Monthly Archives: May 2015

Verizon and AOL

I was reading about Verizon’s recent $4.4 billion cash purchase of AOL. Most M&A transactions have a strategic reason, or a few reasons, that are clear at first sight. However I struggled to fit the pieces of the puzzle together in this case.

Browsing the web, it seems as though a lot of people experienced the same confusion. It’s unusual for a company like Verizon which controls the infrastructure layer to purchase a company like AOL that operates primarily on the content layer. The best piece I could find on the motivations behind the merger were in an Andreessen Horowitz podcast featuring Chris Dixon and Frank Chen.

You can listen to the full 12 minute podcast here. I’ve summarized my key takeaways below, together with my views on the merits of each takeaway in italics.

1. Carriers like Verizon are becoming dumb pipes and original content is becoming more valuable. So Verizon is simply trying to shift away from an area of low value to an area of high value. While this argument makes sense, I’m not sure that AOL would be the best target for Verizon to execute this strategy. Rather than buy all of AOL, Verizon could have bought individual content properties within AOL, and much better properties outside of it, at an aggregate lower price.

2. Newspapers were the first form of traditional media to experience disruption and TV is next. This makes mobile video content and the ad technology to monetize this content very important. AOL’s ability to track users across content platforms could complement Verizon’s ability to track users and devices across its network infrastructure to create a very powerful ad network. This seems like the most credible explanation to me as it has the potential to justify a multi billion dollar price tag.

3. Verizon may have purchased AOL in order to side step net neutrality regulations which require carriers to treat all content traveling over their network equally. Verizon could use its ownership of AOL to justify making AOL content available to its users at no data cost. This would pull more users to Verizon and make it more attractive for other content owners to enter into zero rating agreements with AOL in order to make their content available to Verizon’s larger user base free of data charges. While a plausible argument, this seems like a risky strategy. We have yet to see how net neutrality regulations play out in practice. A carrier’s ownership of a content property may not be enough to justify making it available at no data cost. And similar to my comments on the first argument, if Verizon wanted to attract more users and get more zero rating agreements with content owners, it would likely have pursued individual content sites rather than all of AOL.


In addition to TazeDirekt, Hasan’s second entrepreneurial venture Webnak is a marketplace connecting companies looking to make ground shipments with truckers through an auction platform.

Whereas companies traditionally completed their ground shipments by calling brokers and trucking companies, Webnak’s auction-based app allows them to collect multiple bids much faster. This also helps them complete the shipment at a lower price.

Webnak also offers large companies that perform multiple daily shipments a premium service. Under this premium service, Webnak guarantees that the company will get its shipments completed. Webnak operators, rather than the corporate customer, use the Webnak platform to find truckers to complete the company’s planned shipments.

Webnak was founded based on the problems which Hasan’s previous business Erikli Water, Turkey’s largest bottled water company, faced when trying to find truckers. Hasan describes his motivation for creating Webnak in the video below in Turkish.

Webnak was also recently featured on the news segment of Kanal D, one of Turkey’s leading TV channels. You can watch the video, which also features Webnak’s head of business development Volkan Ozkan, in Turkish here.

Interestingly, Webnak’s name isn’t mentioned in the piece as it’s likely not allowed by Turkey’s TV regulator.


Bitaksi uses gamification to promote competition and high quality service among its taxi drivers.

Umut Buyukyildirim covers many aspects of Bitaksi’s gamification system in his blog post in Turkish. For example, you can see how Bitaksi offers base case rewards to drivers according to the number of rides they complete while offering even higher incremental rewards for rides paid with a credit card, rides offered during times of peak demand, and rides completed on Saturday’s. Drivers also earn points for receiving 4 or 5 star ratings from passengers.

The resulting point totals determine whether a driver has Classic, Silver, Gold, or Elite status. In addition to serving as markers of achievement, these tiers allow drivers to earn performance-based gifts like smartphones.

Bitaksi has focused on gamifying the driver side of its marketplace so far. This is because the immediate benefits of gamification are greatest there. However, the company also has the opportunity to gamify the passenger side of its platform. Whereas drivers need to be equally incentivized by the number of rides they complete and the quality of service that they offer, the number of rides they complete will likely be the most important factor to motivate passengers.

Anonymous messaging

The recent rise, and in some cases subsequent fall, of anonymous messaging apps like Yik Yak, Whisper, and Secret has brought a lot of media and investor attention to the anonymous messaging space. Each of these companies is an example of 1-to-n anonymous messaging for the consumer. In other words, a user broadcasts an anonymous message to the other users of an app who are then able to interact with the original message by performing actions like up voting, commenting on, and sharing the message.

We already know from messaging apps where users are tied to their real identity that 1-to-n messaging is only one form of communication. The likes of Whatsapp, Facebook Messenger, Line, and WeChat also allow for 1-to-1 and n-to-n communication. I believe that these use cases also exist in the anonymous communication space.

It is with this hypothesis in mind that we recently invested in and Five.

Short for, is a 1-to-1 anonymous messaging app with over 3M users. Founded by Turkish entrepreneur Ozan Yerli, over 50% of’s users are currently from Turkey. These 1.5M users represent over 15% of’s target 10M population between the ages of 13 and 24 in Turkey. The company also has over 200,000 users in the US and has been primarily focused on growing this number since opening its Silicon Valley office in December 2014.

Founded by Nikita Bier, Five is an n-to-n semi-anonymous messaging app that hopes to recreate the chat room experience of the early 2000’s on mobile. The platform is actually a restricted version of n-to-n as it allows for only 5 people per chat room. This is the number that Five has discovered optimizes the quality of a conversation by ensuring that there is a sufficient quantity of communication without too much noise. The platform is also semi-anonymous in that users log in with an avatar of their face rather than in complete anonymity. This allows for more accountability than a completely anonymous setting while respecting the needs of users who don’t want to reveal their real name in the chat rooms.

In addition to our investments in the consumer chat space, I also made a personal investment in anonymous enterprise feedback platform BetterCompany. Founded by Tom Williams, BetterCompany allows workers to share anonymous feedback with their co-workers. Rather than allow for unstructured feedback which risks producing overwhelmingly critical and sometimes even harmful comments, BetterCompany uses a structured approach to ensure that workers congratulate the strengths while also highlighting the weaknesses of their co-workers.

As our investments show, we’re strong believers in both consumer and enterprise applications in the anonymous messaging space. Anonymous communication is a clear need which, with the right product features in place, can be met without sacrificing constructive exchanges.

Artificial intelligence

I recently watched the Avengers: Age of Ultron movie. If you’re into science fiction and action movies with great special effects, I highly recommend it. Its IMDB rating is 8.2 and this is also a good sign as I find that movies with a rating above 8 are usually very good.

The movie is another example of one that explores the impact that technology will have on our future lives. Technology is becoming increasingly mainstream and this is being reflected in the themes of Hollywood movies.

The core issue explored in this latest version of the Avengers is artificial intelligence. Although many parts of the movie are exaggerated, as superhero movies should be, the movie actually helped grow my thinking on AI.

Prior to watching the movie, I thought of AI as being within human control. We could use it to benefit humanity by building artificially intelligent robots that help us, or to hurt humanity by building robots that destroy us. My thinking about AI was similar to nuclear technology. Nuclear technology can be used to achieve both positive (nuclear energy, assuming there isn’t an accident) and negative (nuclear bombs) outcomes for humanity, with both being under human control.

However, as the movie shows, AI is different than nuclear energy. By definition, artificial intelligence implies that machines are able to learn. The machines do not simply take inputs and produce outputs as is the case for nuclear technology. Rather, they take inputs, produce outputs, and based on the feedback which they get from those outputs, are able to learn and change their actions in the future. As a result of this ability to learn and change their behavior, their actions may evolve to be different than what humans originally design them to be. Even if our goal is for the machines to act to help us, their capacity to learn from the experiences they’re exposed to could cause the machines to change their behavior such that they harm humans. This is actually similar to how, as humans, we learn to be caring or threatening individuals.

I’m not an AI expert so I don’t know how big a risk this is and what, if any, measures can be taken to prevent it. But the movie certainly made a good case for the possibility that, even if designed with good intentions, AI could get out of our control.


When you’re successful in business I believe it’s necessary to give back to your community. This is exactly what our Muslim female clothing e-commerce startup Modanisa is doing.

In partnership with Kiva, an online platform connecting lenders with low-income underserved entrepreneurs, Modanisa is supporting the small businesses of Muslim women around the globe. Since June 2014, Modanisa has offered loans between $225 and $2,750 to 53 different women running businesses in sectors like food, clothing, higher education, and cosmetics.

The support is offered in the form of an interest-free loan with a payback period. The interest-free nature of the loan shows that it’s not designed to generate a return for the lender. The purpose of the payback period is only to ensure that, after receiving the loan, the recipient works hard to generate income. If it had been designed as a grant, this would have self-selected applicants with a lower likelihood to work hard to pay back the loan, thereby defeating the purpose of supporting low-income underserved entrepreneurs.

I hope that Modanisa achieves much greater business success in the future so that it can support even more women entrepreneurs. And I hope that it serves as a role model for other startups. You don’t need to be a large company to experience the joy of giving. Everyone can give within their own means.

Text-based concierge services

In recent months, many new startups have emerged to offer text-based concierge services.

For example, if you’re looking to place a food order, rather than review listings on your local food ordering marketplace yourself, you can now send a text message with your cuisine, specific dish, and price range preferences to Operator or Magic. The operators at the other end of the line will review the restaurants on the marketplaces in your geographic area and present you with a recommended dish together with a price. The way the services make money is by placing a premium on the underlying value of your order which covers their costs of hiring the operator. These services also allow you to order groceries, home services, flight reservations, and pretty much anything else you can think of.

In addition to horizontal players like Operator and Magic, startups which focus on specific verticals are emerging. The Happy Home Company is a good example for home services. The Happy Home Company operates through an app as well as a text-based interface.

Traditional concierge services already exist. The promise of these text-based concierge services is that they’re going to be more economical than traditional concierge services which only the wealthy can afford. Traditional concierge services tend to require an up-front subscription fee which then allows for unlimited usage. The American Express Platinum Card Concierge service which comes at an annual cost of $450 ($37.5 per month) is a good example of this. There are many people who would be intimidated by this up-front fee but would be willing to pay a much smaller surcharge for a specific transaction.

The other side of the equation is the cost side. For text-based concierge services to be profitable, the per transaction service fee they earn needs to be greater than the cost of the operator fulfilling that transaction. For example, if an operator works for $200 per day and fulfills 50 transactions during the day, the concierge service needs to earn a service fee greater than $4 per transaction to be profitable. By equipping these operators with the right software tools and processes, this per transaction cost can be reduced over time.

The likes of Operator, Magic, and The Happy Home Company which charge on a per transaction basis make concierge services accessible to a new segment of customers that found the subscription model prohibitively expensive. These customers want to trade their money to save themselves search time. The text-based concierge services enable them to connect with someone who is wiling to perform their search at a lower cost per unit of time. I think that there are enough potential customers willing to perform this arbitrage for text-based concierge services to grow into very sizable, and profitable businesses.

Damned if you invest, damned if you don’t

I sometimes browse the user comments below Webrazzi‘s coverage of our investments. There’s a lot of praise and even more criticism. This is because it’s easier to point out flaws than to show why something will work despite the flaws.

Several years ago, people complained that there wasn’t enough capital going to tech startups in Turkey. In addition to our investments, funds like Earlybird, Revo Capital, and 212 are now actively investing in Turkish startups. However, the complaints remain. They’ve simply changed their disguise. Now, rather than complaining that no one is investing in tech startups in Turkey, people are criticizing the specific investments which are being made.

At times like this, I like to remember an excerpt from an Esquire interview with writer and director Woody Allen. I’m a big fan of many of Woody Allen’s tragicomedies like You Will Meet a Tall Dark Stranger, Midnight in Paris, and Magic in the Moonlight. Here’s the excerpt from the interview.

“Back when I started, when I opened Take the Money and Run, the guys at United Artists accumulated the nation’s criticisms into a pile this big and I read them all. Texas, Oklahoma, California, New England… That’s when I realized that it’s ridiculous. I mean, the guy in Tulsa thinks the picture’s a masterpiece, and the guy in Vermont thinks it’s the dumbest thing he’s ever seen. Each guy writes intelligently. The whole thing was so pointless. So I abandoned ever, ever reading any criticisms again. Thanks to my mother, I haven’t wasted any time dwelling on whether I’m brilliant or a fool. It’s completely unprofitable to think about it.”

As Woody Allen points out, no matter what you do there will be people who respect what you’re doing and others who criticize it. This is true in all walks of life, personal and professional. In the specific case of investing in startups, you’re damned if you invest, and damned if you don’t.

What matters is not what others think, but what you believe. Listening to others in order to inform your own decisions is valuable. But listening to them to see what they think of you, or worse yet to seek approval for what you’re doing, isn’t meaningful.

As long as you believe in your inner compass, just do what you know to be right. The rest will take care of itself.

Elon Musk’s biography

Elon Musk is one of the greatest entrepreneurs of our generation. While most entrepreneurs have one very successful startup which defines them, Elon is behind companies like Paypal, Tesla, SpaceX, and SolarCity. The latter three are the companies which he’s working on right now. Their common thread is that they’re attacking fields like sustainable energy and life beyond Earth which will have a big impact on the future of humanity.

I don’t know how Elon does it, and we’re unlikely to develop the tools to understand the inner workings of his mind during our lifetime. So reading his upcoming biography, Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future is our best bet. The book comes out on the 19th of May.

I usually order books after reading their reviews. Since Elon’s biography isn’t available yet, it doesn’t have any reviews. But I decided to make an exception and order the book anyways. I think it will hold valuable lessons for aspiring entrepreneurs, investors looking to understand the combination of innate character traits and experiences that produce great entrepreneurs, and anyone looking to get a glimpse into our future.


Vivense recently opened their first furniture showroom by the Cevahir shopping mall in Istanbul. You can check out a picture from their showroom and see the showroom’s exact location at Vivense’s website.

E-commerce accounts for about 1% of all retail sales in Turkey. It’s even lower in non-commodity product categories with high purchase prices. Furniture is a great example of this. Each piece of furniture is different and the price of furniture is in the hundreds of dollars. As a result, fewer people buy furniture online than commodity phones, low priced clothing, or both commodity and low priced books.

Armed with this information, one approach is to wait it out. E-commerce penetration will gradually rise in Turkey across all categories and furniture will also benefit. This isn’t what Vivense is doing.

Vivense is making it easier for customers to overcome the barrier of buying furniture online by displaying a selection of its products together with different fabrics that can be applied to each product at its showroom. While every product cannot be on display, the quality of the products available gives customers the confidence to purchase other products online.

The showroom is also staffed with interior designers who give customers guidance about how to mix and match specific pieces of furniture to achieve the look that they’re looking to produce in a given room. While the high price of traditional interior design services makes it out of reach for most furniture shoppers, Vivense offers the service for free.

Vivense’s showroom staffed with interior designers has given the company’s sales a very strong boost in recent months. A significant fraction of Vivense’s customers live outside of Istanbul so it’s likely that the company will be opening new showrooms in other cities soon.