Sitar Teli is a founder and managing partner of Connect Ventures, a venture firm she started in 2012 with her two partners, Pietro Bezza and Bill Earner. Since its founding, Connect has invested in over 30 companies across Europe, including Citymapper, Typeform, CharlieHR, Boiler Room, Soldo and Marvel Prototyping. Prior to starting Connect Ventures, Sitar was at Doughty Hanson Technology Ventures, where she led that firm’s investment in SoundCloud’s Series A.
[00:00:04] I'm going to talk about user experience, which is something that if you work in product and product design you probably hear a lot about, but if you work on the business side or you're in venture, you unfortunately don't hear too much about it, and I think that's a shame because I know a lot of VCs that only think about it too much. I also know a lot of founders that don't think about user experience too much, and it's a shame because I think focusing on user experience is one of the best ways to achieve amazing KPIs and reach your business goals. So I'm going to talk a little bit about that, but first a little bit of background on me.
[00:00:45] So, I'm a VC. I'm American, I'm 37. I've been a VC now for about a dozen years. I was previously with another venture fund and then five years ago along with two partners I started Connect Ventures. We are a London-based seed fund. We invest across Europe. We write cheques of about 500k to a million pounds. We've made 36 investments so far, 25 of which are still active. Couple of funds: The latest fund, which we start investing out of last year, is about 50 million pounds. And those are some of the companies that we've invested in.
[00:01:24] So, the Connect strategy: we're pretty focused. We make about 8 to 10 investments a year, and we'd like to lead seed deals, and we're often the first investors, sometimes we're the only investor. There's three things we look for before we even consider an investment.
[00:01:43] One is really strong founder/market fit — so does a founder really understand the market that they're building the company and product in? Mission-led founders, so founders who are looking to do something more than just get rich: they're trying to solve a problem that they have, or something they want to see exist in the world. And then a really strong focus on product and user experience from the beginning. The first two, I think a lot of VCs look for; the third is one that sets us apart a little bit. So we look for that in the beginning and I'm going to explain to you why that is.
[00:02:19] But before we do that, I think it helps to talk a little bit about user experience itself and what it is. I think this quote covers it pretty well. So user experience is pretty comprehensive, right? It's the company, the service, the product that a user interacts with. Another way of looking at it is a company that is focused on user experience puts the user at the centre of everything they do. So when they design their feature set, when they design their user interface, when they think about the customer service experience, and their marketing, they're really thinking about the user first and how the user is going to experience that. That may seem really really obvious but I think you can probably try to think about product interaction you've had recently, possibly even today, that was just fucking terrible, and you probably use a product and you just thought, "I'm pretty sure no human being actually used this before they launched it." That happens way too often, and I think it's because a lot of times you prioritise a lot of things above user experience.
[00:03:26] But this is pretty comprehensive, and it's a bit overwhelming, and we don't really expect teams that we back, and a lot of teams we back are just founders initially, we don't expect them to have all of this under their belt or to be focusing on all of it — by definition they wouldn't be focusing if they did. What we really look for is for them to focus the product user experience. So we look for people who put that at the core of what they do initially.
[00:03:51] Now, why do we focus on that? Because, and I'll talk about some of the companies we've backed in a little bit, but no matter what you're building in tech — whether it's an API platform, whether it's a B2B SaaS company, a marketplace, some kind of networked business — you have a product, and that product has a user experience and the product is going to be first, probably, the primary interaction point your users have with your company. And we think that the better that user experience is, the better the KPIs of the business would be.
[00:04:30] I'm gonna talk a little bit more about that in a bit, but first: we're a seed stage fund, right? So why do we talk about user experience at the seed stage? There's a few different reasons, but, you knowm a lot of times when VCs talk about what they look for, they talk about market size, the business model, network effects. It's not that we don't care about those things — we actually care about all of those things, we just think if you're in a great market, and you have a great business model, but you have a terrible product, you're just making it really, really hard for yourself.
[00:05:08] So instead, we look for companies that are in great markets, and have great business models, but also have great products that they're building. Then there's also a personal reason which is I really really don't want to help people build more terrible products. There is a lot of them out there. I really hate them. I don't enjoy interacting with them. I don't know anyone who does. I don't really wanna inflict more of them on the world, and I think if I have a legacy it'll be, like, I never funded a shitty product: that'll be on my tombstone. So on a personal note, I just, it's what I want to do.
[00:05:45] But it's about much more than that. It's about about DNA. Companies have DNA, and it's set very, very early. The culture of a company; what it cares about; how it thinks about the customer; how it thinks about product design. Who's, you know, the most important group in the company? Is it marketing? Is it sales? Is it product and engineering? All of that is set very early by what the founders care about, who they hire, what skills they look for, whether they look for people that are empathetic to users. That's all set really early. And what we've found is changing DNA in companies is like changing DNA in people: it's extremely difficult. So if you don't care about users initially, you're not going to care about them two or three years down the line.
[00:06:33] So these are some of our companies that we've backed, they're in a variety of spaces. Some are more well known than others. Some are more recent than others. So Citymapper is one that's pretty well known at this point. We invested them in 2012. It's a transport planning app: helps you get from A to B. Seems pretty obvious now but when we invested in them, the biggest feedback we got from people when we told them about the investment was, "but Google Maps exist, so why would you ever need anything else?" I think that's pretty typical of people that don't understand user experience, actually: that you're solving a specific problem that a general mapping solution wouldn't.
[00:07:13] Auxy is a music sequencing app. CharlieHR — which, I was here at NextGen last night and a few of you guys were mentioning that you used it — is an HR software. Typeform does forms and surveys, and Soldo is a integrated card and expense management software for small and medium sized companies. These are completely different markets, right. Some are B2B; some are consumer; Soldo is both. They have different business models: Soldo is a combination — it's fintech, so it's a combination of the transactions as well as subscription. Charlie and Typeform are subscriptions. Auxy has in-app purchases. Citymapper's going to run a bus, which is probably the most unusual business model we've ever backed. They're all really different.
[00:08:01] What they have in common is they're extremely focused on user experience. If you've ever used these products, you know that they stand apart based on how easy they are to use, the usability, how much they think about the user is in everything that they do. And so I'm gonna talk a little bit more about why focusing on that user experience makes business sense. I think you can understand why it's nice, right? As a user, as a customer, as someone who uses software products, it's nice to have products that think about you. They're elegant to use, but you guys are backing companies, and you guys are building companies, and so why should you care about user experience, right?
[00:08:45] How does it help you actually achieve below your goal, which is, I think for most people, building a successful company? So I'm going to do a little bit of a case study on Typeform, which is the company that I talked about a little bit, which is a form and survey company. It's based in Barcelona. These are not Typeforms. These are horrific. These are forums in surveys that existed — still exist now. This is what Typeform is trying to end. They are not mobile-friendly. They're not particularly attractive either and they're not particularly usable. These are Typeforms. They are everything these are not. They're highly visual. They're mobile. They're engaging. They do exactly the same thing, right? These two companies are doing the exact same thing: they're asking questions. The difference is, I think, the Typeform founders, David and Robert, realise that human beings are going to be answering the questions, so you should possibly treat them with a little bit of respect. I am not sure what these people thought when they were designing these, but I don't think they were thinking about actual humans answering the questions.
[00:10:05] So that's nice, but what effect does it have on the business? Typeforms have four times the completion rate of other forms and surveys. So if you're sending out a survey, and you send it out with Typeform and you send out a 100, you'll get about, on average, fifty five responses. If you send it out with one of these guys, you'll get, you know, 12 or 15... If you're lucky.
[00:10:34] So that's great script for the users. It means you know when you send out a form or survey which you really want is the information back, so you're gonna get four times as much, or put another way, you need a quarter as many sent out in order to get the same amount of data. So that's really great for the for their customers, but it's also really great, for Typeform because for every 89 typeforms sent out, a new user signs up. So if you were at Andy Young's talk earlier, you heard about, you know product growth — 80 percent of Typeform's users come from interacting via Typeform. So if you think about, so, the first business KPI, customer acquisition cost, which is one of the most critical, right? If you're going to grow a company you need users. 80 percent of Typeform's users come from the product. They come from the product because people like using the product they send out lots of services. You answer a survey, eighty-ninth person signs up, you send out more surveys and it just goes on and on and on and on. They have tens of thousands of paying customers, they've hundreds of thousands of users, And they've acquired almost all of them through a similar process to the way Andy built his first company, which is you just they sent it out to a few people and it grew from there.
[00:12:00] Some other KPIs, right? Engagement, loyalty and referrals. This is what Typefrom calls their Twitter wall of love. People tweet about Typeform. It is a service and form company and people are actually taking time out of their day to tweet about it. This woman on the bottom likes it as much as she likes dog Instagram accounts. People really like this thing, and you think about, and you think about the things you're willing to actually take time out of your day and tell other people about, and these guys are willing to do it for a piece of software. And when you really really focus on user experience, especially when you really stand out from the other experiences that are out there, you have this really positive effect, right? Virality is just another word for people like using my software and they're going to tell other people about it. You can put... you can add fuel to the fire, and you can make it easier for people to tell about it, but you can't make people tell other people about something they hate. Actually, you can — and they'll tell them you hate it and then they'll never use your product. So you what would you want them to do is say I love this product and I'm going to tell other people about it because it's so good. People tweet like every single day about a form and survey company simply because it's just a really great experience and in the end what Typefrom gets, is more of everything a company wants, and less of everything it doesn't. Right, what they get is more sign ups and conversions. They get a higher engagement rate from their users.
[00:13:34] They get great variety, they have an incredible brand they and all of it feeds into the ultimate kind of metric which they have which is revenue rate. They have lots of revenue and it just grows month on month on month and this means they have less of all the other stuff, right? They have less churn. Their costs are lower. They get less customer complaints. Those are all KPIs that are really important to companies, and I think if you look at the control of it, you look at what bad products do, you know there are some really terrible user experiences out there — like, I still don't know how to answer this Skype popup, and I don't know what the person was thinking who designed it. I don't know if they showed it to anyone else but I can't imagine that they showed it to like 10 people and those 10 people didn't tell them. That makes no sense. I genuinely don't know what the answer is to that question.
[00:14:44] Why would you have 106 pages of terms to go through? Why would you have a drop-down to pick a date on your credit card form? These seem like really, really obvious things. These are all real. I didn't Photoshop anything. This exists and I find it painful, but I also am kind of shocked that it exists, but I think it's what happens when you don't really put the user at the center of what you do. Right. The product is just something you get out there and then you move on to the next thing which is growing the business.
[00:15:20] Growing is something that is kind of horrible, and you think about as a founder or a as an investor you're backing companies or you're building companies and you know what is the drop-off rate of these interactions? Is someone going to come back if they have a better alternative? Are they going to keep using your product? Are they going to tell people they had a great experience or are they going to share, but this is like all Google, like are they going to share the terrible experience that you've created, right? So you have to think about it: what is it that focusing on user experience does? And I think a lot of it comes down to how companies design their products and how they do their product management. I think a lot of product management ends up being like the comic on the left, and then you get these products that you know instead of solving the problem that your users have. They solve a whole bunch of problems no one has, and then the one solution that they need they have to struggle to find, right? And so... I've actually been in some product management discussions, like the one on the left, which is just like let's just build the more features, when really a lot of times the answer is you take away features because you can't figure out what the solution is to the problem because the software is just too bloated.
[00:16:41] So a lot of the art of user experience is really, really figuring out the key problem you want to solve and then solving it, and that's when you get the really, really positive effects.
[00:16:55] So, I like for talks to be practical, and I think, you know, one thing that I think might be helpful to founders is — so we look for user experience-focused companies: what does that mean? What do we look for and what is our process? And so beforehand, you know, we just, we all like user experience, that's nice, but you can't just look at products all day, you do actually have to read and learn about it. There's a lot of really good literature out there about it. A lot of it comes from the product and design world, which is great. So it's not, you know, it tends not to be in, kind of, the business section, necessarily; it's more in that, oftentimes in design or even art, but it's pretty useful.
[00:17:38] Before we have a meeting, we tend to use the product. They don't have a product? We'll look for... We'll ask for prototypes. Prototypes and wireframes can teach you a lot about how founders think about the product. The great user experiences focus on providing value to the user, not extracting value for the company. So as an example, one of the things I always do is the onboarding process for any company I'm looking at, right? One of the questions I ask is "When are they asking for the email address?" That's a really good example of when are you trying to extract value for the company versus when are you trying to give value to the user. The number of marketplaces where just to browse the marketplace I have to sign up — I don't really understand why you would do that. I haven't even seen anything yet. Why would I sign up for your service? I have no idea if you have what I need, right? It's really asking for the right information at the right time, such that you've given value to users before you try to get value for the company, and the user is willing to give you that information, right? The value of an email address that's completely unqualified is pretty low.
[00:18:48] So really thinking through those things, I think, is important, and so rather than go through a series of questions, just do that onboarding flow, and you can learn a lot about how you are thinking about it and then ask questions about it. During the meeting we start with the product. It's almost always a dive straight into the product and start going through it, ask questions if I already spent time on it. Presentation, we'll go through, but more often will spend a lot of time on the product and ask questions about that, the product roadmap, kind of where are they headed with it? And then the presentation can always kind of look at afterwards and ask questions by email et cetera, but while we have in front of us we really want to know how they are how they were thinking about this, and it's interesting how people respond to that. So really product-centred founders relax, and they really open up, and they get pretty excited. Whereas others kind of want to go right back to the script that they've done and go right back to the presentation because they're not actually that comfortable talking about the product.
[00:19:48] And then on the team side what do we look for? We look for founding teams that include either user experience or interaction designers, product managers, product designers, but above all we look for people that have empathy with their users, and a lot of that is just about asking questions to the founders. Why did you make this choice? Why are you building this feature? What are the features you've removed? What are the things you tried before? And, you know, it's because I think really great user experience is about having empathy with your users.
[00:20:24] There's of course, there's always this idea that, you know, if you build a great product you get it out there and it'll just like that's magic and it'll happen really really fast. It's not. It's like almost everything in life other than actual sprinting. It's not a sprint. It is very much a marathon. Do you guys know who they are, by the way? Okay. So it is very much a marathon, and it takes a really, really, really long time to get to a great product market fit. So as an example Citymapper's a five year old company and it's just starting to hit its stride. It's taken a long time for it to get to this point. Typeform, from when it started to when it launched its beta, took one year. From when it... from its beta to its full public launch took almost another year. That's almost two years to build a product that was in a market that you could say was crowded and already had a lot of solutions in it. It takes a really, really long time to get to a great product. It's a grind, right? Like, product/market fit is a lot of work. It's absolutely not something you just launch and then it's done, right. There's a lot of customer discovery involved. There's just, it's a really, really long process. I have yet to work with a company that has just launched their product and it's really taken off. So similar to what Andy said, almost all of the curves look — they might be growing, but they're like linear growth and then it... the slope changes and changes and changes.
[00:21:55] I've never seen anything actually grow exponentially, even networked businesses like SoundCloud, which at one point were growing really, really fast — even there it was a linear growth curve where the slope just kept changing and it took a really, really long time to get there.
[00:22:13] And then the final thing is, everything I just said only applies to a subset of companies. So there's a lot of companies where frankly focusing on user experience is just not enough. One of them is a lot of businesses that have an offline component. So if you look at things like Deliveroo, or Uber, or cleaning marketplaces, really the best user experience is massive liquidity and really low prices, and that only comes from raising a shit-ton of capital. So you can have even a terrible user experience, but if you have really low prices, and your car is always available, you're probably going to be fine. And so those are sectors we just tend to stay away from. They're great businesses and you can build really great businesses in those sectors. You can make a lot of money in those sectors, but they're just not ones that we focus on because user experience isn't a strong enough differentiator. And then a lot of low margin businesses like ecommerce, again the same thing: a lot of the strategy is around raising lots of capital, rather than any kind of user experience that really differentiates you.
[00:23:20] And then the final point is one thing that we're exploring now is how much a user experience applies to more nascent technologies. So we made a couple investments recently that are definitely in the more technical space. One is an autonomous drone software company. Another is in medical imaging that uses AI. We're not sure yet. We suspect it may not be actually that critical, but we're finding out. But in those areas it's probably much more important to have really deeply technical founders that can actually build the thing that's probably really hard to build, rather than a product designer. And so those are a couple of sectors that it doesn't apply to. And I think you have to think about what is the company you're building? What is the market that it's in and whether or not this is actually going to be the key differentiator? But if you're not in one of these sectors, I encourage all of you to go back to your product, or if you're an investor, go back to your portfolio — use the product, try to imagine you're using it for the first time and ask yourself, "is this actually a user experience that I enjoy?".
[00:24:25] The answer is probably no. And that's just, you know, it's unfortunate, but it's also an opportunity because there is a lot to be gained from improving the user experience of your products and a lot of the gain is in your KPI as in it's a financial gain I actually have five minutes left so I was told I couldn't do questions, but fuck the rules. Does anyone have any questions?