Monthly Archives: September 2015

Ad blocking

There has been a lot of news around ad blockers recently. Basically, ad blockers let users enjoy an ad-free experience while browsing the web (desktop and mobile). They don’t block ads that appear in mobile apps.

Ad blocking therefore threatens the business model of browser-dependent companies like Google and leading publishers that depend on advertising as their main revenue stream. As a result, these companies have started paying ad blockers to allow some of their ads to actually be delivered to users. The argument is that this is only being done for ads that are actually relevant to users, but what constitutes a relevant ad is in the eye of the beholder. You can imagine how letting publishers pay for their ads to not be blocked by an ad blocker could be abused to allow irrelevant ads to pass through.

Andreessen Horowitz recently hosted a podcast on ad blocking which you can listen to here. The podcast addresses how ad blocking emerged, what types of browsing it impacts, how often it’s currently used, and potential solutions for publishers to monetize users that choose to block ads.

The assumption that publishers need to develop solutions to ad blocking implies that ad blocking isn’t going away, and I agree. Users don’t enjoy the content of most publishers enough to pay for it. And they often don’t enjoy it enough to even accept the irrelevant ads that come with the content. As a result of ad blockers, as a publisher you’re going to have to improve your content and/or make your ads more relevant to users to survive.

Launching a new city

Rinse is our investment in the on-demand laundry and dry cleaning space. The company is founded by my classmate Ajay Prakash and James Joun.

Until earlier this year, Rinse was operating only in San Francisco. It then launched its second city, Los Angeles. As with any startup with heavy local operational requirements, the launch of a new city is a delicate operation. When is the right time to do it? How should you go about it? What are the best practices?

Arena Ventures, one of Rinse’s lead investors, recently interviewed Ajay and Rinse’s Los Angeles GM Lonny Olinick to understand how Rinse thought through these questions as it prepared for its LA launch. You can read the full article here.

My key takeaways are:

  1. Timing: “You’re ready to launch in another city when you can take care of your customers without having to ‘cheat’ [do things that don’t scale] like that anymore.”
  2. Local team: “It’s important when you launch a new city to hire someone who has a local’s understanding: “it’s hard to quantify, but there’s a lot of value in local knowledge and pre-existing relationships” (from traffic patterns to the culture of different neighborhoods).”
  3. Staging the launch according to customers’ tolerance of mistakes: “An alpha test with locals they knew, an early beta test with friends-of-friends and some early adopters, a partnership-based “Friends of Rinse” campaign, and then finally a shift into outbound marketing to the public.”

Startups in San Francisco

The holiday part of our trip to San Francisco just ended. My wife flew back to Istanbul over the weekend and I’m sticking around to meet with our US startups.

I reached out to our Northern California startups yesterday to arrange our meetings. Of the 13 startups I emailed, 10 of them are based in San Francisco. Of the other 3, one is in Palo Alto, one in San Mateo, and one in Oakland. The number of startups based in San Francisco is a reflection of how startups’ center of gravity has shifted from the Peninsula (Palo Alto and its surroundings) to the city. The last time I was here was over two years ago and there was a much greater balance between startups locating in the city and those residing in the Peninsula. I think that the main factor behind startups moving to the city is that, as their competition for talent has increased, they’ve responded to the demands of their young workforce that prefers to live in an urban area with a lot to do than the less lively suburbs.

As interesting as the fact that 10 of our 13 startups are located in San Francisco is the fact that we’re going to be meeting with the other 3 in the city as well. Although they’re not located there, they’re traveling to the city for other business meetings so we agreed to meet in the city.

Whether you’re a Northern California startup based in the city or not, it seems like you’re going to be spending a lot of time in the city. It’s where business gets done. The result is that real estate costs have skyrocketed. We’re therefore seeing some departures from the city. These will likely balance San Francisco’s dominance in the coming years.

Expecting poor behavior

I recently discovered a neat trick to lower my stress level and frustration throughout the day. Each morning, I tell myself that I’m going to run into up to 10 inappropriate behaviors during the day.

For example, a car may cut into your lane on the highway, a business partner might do something that you find unethical, or you might read some political news where the participants’ actions baffle you. There are countless other examples.

I used to get frustrated when each of these behaviors occurred. And this frustration would increase my stress level and negatively impact my performance throughout the rest of the day. This was because my default expectation was for everything to work out. That’s not a pragmatic approach to life.

There will be times when the behavior of other people disappoints you. Sometimes they’ll have negative intent, and sometimes they’ll have a rational explanation for behaving that way that you just don’t know about in the moment. Whatever the reason, poor behavior will occur, so it’s best to accept this. By preparing yourself to run into up to 10 poor behaviors each day, you change your baseline to accommodate the reality of poor behavior. This makes you less frustrated when it takes place.

Since adopting this approach, I’ve seen a noticeable improvement in my personal happiness throughout the day. That doesn’t mean that I no longer get frustrated. I still do. Sometimes you just can’t hold yourself even if you know that a poor behavior is simply one of your daily 10. But I get frustrated less often, and experience frustrations less intensely, than before.

Fortunately, I have yet to experience a day with more than 10 poor behaviors. If that happens, I may have to revise my expectation upwards.

VC at 80

Alan Patricof is a Managing Director at VC firm Greycroft Partners. He recently turned 80 and wrote a post about why he remains an active VC at that age. The full post is here.

There are two key parts of the post that resonate with me.

The first is when Alan writes “Leisure activities with little mental stimulation do nothing to propel me forward.” I feel the same way, returning to do my work on vacations because leisure becomes quite boring after a day or two. If I’m fortunate enough to live as long as Alan, I hope I feel the same way when I’m 80. The fact that I really like what I’m doing suggests that this is likely to be the case.

The second part of the post that resonates with me is when Alan writes “I am almost always the oldest person in the room but with the longest time perspective.” Currently, I’m almost always the youngest person in the room. Although most investors are older than the entrepreneurs they back, I’m younger than most of our entrepreneurs, and younger than nearly all the other investors we interact with. This brings its advantages, like being able to better relate to young entrepreneurs, together with its challenges, like having some people take you less seriously because of your age.

But as Alan points out, each age has its pros and cons. When you’re older, you have more experience but this experience can get in the way of looking at new ideas with an open mind and seeing the opportunities they present. I look forward to the advantages and the new challenges that being an older VC will bring.

Blitzscaling

LinkedIn co-founder Reid Hoffman, Greylock partner and former Mozilla CEO John Lilly, LinkedIn co-founder Allen Blue, and Reid’s co-author of the book The Alliance Chris Yeh have started teaching a class at Stanford called Technoloy-enabled Blitzscaling. Basically, the class shares how to grow a startup at a very fast pace to outmaneuver competition while also balancing the need for the company to have a strong sustainable foundation in areas like team, product, and distribution.

From Reid’s post describing the class, here are some of the questions that the class will answer:

• What is the role of the founder?
• What is the role of the CEO?
• What is the best approach to hiring an executive team?
• What is the proper role of middle management in the organization?
• What is the function of the Board of Directors and investors?
• What is the state of the product?
• What is the work that needs to be done on product-market fit?
• What are the roles of sustaining and disruptive innovation?
• How should you deal with competition?
• What is the appropriate financing strategy?
• How should the company make decisions about capital allocation?
• How should you think about marketing and branding?
• How do companies scale up customer acquisition?
• How do different sales models change as the business grows?
• How should you handle hiring and company culture?
• What are the major threats to the firm?
• What are the key decisions and questions?
• What role do analytics and dashboards play?
• When and how should you worry about globalization?
• How do you get the most out of partnerships and business development?
• How should your technology strategy change over time?

Chris McCann, community lead at Greylock, is sharing his notes from each class. You can follow him on Medium here and read his notes from the first class here. The class sessions are also being recorded on video and made available to the public although I couldn’t find the first class’ recording yet.

From the notes of the first class, it looks like the course is going to share a treasure trove of knowledge. I really like the approach of most people in the tech sector who share their knowledge so that we can progress faster as humanity rather than protecting it in an attempt to retain a competitive advantage.

Donating on Kapgel

It’s the Feast of Sacrifice in Turkey right now. This is a time when Turkish people help others who are less fortunate than themselves. It’s a Muslim holiday so Muslims across the world do the same.

As part of the holiday, our on demand goods delivery marketplace Kapgel has partnered with three charitable organizations, Losev which supports children with leukemia, the Kasimpasa Children’s Home, and the Turkish Red Crescent (the equivalent of the Red Cross in Turkey) for Kapgel users to donate clothing and other gifts to these organizations.

All you need to do to make a donation is enter the organization’s address in the delivery field within the Kapgel app. You can find the addresses here. Kapgel then delivers the donation to the organization. I used it to send a t-shirt to Losev.

These partnerships are an example of the great work being performed by the Kapgel team. I hope they serve as a role model for other startups.

OBilet in the Financial Times

I wrote about our online bus ticketing marketplace OBilet in three separate posts here, here, and here. And more recently, OBilet was featured in the Financial Times. You can read the full article here.

It’s not every day that a Turkish startup founded by two students while still in college (for the record, they finished college; I recommend all students do so) is featured in the Financial Times. OBilet’s founders Yigit and Ali are definitely onto something.

The duo are a great inspiration for college students across Turkey who aspire to be entrepreneurs. They’re proof that starting a business in Turkey when you’re that young isn’t easy, but it can be done. Great work guys.

It’s you

I recently read Jason Calacanis’ post entitled “You don’t have what it takes“. Basically, Jason points out that the vast majority of people don’t have what it takes to build a successful startup. I agree with this assessment.

The reason why the post resonated with me is because, when talking with entrepreneurs, very few investors do what Jason did and tell the entrepreneur that they’re not going to invest because they don’t think the entrepreneur is cut out to succeed. Instead, we tell entrepreneurs that the market isn’t big enough, that the company doesn’t have enough traction, or a myriad of other reasons for why we’re not going to invest. We do anything to avoid saying “it’s you”. I’m also guilty of this behavior.

After reading Jason’s post, I’ve decided to be more direct in my feedback to entrepreneurs. Maybe I’m being naive but I believe there’s a way to tell the truth while still remaining kind. I’m going to give it a try and see how it turns out.

Great execution

I don’t check my bag in while flying to avoid waiting for it at the luggage claim station upon arrival. I prefer to travel with a carry-on.

The downside of using a carry-on is that, since you can access it during the flight, it can’t contain any sharp objects. Because of this restriction, I travel without a razor and rely on hotel razors when I need to shave during a trip.

If you’ve used hotel razors before, you likely know what a dreadful experience they provide. They’re of very poor quality and leave your face cut up in multiple spots after the shave.

I was expecting a similar experience when I called our hotel’s front desk for a razor this morning. However, to my surprise, they sent up a high quality razor. You can see it below. And for the first time, I had a cut-free shave at a hotel. In fact, I had as good a shaving experience with the hotel razor as with my own razor at home.

IMG_1554

The razor is part of a sample set from the Dollar Shave Club. The Dollar Shave Club is a monthly online subscription service that delivers razor blades to your door. They’ve raised a total of $148M in funding, including their most recent $75M Series D.

When I first heard of the Dollar Shave Club a few years ago, I doubted that the company could be successful. I saw it as a service with no product differentiation where the business model differentiation wouldn’t be enough to create a large sustainable business. Although I don’t know the company’s performance metrics, the company’s fundraising to date suggests that I’m likely wrong.

The reason I was wrong is because I didn’t take into account the company’s execution. As my hotel experience shows, the Dollar Shave Club knows what it’s doing. The company correctly identified hotel guests as a customer segment that has a horrible shaving experience and partnered with hotels to improve this experience by offering the company’s sample product. The Dollar Shave Club’s razors may not be differentiated relative to the razor you use at home, but they are differentiated relative to hotel razors. And this produces a memorable customer experience.

I don’t know the underlying customer acquisition cost of the partnership, but the difference between a regular hotel shave and that with a Dollar Shave Club razor is so great that I imagine the sample set has a pretty high customer conversion rate. And even if the Dollar Shave Club is incurring the full cost of providing the sample set (without any participation from the hotel), the cost of producing razors at their current scale is likely pretty low.

The Dollar Shave Club is a great example of how great execution can turn a seemingly undifferentiated product into a genuine pleasure to consume and hence a great business.