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.

Value of the Identity Layer – Payments Edition

Posted on 2 Feb 2010 by cemsertoglu

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 1 Feb 2010 by cemsertoglu

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 20 Jan 2010 by cemsertoglu

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.

The 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 19 Jan 2010 by cemsertoglu

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 11 Jan 2010 by cemsertoglu

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.

Cem Sertoglu

Category Archives: Web/Tech