, um, lots more risk than we absolutely need to. Um, so insofar as a founder or a founding team are, are concerned, I mean, you, you need to, you need to be credible. I mean, it, it helps if you, if you're doing a legal startup to be a lawyer, for example. Um, and to, and to understand a lot of the, um, the content and, and have a deep understanding of the market in which you're, which you're operating in. Um, and, and furthermore, you know, we'll be able to assess the quality of people's work, whether they've come up with a great product idea,

• 7:46Speaker 02

  whether they sort of analyze the competitive environment properly, uh, whether they've got a vision, um, whether it's a product vision, vision for future profitability. Um, thought about what their sort of long-term competitive advantages might be. So, uh, over the course of our investment meetings and, and workshops, we can sort of tease out, uh, whether people are ready for investment as well as whether their idea is an appropriate one for investment.

• 8:11Harry Stebbings?

  And at idea stage, what does the deal look like? I mean, what type of, what time, type of cash is being put into the business at that stage?

• 8:17Speaker 02

  Sure. So, uh, in fact, a lot of the time we, uh, we get called something similar to an incubator because we offer the office space and, and things on those lines. And that's definitely not, um, not what we are. Um, we're offering, um, much, much larger checks, so around, uh, two hundred and fifty thousand. Um.

• 8:36Harry Stebbings?

  Even at that idea stage?

• 8:37Speaker 02

  Exactly. Even at that idea stage, which, which very much sets us apart from, from any accelerator or incubator.

• 8:43Harry Stebbings?

  Absolutely, yeah.

• 8:43Speaker 02

  Um. And.

• 8:45Harry Stebbings?

  It'll be kind of eight to twenty grand, yeah.

• 8:48Speaker 02

  Yeah, exactly, exactly. Um, and depending on the deal, um, it might be structured in a different way. So it might be staged, uh, depending on, depending on the founder, depending on the idea, um, and, uh, and when indeed a business might, might well need, uh, uh, extra slug cash.

• 9:05Harry Stebbings?

  So you see a huge amount of business at this very early stage. What are the key activities then, do you think, that entrepreneurs can do to build a successful business and make it ready for further rounds of funding?

• 9:17Speaker 02

  Sure, so that's that's definitely something which which we concentrate on on a on a great deal, because we take founders, both the idea and seed stage, and clearly we want them to be to be going out and raising a good series A as soon as possible, really. So aside from the the business that I was talking about with with what what a great idea is and what an investable idea is, we're developing an operator framework called The Path Forward. And and we see it as a as a process of developing firstly a valid idea. Insofar as that's the case, you need to prove the need for your for your product, your prototype,

• 9:57Speaker 02

  and for that prototype to be resonant with your first hundred and then a thousand customers. And then then you need to go and and work on your product. And you'll know when when you're going in the right product direction, when you've got some passionate advocates, maybe you're sort of expanding your expanding the product itself, adding more more services perhaps, and and you're building your team. And then the final stage, which you need to get ready for for series A, is is developing that valuable business. So scalable economics, or at least, you know, the way to convergence, really growth, which is ramping up and and perhaps even, you know, plugging even more gaps in your

• 10:40Speaker 02

  team, because you don't want to go out there to series A investors without, you know, co-founders, without technical talent and and investable people either.

• 10:48Harry Stebbings?

  And you said there about prototyping and testing with your first hundred or a thousand people. Is that the model that you go for, the smaller pool of customers who then give you feedback? Would you agree with kind of the push it out to as many people as possible approach?

• 11:03Speaker 02

  Good question. I mean, I suppose it it depends, it depends a lot on the kind of business. But one of the, one of the great things, um, I should have mentioned that we're an e-commerce fund. Um, and one of the great things about e-commerce is that you can, you can test relatively cheaply and get immediate feedback from, from customers. So I would always encourage and that approach rather than uh building and doing big launches.

• 11:30Harry Stebbings?

  And you said about kind of getting ready for a good series A. What would that look like for a good series A in your mind? And are there any kind of VCs in London that you particularly like to work with?

• 11:43Speaker 02

  Uh, all of them, Harry.

• 11:46Speaker 02

  All of them. Um, so, um, a good series A, I mean, there's, there's there's more money at series A now than, than perhaps there has been. Uh, there are a lot of new funds, uh, uh, popping up and as the round sizes are uh getting bigger. Um, and so perhaps more startups are spending longer in the seed stage, you know, having to having to raise an early seed or a late seed and uh late seeds, certainly in terms of value raised. And looking a little bit like uh series A did maybe three, four years ago. Clearly only the best, uh, the best companies can, can move quickly from the idea through seed to series A.

• 12:29Speaker 02

  Um, otherwise you're sort of looking at uh crowdfunding perhaps or, or angel rounds. Um, or indeed more money from us. In terms of uh series A investors that, that you want to work with, I mean, I'd encourage founders to, um, to obviously look to choose the, the best ones for them. So if, if an investor has a particular partner, principal or associate who are, who are experts in a certain area, which is relevant to to your company, uh, definitely you should, you should target them and make them your, your priority. Um.

• 13:02Harry Stebbings?

  For e-commerce, who would you look to?

• 13:04Speaker 02

  Uh, again, it, it depends because it's, it's more about different sectors, I suppose. So Google Ventures, for example, just, just took on, uh, Lost My Name. Um, which is, uh, which is one of ours. Um, and they were looking for a transatlantic investor. Um, because they want to sort of move into other markets perhaps. Um, so, so it's more about, um. Those kind of sector-specific or goal-driven, uh, goal-driven aspects where, where founders should be going out and looking to the right investors.

• 13:36Harry Stebbings?

  And having witnessed this early-stage financing environment for the last few years now, what are the nuances and complexities of the stage?

• 13:44Speaker 02

  Fundamentally, it's, it's, it's really risky. Um, it's even more risky, uh, at the early stages than it is at, uh, at the later stages. Given that, I don't think there's really any substitute for hard work in, in research and deal research. Um, asking really pressing questions, stretching founders.

• 14:03Harry Stebbings?

  What questions do you like to ask?

• 14:06Harry Stebbings?

  Do you have a template set, kind of, you know, total addressable market, route to market?

• 14:11Speaker 02

  Uh, we meet entrepreneurs, you know, probably three or four times before, before we might make an investment. And so we, and, and it's not just me, it'll be other guys from the team as well. And so hopefully we will have, uh, teased out a lot of the assumptions and, and asked a lot of the questions which, which we all need answers to. Whether it's with regard to market size or, or how they see their business in one year's time. Or, um, what their, uh, target or their initial target customer is. Um, but I have to say, I, I, I'm a big fan of, um, of asking open-ended questions to see how people, uh, to see how people react. Um, and one of, one of my favourites is, is asking people at the end of meetings.

• 14:56Speaker 02

  Um, is there anything which I, which I should have asked, which I haven't asked? Um, just to, just to, as I said, just get some open-ended feedback.

• 15:03Harry Stebbings?

  Have you had any interesting responses to that?

• 15:07Speaker 02

  Uh, mo- mostly the response is no, absolutely not, can I leave?

• 15:12Speaker 02

  Uh, um, but, but occasionally, yes. Um, because sometimes either through nerves or just because we don't have the time. People might not, may well not have mentioned something which, which could be important to the investment decision. And that just gives them an opportunity at the end to, uh, to tell me about. Anything, well, effectively that they missed out during the main meeting.

• 15:33Harry Stebbings?

  And then moving on from the kind of deep dive into the seed stage.

• 15:38Speaker 02

  Um.

• 15:38Harry Stebbings?

  Moving outwards, the twenty minute VC obviously has quite a diverse range of guests from the US, UK and globally. But what are the similarities then and the differences between the US and the UK with regards to startup attractiveness?

• 15:52Speaker 02

  Yeah, it's a, it's a good question, quite, quite a complicated one, actually. Um, so it almost seems, um. For example, when, when a new Y C class gets announced, um, it almost seems as though there's like a spate of UK clones, like a UK pill pack. Or a UK willing, um, I've seen some direct match to bond trading one be cloned here as well. And that's not a bad thing, of course. And we have a big enough markets here in the UK to generate venture scale exits, admittedly not in every, in every market. And the market dynamics are different, uh, depending on the sector. Uh, so in sectors like healthcare, where the payer landscape is so different between the two geographies.

• 16:32Speaker 02

  The startups need to, need to, need to think differently about the problems and, and whether the economics stack up here. Uh, relative to America or indeed vice versa. For consumers, I think capital markets probably pay, uh, play a little bit more. Of a role in the average American's daily life and they have a bigger appetite for consumer credit. Uh, so, so it lends itself more to certain kinds of finance startups. Um, so it's, it's, it's really about. Appreciating the kind of differences, uh, between, uh, relative to consumer facing e-commerce. Uh, the differences between the market structures and, and, and what worked here and what is, what the effective market sizes are and what the key dynamics are.

• 17:14Harry Stebbings?

  And if you're a founder starting out, where would you most like to be starting out in the world and why?

• 17:19Speaker 02

  Good question. I suppose, um. I'm just thinking in terms of the US and the UK here, and there's a big difference between there being a huge or much more venture money available in America, but conversely here in the UK, we have, there's more government money and tax breaks here as well as in Europe. In terms of advice for founders, I would just advise them to have a look at where you want to build your startup and make a reasoned choice based on who your potential customers are, what the market dynamic looks like, as to which geography you should launch

• 17:59Speaker 02

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

• 18:10Harry Stebbings?

  And talking about Y C, considering their recent intake, where do you see growth areas in consumer-facing startups?

• 18:17Speaker 02

  Yeah, well, Y C's recent intake was, it's very interesting. Tom Tungus did a great blog post analysing some of the most recent intakes.

• 18:30Harry Stebbings?

  Tom's also coming on the show, actually, in October.

• 18:33Speaker 02

  Is he? Yeah. Great, well, I shall be sure to be tuning into that one. I mean, that analysis, as well as looking at the new intake, there's a significant increase in startups in the finance sector which are getting funded, as well as the product commerce ones. There's growth in education and health, a stable level of demand, a stable level of funding in on-demand startups, and a decreasing amount into gaming and social media, which is not really surprising. And this is broadly similar to where we see opportunities here. We're, we and certainly I are pretty hot on consumer-facing financial services opportunities at the

• 19:15Speaker 02

  moment, and we're also big believers in healthcare. We have Big Health and Hello and a couple of others in our portfolio already. But it's a gigantic market and there are massive opportunities for tech not only to disrupt existing businesses. But to add huge amounts of value to other people's lives, which is clearly one of the things which we're all in it for. And I also, I delved into a report the other day on the fifty next unicorns. And in that, in that report, they were overweight in on-demand commerce and consumer services. And underweight in health, finance and education. And I would have thought that being underweight in that kind of report is probably a leading indicator for opportunities.

• 19:57Speaker 02

  And this matches well with, you know, what we've been talking about in finance and healthcare.

• 20:01Harry Stebbings?

  And if it's okay with you, we're gonna dive into a quickfire round now.

• 20:05Speaker 02

  Sure.

• 20:06Harry Stebbings?

  So your favourite book and why?

• 20:08Speaker 02

  Uh, that's an easy one. It's Mikhail Bogorov's Master of Margarita. No question.

• 20:13Harry Stebbings?

  Okay. London's funding landscape evolving or not and why?

• 20:18Speaker 02

  Uh, yes, yeah, absolutely. Um, there are more chickens and more eggs. Um, so there's more, there's more money.

• 20:26Harry Stebbings?

  Highly analytical approach there.

• 20:30Speaker 02

  Yeah, let me explain. There's, there's more money and more small, more smart money at every stage. Um, there are more startups, there are an increasing number of second and third time founders. Um, and I see founders and VCs coming up from the valley and other successful hubs. So, so evolving and, and developing quickly. Yeah.

• 20:50Harry Stebbings?

  Your most read blog or newsletter?

• 20:53Speaker 02

  Oh, I read a lot. Um, maybe about, um, one and a half, two hours a day. Uh, so Matt and Mark Daly's, Dan Primatt's term sheet, um, Nick, my boss's blog. And don't tell him. Tom Tungert's, um, Mahesh Filankey, but oh gosh. Um, okay, so for early stage startups, I'd have to say that the first round review as a weekly is probably the best one. And, and yeah, Nick's, Nick's blog, the Equity Kicker is, is, is, is probably the best daily. But again, don't tell him.

• 21:25Harry Stebbings?

  Have you tried Ben Evans's weekly newsletter?

• 21:29Speaker 02

  Yes, yeah, yeah. I mean, another, that's, that's another great one. And there's, there's definitely it's fortunate that there are so many good ones around. And I think it's important that, that you read a lot and you change your mind a little bit often. And that's, that's very important to sort of make good investment decisions.

• 21:45Harry Stebbings?

  And when I say successful VC, who's the first person that comes to mind?

• 21:49Speaker 02

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

• 22:02Harry Stebbings?

  Crowdfunding, does it have the potential to replace VC?

• 22:05Speaker 02

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

• 22:16Harry Stebbings?

  And your most recent investment and why you said yes?

• 22:19Speaker 02

  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 name is a work in progress, it might change, it might not, but it's, it's got super utility, the opportunity for, for great content and genuinely looking to improve people's lives. And aside from the rationale, she's a top-quality founder, a great person and a very hard negotiator.

• 22:51Harry Stebbings?

  Well, thank you so much for coming on the show, Matthew. It's been an absolute pleasure having you.

• 22:55Speaker 02

  Yeah, no problem. It's my pleasure.

• 22:57Harry Stebbings?

  So fantastic to have my good buddy Matt on the show today and I'd like to say a special thank you to him for giving up his time today to come on the show. And if you can't get enough of the 20-minute VC, sign up to our newsletter on www.the20minutavec.com, all in letters. And before we leave you today, do not forget to sign up for the amazing 30-day free trial on offer at Loyalty Bay, who work with large enterprises like Virgin Media, right through to startups, to increase website conversions by, on average, check this out, a staggering over 100%. And if the trial was not good enough, they are also offering a free ebook giveaway on conversion rate optimisation, written by founder Will Roberts.

• 23:40Harry Stebbings?

  I have to say it's a phenomenally well-worth read and you can find the link in the show notes and on the 20-minute VC site and www.loyaltybay.co.uk. If you want to stay in the podcast app, you can also find it in the show notes. And as always, thank you so much for your continued support and we look so forward to seeing you in Friday's episode.