Monthly Archives: August 2013

Improving online advertising returns through remarketing

During the course of the last week I was seeing a lot of Vivense advertisements while browsing the web. Vivense, one of our investments, is a furniture e-commerce platform in Turkey which differentiates itself through its unique product selection and direct shipment to customers. Somehow, whatever I was doing, Vivense managed to find me. Whether I was performing a search, reading the news, or watching a video, Vivense was there. In addition, Vivense didn’t just serve me generic ads, but ads of sofas. I’ve been looking for a new sofa for quite some time now. So how did Vivense do this?

The answer is remarketing. Stated simply, remarketing is the practice of serving your website’s ads to users who have previously visited your website. Since users who have been to your website in the past are more likely to become your customers than the average internet user, this targeted approach makes it more likely that your ad dollars actually generate new customers. Vivense’s remarketing activities determined that I had recently visited Vivense’s website, and they took advantage of this information to encourage me to revisit their website. 
However, Vivense did more than simply encourage me to revisit their website. They presented me with an ad for a specific product which was more likely to attract my interest than a generic ad. Vivense knew that I had looked for a sofa on their website, and they took advantage of this information to offer me a more targeted ad. As you can see, remarketing is an area which is ripe for optimization. In addition to optimizing your ads by integrating product placements, you can optimize based on your website visitor’s level of engagement. For example, you can choose to serve ads exclusively to visitors who have filled their shopping cart but not made the final purchase. These visitors have expressed a greater desire to become your customers than visitors who left your website at the entrance page, and are therefore a better target for your ad dollars.
As online advertising costs continue to rise, it becomes increasingly important to ensure that your ad dollars are well spent. As Vivense’s experiences show, remarketing is a promising tool that can help you achieve this goal.

Early share sales by founders make sense under certain conditions

One of our entrepreneurs recently requested to sell some of his personal shares to us. After thinking through the positive and negative consequences of such a share sale which takes place before an exit or funding round, we decided to move forward with the transaction. I’m now going to review our reasoning which produced this outcome. Although most venture capitalists don’t look favorably on the sale of shares by a founder before a funding event, or often even before the ultimate exit, I believe that they should be considered on a case by case basis.

The clear advantage of allowing a founder to sell shares before an exit or funding round is that it provides them with financial flexibility. Since the vast majority of a founder’s wealth is often tied up in the company’s illiquid stock, this can place the founder under external financial pressure. If the founder needs to think about how to make ends meet on a regular basis, this will leave them with less time to concentrate on what ultimately matters, the success of the startup. An early share sale is a simple way to alleviate some of this external financial pressure.

The disadvantage of allowing a founder to engage in an early share sale is that it may serve as a negative signal to third parties, including current and future investors. The founder is almost always the person closest to the company and they therefore have the most insight about the company’s future prospects. If the founder is selling stock, then perhaps current investors should have doubts about the potential upside of the company. Future investors, who have even less information than current investors, may have reason to be hesitant to invest in a new round.

Although these are valid concerns which need to be addressed, I do not believe that the solution requires an outright ban on early share sales by founders. Instead, investors should take reasonable measures to solve the concerns raised by an early share sale. More specifically, this can take place by restricting the magnitude of the share sale to ensure that the founder is still incentivized to make the startup a success after selling their shares, and pursuing the transaction at a discount to the startup’s enterprise value which would have been negotiated in a regular round. Taken together, these two measures limit the negative signaling impact of an early share sale while still allowing the entrepreneur to achieve the financial flexibility necessary to focus only on the success of the business.