Culture & Startups

Last week I was kindly invited by Ross Bailey to participate in a panel at the Appear Here offices, featuring Mark Evans of Balderton, Russell Buckley of Ballpark Ventures and myself. Despite feeling outsmarted by two of the best in the business, the common denominator between us three was that we had all invested in Ross and Appear Here at different times and stages.

Me reading an extract from the original Appear Here investment note dated Dec ’12.

The idea of the session was to expose the entire Appear Here team to some of the strategic thinking that goes on between management and investors, which rarely makes it through all the ranks of a company, and at best gets ‘massaged’ down. It was also an opportunity for the team to ask us investors some difficult questions.

Ross showing off his white teeth to the team, while Mark tells it how it is.

Interestingly, and unexpectedly for me, we ended up talking mostly about company culture. Ross has always been religious about it since the very early days of Appear Here, I know that because I got involved with Appear Here when it was just him and a few slides, so I have had the privilege to see the baby grow from its very early days: from his obsession with style, design, look & feel, to messaging, choice of words and, later on as growth kicked in, hiring, office layout, parties etc. Today the Appear Here culture transpires consistently across every single touch point with every stakeholder, from the website to the office to the employees.

Nice touch, the morning after the Appear Here summer party.

Nice touch, the morning after the Appear Here summer party.

It’s very hard to define what culture actually means for a company, it’s often not immediately tangible, it’s the result of multiple different things all contributing to it over time, and it’s often very hard, if not impossible, to quantify the monetary impact of having (or not having) one. There also is no widely accepted way of going about building one. What’s clear though is that some of the most successful companies out there happen to have a great company culture, unique and native to them, which has followed them consistently throughout the years. People tend to think these companies have a great culture because they have been successful, but it’s in fact often the very opposite: they have been successful because they have over-invested in building a culture from the early days, which helped them attract and retain the very best people.

Team dinners at Appear Here offices.

Team dinners at Appear Here offices.

It’s very clear from talking to people the other night, that everyone at Appear Here is absolutely delighted to work there, and they all seem to be working incredibly hard and passionately for that reason.

We also talked about a high profile startup, with scale and hundreds of employees by now, who is having a very hard time with culture at the moment. Its founder never really thought culture was a critical factor to its success, and as a result it was never treated as a priority over hard work, growth, processes and KPIs. Now that they have reached scale, they realised they have a problem and that its employees are complaining about the company culture (or the absence of it), and some (many) are leaving. They tried to react by injecting culture, almost artificially, but it does not seem to be working. Culture is not something you can turn on on tap, it’s something that matures with time. There are no shortcuts to it.

Appear Here never had a significant amount of funding until they raised their Series A from Balderton in November 2014, and yet they managed to create a strong culture from the early days, being scrappy, creative and resourceful.

As investor I often get dragged into over-analysing unit economics of a business, addressable market sizes, competitive landscape etc when culture, or the founders’ ability to create a culture that attracts and retains talent, is often the most determining success factor, certainly in the long term. The skill of spotting entrepreneurs that have that innate ability before it’s obvious cannot be learnt at school or from books, it only comes with years and years of experience. I’m still learning…

The Investment Thesis Behind Appear Here

As I think it is a good practice for investors to make investment thesis publicly available, this post will be about the investment thesis that led Forward Investment Partners to invest in Appear Here back in November 2012.

As a backgrounder on the company, Appear Here aims to be THE online marketplace where commercial property is rented out, irrespective of lease length. The investment thesis can be summarised as backing a compelling entrepreneur to disrupt a large, ripe market via a proven and attractive business model.


Commercial property is a large sector (between retail and office rentals, the UK market is worth well in excess of £30B a year), currently undergoing rapid and significant structural changes:

1) Landlords are under pressure as an ever larger portion of their portfolio becomes vacant and occupied lease lengths keep falling year after year.

  • Vacancy rates up. This is driven by the weak economy, and online sales growing as a portion of total retail sales. This has meant UK retail vacancy rate (i.e. readily available retail units as a % of total available retail units) has surpassed 16% towards the end of 2012. This is likely to grow even further, possibly double, driven by ongoing growth of e-commerce and the large number of long-term leases coming up for renewal in the next 2-3 years which are unlikely to be renewed. It is also worth noting that vacancies have a double-whammy impact on landlords: not only do they generate no rental income (opportunity cost), they still incur in business rates which the landlords have to front (actual cost). This cost UK landlords £1.1B in 2011/12;

commercial property vacancy rate

  • Lease lengths down: the average length of new signed leases continues to shorten, from over 20 years in 1991 to c. 9 years in 1999 to below 5 years now, with terms now often including long rent-free periods and short break clauses. There is no sign of this trend inverting any time soon;

commercial lease length

  • Conclusion: landlords know they need to adapt to a new environment where their inventory gets rented out on extremely flexible and standardized terms (e.g. rolling weekly/monthly leases). What they are looking for is a platform that will help them to optimize this inventory so the total net value of the yield is the same.

2) Secondly, on the demand side, brands are increasingly trying to build direct relationships with their customers, cutting the intermediaries out of the equation as Paul Fisher has elegantly illustrated in one of his recent blog post.

  • In the long-term the dis-intermediation of the retail world is inevitable and brands will establish more direct relationships with their customers;
  • Retailers, particularly online ones, are starting to value bricks & mortar as an extension of their brand: much more about the touchy-feely customer experience rather than product revenue. What companies like Rapha, Warby Parker, Moo, Etsy etc. have done offline are good examples;
  • As online cost of customer acquisition keeps increasing month on month and return from online marketing dollars is maxed out, offline becomes an attractive complement as another touch point in the customer purchase cycle. This requires a shift to viewing a square foot of space as media rather than as potential revenue generator;
  • Conclusion: brands need flexible and easily accessible physical retail.

3) Last, dis-intermediation in the property marketplace is inevitable: timing is not clear, but the web WILL disrupt as it has done already in other sectors:

  • the transparency brought by the internet makes it increasingly difficult for middle-men to justify their share of the value created along the entire value chain, leaving buyers and sellers to retain the margin that would otherwise go to the market intermediaries;
  • the compensation model under which commercial property agents are remunerated is still the same as it was when lease length averaged > 10 years, with short-term leases not generating enough commission to be worth their while;
  • Conclusion: the web will enable dis-intermediation in the commercial property market.

Business Model

An online transactional marketplace is a proven business model that is very attractive because of its economics and its defensibility, at scale.

  • Attractive economics: marketplaces generates a fee without taking the cost of inventory and incurring in the risk of not being able to shift it; in the case of Appear Here, the inventory is owned and held by the landlords, and Appear Here valuably facilitates the transaction via its website;
  • Defensibility: marketplaces also tend to be highly defensible, once they reach a certain level of liquidity; this is because buyers/sellers tend to naturally gravitate (and stick) to highly liquid marketplaces where they have the highest chance of being able to find a large number of seller/buyers.


Ross Bailey is a charismatic and energetic entrepreneur with a grand vision and the courage to go after it. We, at Forward Investment Partners, love backing entrepreneurs like Ross.