Culture is Important in Global Services

Posted on 29 Mar 2010 by cemsertoglu

Fred Wilson had a very important post last week, examining the non-US growth of a few web properties, and concluding:

There's a lot of money "rest of world" and I suspect that will only be
more and more true over time. So we should start building web
businesses with that in mind.

The topic is very relevant to my business thesis, so i have been thinking about it over the weekend. At the heart of the discussion is the notion of global web businesses. The thinking here is pretty linear. In capitalism, most businesses enjoy economies of scale. In the connected, digital economy, since most physical points of friction are eliminated, the economies of scale allow for significant economic advantages to the largest players. Therefore, it's natural to see large, global, dominant players emerging. Fred is saying that these players will eventually have their non-US markets larger than their US markets and should behave with that in mind.

It makes a lot of sense. And, we're already seeing this in action with Google dominating search in most countries, and Facebook killing all sorts of local social networks that preceeded it at the local level.

Is there not a segment of internet business that is inherently local? I think there is. And the secret sause there is cultural. eBay has een very acquisitive in its global expansion. However, the eBay acquisitions always come with their unique local flavors. It's in the community if not the product but all auction-based local ecommerce businesses I have seen have a unique cultural component. The same is true for dating services, classifieds, recruitment sites…

I think it's very difficult to build, from scratch, a truly global service, except in pure technology-driven ventures (such as search, as in Google, or VoIP, as in Skype). Each company is built with its own cultural unique points and then, as they expand globally, adopt or acquire practices that fit into other cultures.

Cisco’s Internet Impact with CRS-3

Posted on 11 Mar 2010 by cemsertoglu

Two days ago, the tech sector was all ears in anticipation of Cisco's announcement that was going to, in the company's words, "forever change the internet". Yesterday, following the announcement of CRS-3, Cisco's new, powerful router that can move up to 322 terabits per second, there seemed to be an air of disappointment. Cisco stock was down slightly following the news. My sense is that the market has been expecting a new business/product line, as Cisco's been getting closer to the consumer (via the Flip) and these days, announcements like this have been Apple's provenance with very cool consumer devices.

However, I think the announcement is extremely important, as it brings us closer to an "always connected" environment. Cloud computing and multimedia streaming have been two huge ideas over the last couple of years, and the reason is that they contain an enormous value proposition, through optimization of resources at the network level. This is dependent entirely on the bandwidth of the network. And the routers can be a big source of bottleneck on the network.

Two weeks ago, I had the chance to experience Cisco's telepresence offering and I can vouch that it was like nothing I have seen before. The experience was virtually indistinguishable from an in-person meeting. The CRS-3 is a critical step in beginning the proliferation of the bandwidth that makes such an experience possible, the elimination of the router
bottleneck and is a big step towards "forever changing the internet".

To close out, I want to relay a few soundbites from the announcement in terms of what the new router enables (via Mashable):

– the entire printed collection of the Library of Congress to be downloaded in just over one second

– every man, woman and child in China to make a video call, simultaneously

– every motion picture ever created to be streamed in less than four minutes.

Mae on The Valley Girl Show

Posted on 5 Mar 2010 by cemsertoglu

My friend and partner-in-some-crimes Mehtap Mae Özkan was on Jesse Draper’s (Tim‘s daughter) The Valley Girl Show. She’s having a lot of fun, talking money, politics, belly dancing, whirling dervishes and turkey with Jesse.

The Open Finance Platform

Posted on 4 Mar 2010 by cemsertoglu

My former partner Steve Richmond has a post on the very powerful idea of an open finance platform. He's talking about a a bank/financial services account structure that has an API-like framework for third-party services to integrate and compete for customer attention in a marketplace environment. I think it's brilliant. Steve has been working with a few leading financial institutions and it's not that surprising to me that he's thinking about the intersection of financial services and the connected economy.

His vision is:

In this model, the bank owns your "profile," which sits with your
deposit account. Apps use this profile to deliver services that are
interesting and valuable to you – and compete for your business openly
on the platform. Data gets shared two ways, always with explicit
authorization of the user.

Instead of billpay, you have a network of friends and vendors who you can easily transfer funds to.

In the US, the fragmented structure of financial services, and the state regulated banking environment may interfere with this kind of innovation. At one point, e-Trade seemed determined to change the way people banked. PayPal started out with radical disintermediation, but got stuck in cheap p2p payments. It was able to reduce friction in its core area, but did not spread wide outside of that. Prosper took another aspect, the personal loan area, of financial services, but I am not sure how it's been going. Anecdotally, I have been hearing bad news about default rates.

The platform idea is a radical one. It's also one that probably will not grow out of the incumbent players in the market. I'll be thinking about this idea.

Angel vs VC

Posted on 2 Mar 2010 by cemsertoglu

I have made investments both as a VC and as an angel investor. The distinction for me is whose money I am investing. If it's my own, usually in smaller amounts, I view it as an angel investment, even if it is a part of a round with institutional investors.

It is quite frequent that I find myself in an investment conversation that does not fit the investment vehicle I am representing at that point. This usually happens in early rounds where the amount of capital required is too small for a VC, or the terms offered are not strong enough. In these cases, I can think about an angel investment, but in my scope of activities, this can sometimes pose problems. The primary issue it brings up is whether it hurts the alignment with my investors. I try to avoid situations where it can lead to a "front-running my investors" scenario. So far, I have been successful at that.

So the ideal solution is forming a structure where a VC can participate in these types of angel rounds. Ben Horowitz has a great post on the issue and I don't need to spell out the points he already makes. I basically agree 100%.

I also think it's a great idea to utilize the Series Seed type documents in these types of deals. My latest angel investment, CivicSolar, used this set of documents which made the process considerable faster, and I presume, less expensive for CivicSolar.

Crowdsourcing Context

Posted on 25 Feb 2010 by cemsertoglu

I am very intrigued by Polyvore, the fashion content community that is innovating on an interesting aspect of user-generated content. The power of crowdsourcing when applied to crativity and taxonomy is very fascinating and can lead to impactful search innovation.

This is especially relevant for hard-to-categorize and segment areas such as fashion. Machines have not been as effective tackling this problem, where they perfom in the identification of patterns and items, but fail in the context, as we saw with Like.com. Polyvore will be an interesting company to watch. I am blown away by some of the stats shared with GigaOm:

it sees 30,000 new sets created daily. It has 140 million page views
per month, 22 million of them from embedded sets, which are often found
on fashion blogs.

The level of insightful indexing that type of data can enable will be enormous. And that will be very very valuable and monetizable.

Killing Things at Startups

Posted on 22 Feb 2010 by cemsertoglu

My friend Auren has a good post on a very important responsibility for entrepreneurs: the expedient killing of stuff that is not bringing value. He summarizes the issue:

Being able to kill things early is essential to the long-term
growth and success of any company. But recognizing that you should be
searching for things to kill is the first step to building a better
company.
…
As your company grows, you’ll have more things – both big and small
– that either weigh down growth or are not core to long-term success.
The companies that work proactively to get rid of these issues and
devote resources to the areas that matter are the ones that will be
able to remain nimble, innovative, and win.

This is also interesting to me as a VC. Usually, we are not in a position to make the killing decisions at our portfolio companies. So, our job is to prod our entrepreneur partners in their constant pruning of their organizations, and provide the necessary encouragement for them to take action.

New Interface Wave

Posted on 20 Feb 2010 by cemsertoglu

I think we are at the beginning of a new wave of innovation in how we interact with various types of computers. The fact that my laptop looks like a typewriter makes it less and less suitable for a lot of tasks for which I use it (actually, it's quite appropriate for typing this blog, until voice-to-text is perfected). That's why there have been many diverse I/O devices for specific tasks, including mice, joysticks, gamepads, etc.

It feels like we're at an inflection point in the area of interfaces. I am amazed and excited by the prospects offered by companies like Oblong, and innovation such as this. As computers proliferate and enter many other types of devices, the scope of interface innovation will broaden. I suspect there will be an enormous economic opportunity associated with this area.

S&P Upgrades Turkey

Posted on 19 Feb 2010 by cemsertoglu

S&P has upgraded Turkey's sovereign credit rating today. I think i's well-deserved and long overdue, given the level of resiliency Turkey's shown through the global credit crisis. It's also a bit ironic that the move coincided with recent troubles all over the EU, particularly Greece and Portugal (via Marketwatch).

We have not seen any bank failures, significant stimulus moves by the state, or any large company busts. Turkey's held up remarkably well and that performance supports my overall bullish stance on my country.

Cem Sertoglu

Author Archives: cemsertoglu