The First “Turkish Unicorn”

YsOne of the most frequent questions we got when we were raising our Turkey & CEE-focused VC fund at Earlybird, was about the small number of large exits in the region, especially in Turkey.  Our thesis was that the problem was on the supply side – not enough large startups were being built.  We contended that the market was large, and part of the problem, to which we were bringing the solution, was the lack of local funding.

Today, we have the great news that YemekSepeti has been acquired by Delivery Hero for $589m, which makes it the first Turkish internet startup exit above 1 billion TL (TL 1,596,000,000) to be precise.  I have known the company since 2008, and saw it develop into one of the healthiest marketplace businesses I have ever seen in the world.

Congratulations and heartfelt thanks to Nevzat, Melih and the rest of the team that made it happen.  Your story will become a beacon for many more talented young entrepreneurs.  Well deserved!

Marketplace Insights via Etsy


Chicago VC Ezra Galston has a good analysis of the Etsy S1 on Techcrunch today.  We are investors in many marketplace businesses (YemekSepeti, VivenseGrupanya, Idemama,, Videdressing, Auctionata, Carpooling, Smava, etc.), and we watch the industry intently, as there has been more recent value created in marketplaces than any area of consumer internet.

Galston's post is worth reading in full, so I will not try to summarize, except for one very interesting data point: that almost 45% of its revenue comes from Seller Services, compared to ~25% just two years ago.


This means that the growth of the marketplace is going to be more dependent on the number of sellers, than the transaction volume.  At first look, this does not look too intelligent: the latter number will certainly grow faster.  However, as we see marketplaces maturing, this is the way that the leader/incumbent can take aggressive pricing moves to keep competitors away.  This is observable in Etsy's commissions moving from 5+% to 3.5%.  If you are an emerging Etsy competitor, there's not enough margin for you to grow fast.

Ultimately, this can lead to marketplace deflation, a la CraigsList, which came and killed many fledgling classifieds sites with its massive traffic and free offering.  I am curious to see if we start seeing this type of defensive behavior from the modern marketplace champions, such as, Uber and Airbnb.  

Artificial Scarcity Kills Long Term value

ClWhen it rains, it pours on this blog 🙂

I see that I'd blogged about artificial scarcity before, and again, it was about media.

The only reason I did not have eight champions league matches to choose from on my TV is that someone's spreadsheet suggested that it was more profitable to remove my alternatives to try to coerce me into watching the single game that was sold to the Turkish CL rights holder.  Well, it didn't work.

This reminds me of the diamond trade, where supply is artificially manipulated to manage pricing levels.  Ultimately, the laws of nature are on the diamond industry's side: there will be less diamonds in the future.  But in digital media, where the marginal cost of increased consumption is almost nil, the attempts at feigning scarcity will lose in the long term.

How to Start a Startup

StanfordI came across a blog post today by Connor Murphy on the different approaches to fundraising for your startup.  It made me think of the vast amount of resources for tech entrepreneurs today, compared to 1999, when I started my startup journey.  I sometimes wonder whether the naivete, that was a result of how clueless I was about what it would be like to start a tech business, was a factor in my decision.

In any case, if you are a rookie tech founder, there's a ton of intelligence, advice and anecdotes available for you out there.  One of the better resources is YCombinator's Sam Altman's class at Stanford titled "How to Start a Startup".  He tapes his class sessions and posts them on Youtube.  I would highly recommend investing a few days in digesting his content.

Why Price Matters

Notice a pattern in my blog titles? 🙂

This is the age of TechCrunch and Business Insider.  Numbers with a lot of zeroes are sexy, so tech startups are sexy. Again.  The last link is not to be taken as a suggestion that I think there is a bubble.  I don't think there is.  Not like in 1999.  Topic for another post.

But, the high valuations and the amplification of tech media is whetting the appetites of entrepreneurs in our region, causing eventual disappointment on both sides of the table.

Our region has historically had difficulty creating large technology companies.  I am excluding Turkcell, etc., as I view them more as regulated utilities.  Turkey has not produced a single global technology success story, yet.  I think that is an anomaly and it will change, but so far, it's the reality.  The largest tech exit in Turkey was GittiGidiyor, at $220m.  We now have a handful of tech companies valued over $100m, and some of those will get to large exits at some point.

Entrepreneurs should understand that this is the framework we have to work within.  

Now, combine this fact with the expectation you'll see at every early-stage tech investor: at least a 10-20X return on her investment, if all goes well.  They expect this because their portfolio will need these 10-20Xs to deliver the promised returns to their investors.  That's how the math works.  Without these homeruns, the portfolio will deliver mediocre returns, at best.

This is the math you, the entrepreneur, should have in mind in your dialog with any investor in our geography.  Until we see $billion exits, we'll assume your company will be exit at much lower valuations, setting the stage for more modest valuations, compared to silicon valley stories you read about.


Scaling Startups Effectively

I am embarrassed at my blogging pace over the past few years.  However, when I come across a thought that I think deserves more permanence than Twitter, this blog is still where I turn to.

One of those items just came from my friend Saar Gur, who's a General Partner at CRV.  Saar's spent some time analyzing the growth factors in rapidly-growing startups and his thoughts are below.

I think the money slides are 19 and 20. We see so many startups comparing themselves to companies with very different economics underlying their businesses.  And, much capital gets wasted, chasing someone else's growth curve that is just not attainable for their business model.

The LTV/CAC analysis needs to be a top-down one, and one that gets iterated as a company moves down its own growth curve.  Any hasty conclusion is usually a costly one.


Hiring at Startups

StarIn my opinion, a startup founder has three primary jobs:

1. Develop and manage the company's vision
2. Form the right team to make that vision a reality
3. Make sure there's money in the bank

The most important of  these three is #2.  That makes hiring a critical task.  I was reading a recent Mark Suster post, and found myself re-reading a section, that effectively summarizes how a founder should approach hiring:

“Join our company because we’re doing exciting things. 

Join because you’re going to get more responsibility at a young age than you would a bigger company. Join because we’re a meritocracy and promote success not tenure.

Join because every year at the end of the year you can say that your resume is significantly better than it was the year before. Join because as we continue our successes we will have more resources to reward you with and reward we will.

But don’t join if you’re looking for a get-rick-quick scheme. We’re not that company. We pay less than you could earn at other companies. We have to. 

All I ask is to earn your employment every year. If at the end of each year you haven’t grown in skills and stature, if at the end of the year you don’t feel like you’re still enjoying the journey, if at the end of the year you don’t think your resume is going to look better at the end of next year 

… then it is time to leave. I’m going to work hard to make sure you never have to.

and if money comes through options at the end of our journey that’s icing on the cake.”

The post is actually on another interesting topic, but I wanted to pick this section out.


Facebook Home: Less Utility, More Ads

Facebook-home-660x481So, Home is here. Facebook is coming out with a smartphone and it sits squarely at the center of the company's vision. The service is moving from a web application and service DNA to an OS DNA.  Considering how the connected world is moving away from central devices (PC, Laptop) to edge devices (phone, tablet, nike fit, withings), this makes a ton of sense.

However, I find it unfortunate and dangerous that this is happening with the two leaders of the movement (Google and Facebook) as public companies, with quarterly earnings targets.

The future is one that the Net (or the connected world) is constantly with us.  That is a given. Previously, only your phone was with you and it was part of a relatively dumb telco infrastructure. Now, the Net is aware of every single move.  

I am not a privacy activist (although I appreciate their work).  I generally would not mind the above issue, if it is helping my life in meaningful ways, the way that early Facebook was about utility.  But now it's about advertising.  And, I am afraid that this hyper-awareness will result in an increased invasion of capitalism in our lives.

I was expecting more utility from Facebook with it's critical mobile move.

Progress Breaks the Web

BrokenI have been thinking of the "apps breaking the web" meme over the last couple of months.  The issue is adjacent in my mind to the "mobile strategy" topic I recently blogged about.  And there has been a collection of smart writing on the issue from Anil Dash, Scott Hanselman, Semil Shah and most recently, Felix Salmon, who are exploring the effects of not just native apps, but also large consumer content services, on the networked structure of the internet.

As I think of the topic, it's now becoming clear to me that the constant breaking of the chaotic network structure is in the nature of such chaotic networks.  The needs are driving progress and progres keeps moving the intelligence and contecxt of the network from the center to the edges back to the center, and so on…

You can see this in the usenet > aol > geocities > typepad > facebook > twitter pattern.  We are now going through a centralization period, where Facebook (with its identity layer ownership) and Apple (with its App distribution power) are consolidating the intelligence and the context of the network. The needs of the users, and the reality of pwerful computers in everyone's pocket with a fat pipe to the sky, will allow innovators to push it back to the edges.

It's this innovation cycle that has been creating enormous value, as it keeps finding new solutions to new problems.

Product Strategy, not Mobile Strategy

Mobile-devicesIt feels like the overarching theme in technology startups
in 2012 was “mobile”, with mobile wisdom and sexy statistics echoing in the
news, blogs and conferences.  The
discussion was marked with numerous milestones, such as the successes of Angry
Birds, Instagram, Uber, Spotify, Hotel Tonight, and most recently, the
proclamations of eBay and Etsy about how mobile has arrived in the holiday
season.  We have VCs that put “mobile” on
investment strategy slides, and discussions by entrepreneurs about the
challenges of mobile development. 
Thinkers like Fred Wilson are also weighing in with their experiences.

I personally find the discussion quite frustrating.  It is not clear to me what mobile really
is.  It used to be a clear distinction:
mobile was your phone and web was (accessed through) your computer.  This has now changed.  We have high-powered computers in our
pockets, with improving form-factors (iPhones and most Android phones have
large enough screens and pinch zooming) and innovative interfaces.  Add to this the tablet, which, in my
experience, really belongs on the coffee table at home and the senior
executives briefcases in the office.

At the product level, there’s further confusion around apps and mobile web.  To me, it feels like apps emerged due to the
frustration around mobile data speed. 
We’d seen this on PCs before.  The
need goes away once the web is fast enough (just ask  However, Apple and Google love to get in
between us, and the tools we use, and are continuing to encourage the app
world. I continue to believe native apps break the web and am counting the days until
they go away.  (This last point excludes
the apps that are obviously native-appropriate, such as mobile games, and pure
mobile needs like Moped, Wunderlist, Uber, Instagram, etc.)

It will be a good day when the whole noise around “mobile”
starts to go away.  To me, there are
unmet needs and points of friction, and the current paradigm (that Meeker
explains so well, especially with Slide 9, which is the reason for this post) with proliferation of diverse mobile devices, will inspire
brilliant engineers to come up with products and services, that make use of
these powerful devices all around us, irrespective of the form factor, that are
connected to the sky with a fat pipe.

Through this process, some startups will have to focus on
one type of device, and others, another. 
Lately, the challenge has grown for many startups because they feel
compelled to parallel develop on and optimize their product for multiple device
types.  The ante at the table is now a
great website, a great mobile site, and iOS and Android apps. In most markets,
the competition is fierce enough that under investing in any of these may cost
valuable early traction.  If you have
ever run a product team, you know how difficult it is to do this.

And, it is this challenge that will move us away from
multiple development needs for different device types.  Engineers will create frameworks that will
simplify this task, and we’ll go back to simpler development models (remember
X-browser optimization challenges. 
That’s history now).

 To conclude, I think a lot of the current mobile discussion
in startup-land these days is noise.  We
are just in transitional period with multi-device product paths.  However, the core challenges around product–market fit are similar to what they have always been.  If anything, the ways you can solve a problem
today are more numerous, with the immense processing power we now have in our
pockets and the fattening pipes to the sky.

It is a great time to be focusing on what problem you want
to solve next, rather than “what your mobile strategy is”.