Monthly Archives: July 2015

Optimizing communication

I listened to this Andreessen Horowitz podcast entitled “It’s not what you say, it’s how you say it” this week. I found it fascinating which is why I wanted to share it here. It’s 34 minutes long but I left the piece wanting to learn more.

The podcast consists of an interview with Textio co-founder and CEO Kieran Snyder. Textio is a company that analyzes pieces of text to determine how likely they are to make the reader of the text take a desired action. Although the company’s first product optimizes the text of job postings in order to attract applicants from the right talent for the job (hint: avoid using the word “synergy”), the same technology can be applied in many different contexts. Political elections, investor presentations, marketing messages. The list is endless. Any situation where you’re using text to get people to do something is a candidate.

In the future, the source of the information being analyzed and optimized doesn’t need to be limited to text. It can also include voice communication (where the communicator’s tone can also be analyzed) and face-to-face interactions (where one’s body language can also be analyzed).

Although there are books with recommendations on what tone and body language you need to use to achieve a desired outcome, these are based on anecdotal evidence rather than comprehensive data analysis. The result is that the recommendations aren’t context specific. Textio’s data driven approach is an important step towards accurate, context-specific communication optimization.

Stowaway Cosmetics

Stowaway Cosmetics is our investment in the direct-to-consumer cosmetics space.

When I first read the company’s pitch that they’d be producing smaller cosmetics products for women with an active lifestyle, I immediately thought of my wife. I had noticed that she carried around a very large bag simply to have enough space to store all her lipstick, mascara, and other cosmetic products. And even with a bag this large, she still wasn’t able to find the products she was looking for. I asked her if she would use Stowaway’s right-size products and the answer was a resounding yes.

As I dug deeper on a call with the founders Julie Fredrickson and Chelsa Crowley, I learned that there were two other ways in which Stowaway differentiates itself from traditional cosmetics producers.

The first is that Stowaway’s direct-to-consumer e-commerce sales model avoids offline retail costs. This allows Stowaway to pass on these cost savings to its customers while still managing to keep a healthy margin for itself.

Second, the majority of the cost of producing a cosmetics product lies in the packaging, not the fill of the actual product. The cost of producing a large product is therefore not much different than the cost of producing a smaller one, and this encourages brands to sell larger products because this allows them to charge customers who are unaware of this fact higher prices. A traditional brand’s margin is Stowaway’s opportunity.

Although each of these market realities and the resulting strategic decisions which Stowaway has taken make sense on paper, the company’s ultimate success will be determined by its ability to build a very strong brand. And this comes from delighting customers.

If the review below is any guide, Stowaway seems to be on the right track.

Ride sharing

Ali Halabi is the founder of inner city ride sharing startup Volt. We’re investors in Volt and I wrote about their new launch last week.

Inner city ride sharing is a tough problem to solve, and Ali explains why in this post. The post was written after Waze, a mobile mapping and navigation app acquired by Google, announced that it will be entering the inner city ride sharing space in Tel Aviv through its new service RideWith. Volt is offering the same service in Istanbul.

In the post, Ali gives a good overview of the key players in the market while also explaining the important differences between car hailing companies like Uber and Lyft, intra city ride sharing companies like Blablacar, and inner city ride sharing companies like Volt and RideWith.

Basically, what Volt is attempting to do is the holy grail of ride sharing. This is because it matches passengers with drivers on existing journeys, thereby offering the lowest cost transportation option without adding any new cars onto the road.

The issue of the additional congestion created by car hailing services is the stated reason why cities like New York are looking to limit services like Uber. Although the attempt was unsuccessful this time around, it may resurface in the future. That said, the real reason for the attempted cap on Uber has more to do with the lobbying strength of the taxi industry which car hailing services look to replace than the additional traffic created by car hailing services.

However, in order to succeed in delivering the holy grail of the lowest cost transport alternative, Volt needs an active network of drivers sharing their existing journeys on the platform. We believe that gamification is the solution to this problem, and Ali expands on the reasons why in his post.

The day I met my wife

Three years ago today I met my wife Esra. While I love my work, I love her more. The reason I know this is simple. If I had to choose between living with Esra without my work, and living without her but with my work, I would choose the former.

Esra puts up with my writing of this blog each morning.

She shares in the daily stresses of my job.

She’s my thought partner when making tough decisions.

She knows when to tell me to take some down time.

And she believes in me and what I have to contribute to the world.

Most important of all, she’s an all around generous, smart, and beautiful human being. The day I met her was the most important day of my life as it led to all the other important dates that we celebrate together. I’m very fortunate to share my life with her.

As the readers of my blog, I hope that each of you have also found, or will find, someone in your life about whom you feel the same way.

Y Combinator’s billion dollar fund

Y Combinator (YC) is the most successful startup accelerator in the world. With the first outside stake in companies like Airbnb, DropBox, and Stripe, it has proven that it can repeatedly identify breakthrough companies well before they take off.

Until now, YC has focused on its accelerator program. Post-YC, companies get funded by venture capital funds and YC’s stake in these companies gets diluted. The traditional justification for the lack of a larger YC fund to make follow-on investments was that if such a fund were created, it would create an adverse signaling problem. The companies where YC decides to invest after the accelerator program would be viewed more favorably by outside investors than those companies where it doesn’t invest. YC would be differentiating amongst its startups and this would make the program less attractive to future applicants.

The problem with this argument is that other VC’s are currently filling the role that YC is avoiding. Specifically, funds like Sequoia Capital (an investor in YC), Founders Fund, and Andreessen Horowitz provide the same signaling that YC has refrained from sending. When a YC startup gets money from one of these funds, it’s clear that they’re a much more promising startup than the ones who don’t get money from a top-tier fund.

If YC doesn’t send a signal, other funds do. So by not participating in the subsequent funding rounds of companies that go through its accelerator program, YC is simply leaving money on the table. Until now.

YC is currently putting together a billion dollar fund to perform follow-on investments in its companies. It’s still choosing to avoid the signaling problem by retaining its pro-rata in the follow-on rounds of all of its companies below a post-money valuation of $250M. However, in this way at least it will avoid the dilution of its stake in the future Airbnb’s, DropBox’s, and Stripe’s of the world. I think it needs to go one step further by also starting to differentiate whether and how much it follows on in each of its companies.

YC’s current move, and any future move if it were to start doing more than its pro-rata in winners and not following on in others, will come at the expense of traditional downstream investors in YC companies. The impact will likely be greatest for Sequoia Capital, an investor in YC with the resulting priority access to its startups. Sequoia has participated in the first post-YC funding rounds of each of Airbnb, DropBox, and Stripe.

The upcoming billion dollar YC fund should have been established a long time ago. It’s simply the natural evolution of things. As The Information put it in their coverage of the upcoming YC fund , “as capital gets commoditized, access becomes more important. Early investors have an edge”. Specifically Y Combinator has an edge.

Giving time

This Sunday morning, I woke up thinking about the 5 people who have had the greatest impact on my career. Specifically, I wanted to see if I could come up with a learning to attract more such people into my life.

The common thread across each of these people was that our relationships first started with my giving something valuable to them. This was never a physical good, but an experience or an opportunity which resulted from using my time to produce something that they value.

I was surprised to see that none of these relationships started with me asking for something. I can think of many examples where asking for something has produced a short-term win for me, but each of the long-term wins with the greatest impact on my career started by giving.

And in each case what I was giving was my time to produce something valuable. Since time is a finite resource, this means that you can’t give to everyone around you. You need to prioritize who you give your time to. Reflecting on my experiences, I seem to have prioritized the giving of my time based on my personal goals and how big of a need I would be fulfilling for my counterpart by dedicating that time.

However, these are very rough guidelines. In the end I didn’t know whether, and if so how this giving would have a positive impact on me in the future. I focused simply on the act of giving.

When you give your time, the getting somehow takes care of itself.

Democracies and autocracies

I’ve lived in democracies throughout my life, first in Europe, then the US, and now Turkey. However, not every country is a democracy. The chart from the tweet below shows that as of 2009 over 50% of the world lives in a democracy.

Biased by the places I’ve lived, I would have thought that the percentage of people living in a democracy is higher than 50%. However, this is still a big step up from the 10% figure in 1901.

What’s more interesting is to note that the percentage of the world living in an autocracy hasn’t changed a lot during the same time period. The figure was about 55% in 1901 and around 45% in 2009. I would have guessed that the decline had been much larger.

Only a small part of the increase in the share of the population living in democracies is from the decline of autocracies. The major shift has been from colonial regimes which governed 25% of the population in 1901 and which no longer exist.

Although common wisdom is that democracies are better than autocracies, this isn’t always the case. It depends on who is in charge and a country’s stage of development. Sometimes a benevolent dictator can speed up progress in a developing country. For example, most people would describe Singapore’s first prime minister Lee Kuan Yew as an autocratic leader. While he imposed limits on freedom, he also achieved great outcomes for his people on most other dimensions including the economy and the development of the tech sector. It’s unlikely that Singapore could have made so much progress so fast if it had been run as a democracy.

When not to take no for an answer

Airbnb’s co-founder and CEO Brian Chesky shared 7 rejection emails from investors while the company was trying to raise a seed round in 2008. I wrote about the key learnings from these rejection emails in an earlier blog post.

It turns out that while many investors rejected Airbnb, there was an investor who agreed to invest before the company entered Y Combinator in 2008. This was Paige Craig, currently of Arena Ventures. I covered Paige’s innovative approach to using online fundraising to complement the investments that he makes through Arena Ventures in an earlier post. I think that this is a win-win for Arena and the startups that it backs because it provides Arena with more financial firepower while giving the startups it backs a wider network of people who can support the company.

Paige recently shared the details of how he discovered, thought about, decided to invest in, but unfortunately was passed over by Airbnb which decided to take money from Y Combinator. You can check out the full post here.

I appreciated Paige’s transparency in sharing the email exchanges he had with Airbnb’s founders, the company’s original pitch deck, and metrics. It’s a great story about hustle, making investment decisions based on the positive case (Chris Sacca passed on Airbnb due to thinking about the negative case), and independent thinking.

But most importantly, it teaches that founders aren’t the only ones who shouldn’t take no for an answer. The best deals can be very competitive. When this is the case, the most successful investors know not to take no for an answer.


Our inner-city on-demand ride sharing startup Volt relaunched this week. You can download the iOS or Android app here, and here’s an introductory video trailer.

Volt’s first launch took place in mid-2014 with a list-based interface. Drivers would share the details of the rides that they’re planning, and passengers would do the same for the rides that they want to take. If there was a potential match, Volt would send a message to both sides. Passengers and drivers could also browse through the existing rides and ride demands to discover potential ride companions themselves.

The list-based interface works for rides between cities. There are two reasons for this. The first is that the rides are long enough that they’re generally planned well in advance. The second is that the specific start and ending locations aren’t as important as the cities themselves. Knowing that you’re traveling from Istanbul to Ankara without knowing the specific pick-up and drop-off street names is enough because what matters is getting from one city to the other. Once you’ve done this getting to your specific destination is relatively easy to solve. A list-based textual interface meets the needs of inter-city travel very well.

However, when you’re traveling within a city, the specific start and ending location matter. Sharing this information in a list-based textual interface has limited value because your counterpart is unlikely to know the specific street addresses. In contrast, when the locations are visible on a map, it becomes much easier for passengers and drivers to accept proposed ride matches based on the overlap of their respective journeys. The map-based interface also better meets the unplanned, on-demand nature in which inner-city rides generally take place. Because of its inner-city focus, it made sense for Volt to switch to a map-based interface.

Volt’s relaunch retains its existing trust system built on peer community affiliation and reviews. Together with the new map-based interface, the relaunch also features the introduction of in-app payments and a gamification platform for drivers to earn points which can be converted into rewards. You can earn points simply for driving, although you earn a lot more if you’re also carrying a passenger.

I’m excited about Volt’s new launch and the promise that its ride-sharing platform holds to help solve Istanbul’s traffic problem.

Company fundamentals and what the media portrays

I was surprised to read that on-demand home cleaning company Homejoy is shutting down.

Homejoy cited employment lawsuits referencing its usage of independent contractors as a core reason for its closure but I don’t buy it. There are many on-demand companies facing similar employment lawsuits and they’re not closing. Homejoy is closing shop not because of employment lawsuits but because of fundamental performance reasons. Although I don’t know what Homejoy’s KPI and financial metrics look like, the impression that I had from the media articles I was reading about the company was that it was doing very well.

This mismatch shows that there can be a big difference between a company’s fundamentals and what the media portrays. This is especially true in private markets where, let alone the media, sometimes even a company’s investors don’t have a full view into what’s going on at the company.

And Homejoy isn’t the only company in this situation. There are other media darling companies trying to raise money that are having a lot of difficulty doing so. Whether these companies end up shutting down like Homejoy, or raising down rounds, it won’t be an attractive scene.

But it’s a necessary scene. When investors are forced to recognize losses or mark down the value of their holdings in media darling private market companies, there will be a return to a fundamentally justifiable level of investor demand. This will help normalize private market valuations.