Author Archives: cemsertoglu

Value of the Identity Layer – Payments Edition

Posted on by

Social-brand-identity Dave McClure has a fun recent post/rant on business models.  In it, he makes a simplification:

Well because as we transition to a Startup Ecosystem driven by direct
payment & subscription business models, i want to make it clear how IMPORTANT it is to make sure users don't forget their passwords.  If they forget their password, and/or can't recover it, then guess what MoFo — YOU DON'T GET PAID.

While I agree with his point, he then goes on to assert that the frequent-use models don't have this problem and therefore should win the transactions/subscriptions business models, which is where I start to get question marks.  He provides examples from his tenure at PayPal and concludes that since Facebook and Google are the most frequently used properties, this is their game to use.

I also agree with the last point.  However, I think it's a gross simplification to tie the causality to frequent use.  It's the identity layer that counts.  Not the frequency.  I play some casual games daily.  but they don't know about me nearly as much as Google or Facebook does.  It's that intimate knowledge of who I am that counts!

TBI Research is pointing out the revenue potential demonstrated by some recent data at Facebook through payments.  It's not surprising that the results are positive.  Payments are directly tied to identity.  PayPal is under huge threat here.  In fact, once the payment structures start to slip, eBay will be under threat as well. 

The identity layer is enormously valuable. The biggest contenders for it are Google (because of Gmail) and Facebook.  The identity layer will allow these companies, as well as those who will be able to grab a piece of it, to challenge some very large internet commerce areas.  Payments are a great candidate.  Others will be classifieds & listings, and loyalty programs.

I think there still is an opportunity in the Turkish identity layer, despite Facebook's domination here.  Not sure how one should play it but I continue to think about it.

FRC’s Exchange Fund

Posted on by

I'd been away skiing for a week and now I'm back, refreshed and excited about the year ahead of us.  I was gone in a pretty busy week that saw the announcement of Apple's iPad, which I think is getting underestimated. But on to the more interesting development of the week for me:  First Round Capital's Exchange Fund.

Josh Kopelman describes it as:

This exchange fund
was created to allow First Round Capital entrepreneurs to contribute a
small piece of the stock they own in their company  — and share in the
upside of all the other companies.  The fund is only available to
qualified First Round Capital portfolio companies and First Round
Capital does not receive any
economic upside from the fund.  The goal of the fund is to allow our
entrepreneurs to get the benefit of some tax efficient diversification
without giving up their upside prematurely. 

This is an issue I had thought about when we were busy growing SelectMinds.  I'd even talked to my fellow NY-based entrepreneurs Marc Cenedella and Mark Harris about it circa 2004.  We'd agred it would be tough because of valuation metrics.  However, when structured in the context of a VC fund, that problem is probably mitigated.  There are a few other issues raised in the comments under Josh's post.

All in all, I think it's a great way to try to diversify the risk.  I'll be watching excitedly.

NuBridge Venture Summit – A Turkish Internet Milestone

Posted on by

Newbridge I blogged about the NuBridge Venture Summit (and the preceding NuBridge Angel Summit, which took place last week and was extremely successful) last week.  However, as we are about to kick off this event, I believe it's such an important event for the Turkish internet industry, that I wanted to blog about it again, this time in a dedicated post.

PamirgelenbeThe organizer of the event, Pamir Gelenbe, is London-based VC with Turkish roots.  He approached me with the idea that a TechTour-style mini-conference would make sense for the Turkish market, while we collaborated on the European Tech Tour's Web & Mobility Summit back in November.  I thought it was a great idea and said that we'd support the event.

 In the following months Pamir worked hard at putting together an event that now has such a spectacular line up of participants that my expectations are far exceeded.

The event's format is primarily short presentations by leading Turkish internet companies, interspersed with panel discussions by entrepreneurs and venture capitalists.  There will be networking opportunities that will allow participants to connect and hopefully, a few funding deals will emerge from the event.

As with all events of this type, the critical success factor is who the attendees are.  On that front, Pamir has done an excellent job and has lined up the following participants, each of whom play an important role in global venture capital:

  • 3TS
  • Accel
  • Acton Capital
  • BakerMcKenzie
  • Big Bang Ventures
  • Endeavour Vision
  • General Atlantic
  • Golden Horn Ventures
  • Holtzbrinck
  • Index Ventures
  • Sardis Capital
  • TA Asociates
  • Tiger Global
  • Tomorrow Focus AG
  • Ventech
  • Wellington Partners

For the event to accomplish its mission, an investor list of this caliber would have to be met with a local internet company line-up of equal strength.  On that end, the event boasts a who's who of Turkish internet sector:

  • Airties
  • befunky
  • Bilyoner.com
  • Cimri.com
  • Digitouch
  • Dogan Online
  • Doktorsitesi
  • Ebi
  • e-kolay
  • enuygun
  • Euromessage
  • Gamesultan
  • Gelirortaklari
  • grou.ps
  • Hepsiburada.com
  • Hitay
  • limango
  • Magnet
  • Mynet
  • Nokta
  • Sanalika
  • Sporx
  • Tasit
  • Vatan Bilgisayar
  • Yemeksepeti.com
  • Yogurt

I am very confident that this event will be looked upon as a unique milestone in the development of the Turkish internet industry.  We are very proud to have our portfolio companies (befunky, grou.ps and Yogurt for GHV and YemekSepeti.com for me) presenting, and to have had the opportunity to support this event as a sponsor.

Blogging Intensity and Fragmentation

Posted on by

On the heels of my post on why I blog, comes the updated VC blog rankings from Larry Cheng (I'm a N/A rated, dismal number 51!), and a good post by David Hornik on a tendency he identifies:

For years, my every thought became a VentureBlog post. But I have to
admit, over time, my focus turned elsewhere. I spoke at events,
podcast, taught, started The Lobby conference, and worked hard to help
my portfolio companies thrive. And, along the way, my blog suffered.
Fewer things in my daily life called out for commentary. And
VentureBlog began to languish.

I realize my blogging has suffered in frequency recently.  For me, this is largely due to changes in the way I communicate my professional thoughts.  Back in 2005, SortiPreneur used to be the sole channel I used to do this. However, now I use Facebook to broadcast to my friends and Twitter to reach my professional community.  When you add the fact that a Tweet takes a fraction of the effort a blog post takes,  I find myself asking whether a thought deserves a full blog post everytime I think about sharing it.

Istanbul on the VC Map

Posted on by

Nubridgevetureslogo There are two very important events that will take place in Istanbul over the next couple of weeks. 

First is the NuBridge Angel Summit, organized by my friend Pamir Gelenbe, who's a London-based VC of Turkish origin.  The event brings to Istanbul a group of world-class angel investors, including:

I am also participating in the event, which will take place on January 14 & 15.  It should provide an excellent venue for Turkish internet ventures looking for angel backing.

The second event is the NuBridge Istanbul VC Summit, scheduled for January 21 & 22, which we're proud to sponsor as GHV.  I think this event will be an important milestone in the development path of the Turkish Venture Capital industry.  The event's format will resemble that of the European Tech Tour Association's events, in that a group of top-tier VCs from around the world will get a chance to meet a select group of Turkish internet and technology companies.  You can find a list of participants at the event's website and Çağlar Erol's blog (in Turkish).

I am especially excited to have a few of our GHV portfolio companies (Grou.ps, beFunky, Yogurtistan), as well as a personal investment of mine (YemekSepeti.com), presenting.

If you are interested in being associated with either event, please contact Pamir through the event website, although I understand that attendance will be extremely tight due to space constraints.

VCs Blogging and Tweeting

Posted on by

Jeff Bussgang, whose blog has been a source of inspiration for me over the years, has a post on VCs blogging.  There seems to be a bit of controversy over the issue, as you can see in the comments of the post, and its re-blogs at PEHub and Business Week.

As a VC who blogs and tweets, let me come out with my reasons.

  1. Record of Thoughts: My blog is a personal note pad.  I find it useful to be able to browse over a record, albeit public, of my thoughts on certain topics and how they have evolved over time.
  2. Discussion Arena: I use Sortipreneur, even with its small audience, as a useful discussion environment.  Through my blog and my tweets, I am able to interact with a community where many members are smarter than me.  I use it to ask questions, test ideas and, sometimes, provoke.
  3. Newsfeed: My blog often works as the News tab for me.  I use it to announce investments, events, etc. that may be relevant or interesting to the Turkish startup community.
  4. Education: Probably the most selfish reason for my blog is that it helps me educate my consitutents and help me do my job easier.  I can communicate what type of deals I am interested in, the VC structure, the deal process, etc.

After about four and a half years of blogging, I can say I have benefited a lot from the activity. I beleive ideas grow thorough sharing and a blog is a great vehicle for that.

Reflections on the Decade

Posted on by

Mmx Larry Cheng has a post a few days ago listing the decade-by-decade returns of major US financial indices.  Here are the returns from 2000 to 2010:

S&P500: -2.9%
DJIA: -0.5%
NASDAQ: -5.7%

I am not an Economist so I will not comment on the first two numbers, except that, as Larry also notes, it's much more difficult to count on 6-8% returns from the stock market that we've been taught to assume.

However, the NASDAQ number does make me think.  2000-2010 was the decade in which we saw the biggest breakthroughs in the connected economy.  In this decade, we saw:

  1. The maturing of Google as the precursor of the connected OS.
  2. The enormous drop in the cost to test ideas by creating lean startups.
  3. The emergence of video over IP, with Youtube (Google) streaming more than a billion videos a day now.
  4. The creation of the first attempts to own the identity layer of the connected economy, with Facebook and Twitter.
  5. The blockbuster hits of digital media consumption hardware, with the iPod and perhaps the Kindle.
  6. The biggest milestones of the mobile computing convergence: the iPhone and Blackberry.
  7. The breaking of stale structures of content creation and distribution, through blogging and social media.
  8. The availability of almost-free voice communication with Skype.
  9. The power with which customers of content innovate to get to content of their choice, legally or otherwise, at minimal cost, represented by the torrent universe.

Each of these areas represent enormous leaps forward in utility and value.  Yet, the financial proxy for these innovations, arguably NASDAQ, is down for the decade.  My explanation for this is the inefficiency of the index in representing this value.

The individual stock prices and market capitalizations may be less and less relevant in accurately representing the value these companies will generate.  How do you value a record label during a seismic shift in how digital content is consumed? How could we have been able to predict the impact of iPhone, Kindle, or Google in our lives, before these products are launched?  This problem cuts both ways.  It can over or under-represent a technology/media company's value.

My point is that we are coming out of a decade of giant leaps forward in the connected economy.  The reflection of this massive creation of value and decrease of friction will have to be represented in dollars and cents.  Apparently, it is not being reflected in NASDAQ just yet.  Maybe it will catch up, or manifest itself through other measures. However, I continue to be very bullish about the economic implications of the connected economy.

Is SaaS Renting?

Posted on by

Emrecan Dogan has a good analysis of content rental business models.  He's created a simple framework for evaluating the dynamics of renting different types of content, and he's taken as examples books, textboks, music, movies, video games and software.

Of this list, the software example has attracted my attention.  I think Emrecan's talking about shrink-wrapped software.  He's attached it an average price point of $90. And he concludes that the rental market potential is low.

This made me think of Software-as-a-Service models, which are frequently thought of as rental models.  But when you approach it using Emrecan's framework, SaaS looks more like a subscription/service model than a true rental model.

Maybe it's just a semantics issue but I have seen so many cases where SaaS is treated like a rental approach that I thought the difference is worth noting.

Entrepreneurial Focus

Posted on by

Mark Suster has been blogging about entrepreneurial characteristics.  I like his list and agree with all of his points.

The topic has made me think about a key difference I have noticed in Turkish entrepreneurs and their counterparts in the US (and largely, western Europe): multiple, parallel ventures.

I understand this in the entrepreneurs who are emerging out of a "work for hire" service shop.  In those cases, many of the parallel ventures are off-shoots of ideas or products developed previously.

I also understand large groups of entrepreneurs. In that case there may be excess capacity at the leadership level that gets taken up by a new good idea that the team just does not want to let go.

However, it's surprising to me that a small team that's gone to work on a great idea can find time to focus on a second (or sometimes, third or fourth) project.  There's usually so much work involved in getting one idea off the ground that it should be extremely difficult to parallel process multiple projects.

One reason for the popularity of this model in Turkey may be the scarcity of capital.  Entrepreneurs don't want to put all of their eggs in one basket.  And if they don't have an outside investor who's directing them to focus on one idea, they try to progress several ventures together to see which one is getting traction.

In our investments, we try to get the entrepreneurs to focus on the idea at hand. Many times, there are previous projects they continue to be involved in, but the core focus always has to be in the company we've invested in.

My VC Presentation at Etohum

Posted on by

UPDATE: The folks at Etohum have just uploaded a video of my presentation on Venture Capital, on December 19th at the Etohum Entrepreneurship Camp.  The video is in Turkish.

http://televidyon.com/video-paylas/2122

Here's the presentation accompanying my talk on venture capital at Etohum last week.  Sorry for the tardy post.

NB. It's in Turkish.

Etohum Kampı – Girişim Sermayesihttp://static.slidesharecdn.com/swf/ssplayer2.swf?doc=giriimsermayesietohum19dec2009-091221151030-phpapp02&stripped_title=etohum-kamp-giriim-sermayesi

View more presentations from Burak Buyukdemir.