Applied VC: Delivering world-class talent to the UK's top founders
Ever wondered what it costs to take a startup from pre-seed to seed? We walk founders through a simple model that helps them calculate the costs involved in the pre-seed phase.
Forward Partners has invested in and helped build over 50 businesses. Our team is made up of startup experts who’ve either built their own businesses or worked in top startups. We know what it takes to build a great business, we know the challenges, we know what it costs and we’ve designed everything we do around offering founders a better, faster and cheaper way to achieve their dreams.
In this article we discuss how Forward Partners helps early stage founders understand the challenges and costs of going from pre-seed to seed.
If you’ve recently tuned in to the Forward Partners blog, you’ll have seen us write about Applied VC and how we offer a better, faster and cheaper way for founders to achieve venture scale outcomes. We’ve discussed:
… Beating the odds and how Forward Partners businesses raise their Series A 26% faster and at 55% higher valuations
… How important team is and how using Forward Partners delivers results 32% faster and at ⅓ of the cost
… How Forward Partners gives the founders we work with superpowers
Traditional vs. Applied VC
Even in our first interactions with founders, we’re collaborating and building relationships. In doing so, we are already in the room with founders, thinking through their challenges, strengths or aspirations.
Traditional investors make decisions based on the potential of the business and the ability of the team to deliver. At Forward Partners the businesses and founders we back are special and only 1% of applications make it to a 2nd meeting. It’s what we do after the second meeting that differentiates us.
We’re not just a team of top class investors. We’re a team of investors augmented by a super-team of experienced startup professionals. Our investment decisions are based on the kind of insight that traditional investors typically don’t have the capacity or experience to make. We work with founders to really understand what the business will need to get to the next stage and, crucially, to understand if Forward Partners is the right fit to help founders achieve their goals.
The first step in this process is going through a workshop where we work with founders to map out their business model. Once the canvas is filled out we help founders identify their key assumptions and plot them on an axes of how important they are to the businesses success versus how easy they are to test. (For more information on the Lean Canvas, read this article by our product partner, Dharmesh.)
Using the pre-seed budget calculator
To help founders understand the costs involved in the pre-seed phase, we provide a quick walk through of a simple model that helps startups of all shapes and sizes to work out what it means for them.
*Once you’ve read this section, you can Click + Download our pre-seed budget calculator* (for the best experience, we advise you to make a copy, so you can edit the level of support required and enable dynamic pricing to kick in)
No startup business is the same and as part of our investment process we encourage founders to use our pre-seed budget calculator to validate their cost forecasting and to provide transparency about the cost of getting to the next round of funding using the Forward Partners team.
Based on our observations of the companies we’ve invested in and helped build, we’ve identified the areas of support typically required. Accounting for the type of business and the skillset of the founding team, we identify whether founders need lots of support, a little bit of support or no support in each of the core areas. At the end of the conversation we’ve formed an accurate picture of how much it will cost to go from pre-seed to seed with Forward Partners and how much it would cost using the alternatives of in-house, freelance contractor(s) and / or agency.
The headline is that Forward Partners is less than half the cost of using freelancers and nearly a quarter of the cost of agency when comparing like for like.
The model is intentionally simple and of course there are assumptions within it but our experience tells us that it provides a very good estimate. A few things you should keep in mind when you’re using the model:
The model is intended to provide a perspective on the cost of using like for like support to that which Forward Partners makes available to its portfolio companies. It is possible to find freelancer and agency rates below those which we have used (although still higher than the Forward Partners rate), however, that would not provide a fair comparison
The freelancer rates we’ve used are based on average day rates from a survey of UK based freelance contractors that Forward Partners believe are comparable to our team
The agency rates we’ve used are based on average day rates from a survey of 11 London based independent digital or startup agencies that Forward Partners would recommend
We not only offer a cheaper alternative, we offer a better alternative; a blend of the people and skills needed, when it really counts and in whatever increments required. Finding the same luxury in freelance contractors or from in-house hires is near impossible. Finding an agency with the same flexibility is unlikely
The amount of effort associated with a "high" and "medium" requirement for support is based on a simplified view of what we've observed of our portfolio companies
Our flexibility allows us to support each business and its founders uniquely to their needs. We are never prescriptive.
Our founders’ businesses are exactly that, their businesses. Right now we’re supporting 5 pre-seed companies and they all use the Forward Partners team very differently. Two of those businesses are currently leaning on our team very heavily for support support - one focused on product, UX and development and the other primarily focused on growth. At the other end of the spectrum, one of our founders needs less hands on support from us and uses us for smaller pieces of work. The Forward Partners approach works for all our businesses and founders. We adapt to their needs.
We are a hybrid… At Forward Partners we have a team of experienced startup professionals to rival any digital or startup agency and an investment team to provide strategic advice at every stage.
Our team of experts augments investment decisions and we’re on a continual journey to better support our companies. We care about the businesses we invest in and want them to have access to the best people at a price that they can afford.
None of our team want to provide just execution support nor just investment. We want to support founders to build their businesses better, faster and cheaper.