Turkish startup investment activity in 2016

In a talk at last week’s Webrazzi Summit in Istanbul, my partner Hasan shared his observation that 2016 has been a year where other investors in Turkey have taken over where we left off. Specifically, although the dollar volume of our investments has slowed down in 2016 as we focus the bulk of our remaining budget on our roughly 30 active Turkish investments, other investors in Turkish startups are more than making up for our slow down.

I hope to post the full video of the talk when it’s available, but in this post I want to share the data which supports Hasan’s observation, together with some conclusions from this data. The figures for the total dollars invested in Turkish startups for each year come from Startups.Watch.

In 2012, Hasan invested $2.0M (or 7%) of the total $28.3M that was invested in Turkish startups. $26.3M came from other investors.

In 2013, we invested $32.7M (or 57%) of the total $57.6M. $24.9M came from other investors.

In 2014, we invested $9.7M (or 31%) of the total $31.1M. $21.4M came from other investors.

In 2015, we invested $20.8M (or 37%) of the total $55.7M. $34.9M came from other investors.

And in the first 9 months of 2016, we invested $1.2M (or 2%) of the total $49.1M. $47.9M came from other investors.

If the investment activity we’ve seen in Turkish startups during the first 9 months of the year continues at the same pace during the final 3 months of the year, the year will close with north of $65M in total investments.

We can draw two conclusions from this data.

The first is that 2016 is on track to be a record year for the dollar amount invested in startups in Turkey. Despite the political and resulting economic uncertainties that the country has faced throughout the year, this shows just how strong and resilient Turkish startups are.

The second conclusion is that, as Hasan said, other investors are more than making up for the decline in our investment activity. In fact, the dollar amount invested by other investors in Turkish startups has grown significantly during each of the last 3 years, from $21.4M in 2014 to $34.9M in 2015 to $47.9M during the first 9 months of 2016. If this pace holds, other investors will have invested over $63M in Turkish startups in 2016.

Taken together, these conclusions make us very happy.

Zafaf.net follow up

I wrote about our online wedding marketplace Dugun‘s Middle East expansion under the Zafaf.net brand name in an earlier post.

The Middle East’s leading tech news website Wamda recently also covered Zafaf.net. The piece shares some of the initial challenges faced by the Zafaf.net team, describes how the team overcame these challenges, and highlights some of Zafaf.net’s promising initial metrics.

You can read the full piece here.

San Francisco

I’m heading to San Francisco to work with our startups there and meet new ones over the next 2 weeks.

Due to the 10 hour time difference between Istanbul and San Francisco, I’ll be publishing my daily blog posts about 10 hours later than usual each day.

Beyond meeting with startups, I also look forward to seeing the on-the-ground vibe around the upcoming US presidential election on November 8. The run up to the election has been different and unfortunately more polarized than any that I’ve experienced before.

Although San Francisco is far from being representative of the US as a whole, observing the range of perspectives in person rather than over social media will help paint a more accurate picture for what the US will likely look like following the election. Although the short-term picture will be impacted by who wins, I believe that the long-term one, which is far more important, is quite independent of this year’s winner.

Me too startups

One of the advantages of being an investor is that we get to see hundreds of startups a year. While an entrepreneur is focusing on a specific sector or even a specific part of the value chain in that sector, we often see at least a few, if not tens of startups doing the same. There are some highly technical areas with few competitors but that’s the exception, not the norm.

Since we have exposure to so many different startups which, at the surface, are doing the same thing, we need to go a level deeper in order to develop an informed hypothesis about which startup will win. This is why I ask startup founders what they’re doing differently than competition. Are you a me too startup, or do you know something that others don’t know, or are you doing something that others aren’t doing, that makes you uniquely positioned to win?

Although founders naturally don’t agree, most startups are me too startups. The reason for this is that every startup with a unique insight and therefore a unique approach to a problem produces many more copycats. Depending on the size of the market and the availability of capital, you can be pretty certain that you’ll get anywhere from 5 to 20 directly competing startups that, at the surface, may appear to have a chance of winning the market.

Part of our job as investors is to parse through the answers to this question to see which answers represent real insights and which are simply verbiage in the guise of insights.

Showing that you can work together

My natural tendency in meetings is to dive directly into the work. Work is about solving problems and I like solving problems.

Such an approach can work with someone you’ve known and have been effectively working with for a long time. Since you already know that you can work together, you can focus on doing the actual work.

However, when you’re meeting with someone for the first time, before doing the work, you first need to see whether you can actually work effectively with that person. You need to show that you can work together before actually working together. This means patiently revealing your character and intellect through a hopefully pleasant give and take which is very often about issues outside of work.

How much time you need to spend showing someone that you can work together depends on the person’s character and how long you’ve worked together in the past. The more a person appreciates diving directly into the problems and the longer you’ve been working together, the faster you can get to doing the actual work.

But even people who overwhelmingly prefer to dive directly into the work need to spend time to initially see whether they can work with you. If we have this luxury, it helps us avoid people who we don’t want to work with. And even if not, it hopefully helps us establish at least some common ground with the person which makes it more likely that we’re able to work effectively moving forward.

In addition to its practical benefits, the need is deeply engrained in us through thousands of years of evolution. So it’s unlikely to change any time soon.

Showing that you can work together with someone is a necessary first step to actually working with them.

Mobilotoservis in Ankara

Mobilotoservis, our investment which serves as a car repair and maintenance service that comes to you, started serving customers in Ankara this week.

As a result of the high quality of service that Mobilotoservis delivers to customers at their doorstep, the company has excellent customer satisfaction scores. This leads to many customers referring their friends to Mobilotoservis, including friends who live outside of Mobilotoservis’ initial launch city Istanbul.

However, while it’s great to have pent up demand in a new city, it’s important to fine tune your operations in your first city before diving in to serve this new demand. This serves two purposes. First, it ensures that your operational performance in your first city doesn’t decline when you expand to a new one. Second, it ensures that your second city launch is much more about executing a known playbook than making new mistakes and learning along the way. You’ll always have some of the latter but having your playbook ironed out allows for a much more smooth launch in your new city.

Mobilotoservis patiently waited for the right moment before expanding to Ankara. If you live there, I strongly recommend you try out their service.

An investor’s edge

There are three types of competitive edges that an investor can have. These are an informational edge, an analytical edge, and a behavioral edge.

Having an informational edge means having access to people, facts, or data that others don’t have. For example, local investors often have an informational edge over those that fly in to a country to invest or those that invest in a country from abroad because their on the ground presence lets them spend more time meeting with founders and collecting information about what interesting startups are working on.

Having an analytical edge means that you rely on the same information as others but have a unique insight which lets you arrive at a different conclusion based on the same information. Your perspective is your edge. Being able to see the second or third order effects of a particular action within a system is an example of an analytical edge. However, as this example shows, although these second or third order effects may escape most people, a small number of others will also likely see them. So having an analytical edge is pretty rare.

Having a behavioral edge means that you’re not exposed to an emotional shortcoming that disadvantages other investors. Examples of this include being able to invest in a founder or domain that other investors shy away from due to deeply ingrained prejudices, or investing over a longer time horizon than others.

If you don’t have an informational edge, an analytical edge, or a behavioral edge when making an investment, the investment can still be successful. However, your success will be due to luck, not skill. And in the long run, luck cancels out.

So, before making an investment, it’s useful to ask which, if any, of these competitive edges are letting you capture an opportunity that others are missing.

The impact of accessing autonomous electric vehicles

Here’s an 11 minute video from the Morgan Stanley Research team which quantifies the different impacts that our transition to accessing autonomous electric vehicles will have relative to the status quo of owning human-driven fossil-fueled vehicles.

Whether you look at it from the perspective of saving lives, time, or money, or the new opportunities which emerge as a result of the transition, the changes are significant.

I couldn’t embed the video in this post but you can watch it at this link.


Tala, where we invested through the Female Founders Fund AngelList syndicate, is a mobile banking solution for underserved customers in emerging markets. The company analyzes a customer’s smartphone data to offer its first product, loans, to its customers.

Shivani Siroya, Tala’s founder, talks about Tala in this This Week in Startups interview hosted by Jason Calacanis. In the interview, Shivani shares valuable insights about the signals, including non-obvious ones, which predict loan repayment rates. She also offers some quantitative data about variables like Tala’s loan sizes, interest rates, and repayment rates.

You can watch the full interview below.