Monthly Archives: September 2015

Basic Periscope features

I wrote about user generated live video streaming app Periscope in an earlier post.

Periscope was recently host to a great interview between Semil Shah of the Haystack Fund and Chamath Palihapitiya of Social+Capital. I watched the chat on September 18, less than a day after it was broadcast live on Periscope. Today, I returned to the Periscope app to review some excerpts from the chat, and can no longer access it. Periscope broadcasts can only be viewed live, or within 24 hours of the time of the broadcast.

This is a big constraint. While I understand that Periscope wants to encourage users to view broadcasts live in order to increase engagement, this isn’t always possible. There’s a lot of valuable content being streamed on Periscope that viewers want to access later. And what viewers want, broadcasters are eventually going to have to provide. For example, Semil released a full transcript of the interview on his personal blog following the broadcast. This is because viewers want to revisit certain parts of the broadcast after it takes place. If Periscope doesn’t offer this feature, broadcasters will move to competing user generated live video streaming services that do.

Another constraint I noticed in the video stream was that I couldn’t fast forward or rewind it. I could only pause the stream to take notes. If I already knew what part of the interview I wanted to listen to, I had to wait until that part arrived. And if I wanted to replay a part of the interview that I liked to better understand its message, I had to start the interview all over again.

Archiving videos for future viewing, fast forwarding, and rewinding are basic features that need to be available in Periscope. I’m sure there are others. Periscope’s success so far has been achieved despite not having these basic features, not because the lack of these features improves the user experience. It needs to make them available soon if it hopes to build on its success in the future.

Another great visual

In an earlier post, I wrote about the importance of strong visuals and how they can often communicate a message much more vividly and memorably than written or spoken text. The example I used in the post showed how ride sharing would lower traffic in a city using a visual simulation of the traffic across time in the presence and absence of ride sharing.

Another positive impact of ride sharing is on pollution. As more rides are shared, there will be less cars on the road, and less cars on the road means lower CO2 emissions. Electric vehicles also contribute to achieve the same cause, and their widespread adoption is the holy grail to eliminate CO2 emissions from cars, but, in the meantime, ride sharing is an imperfect but valuable solution.

Here’s a great visual on the impact of getting cars off the road in Beijing, where the government recently banned the usage of 2.5 million of the city’s 5 million cars for 2 weeks in advance of a military parade. Hundreds of factories were also shut down during the time so cars aren’t fully responsible for the change. However, the directional effect is clear.

In the US

I’m going to be in the US over the next 3 weeks. It’s going to be a combination of work and fun.

The fun part comes first, where my wife and I will be remembering the times we spent in Boston. Even though we were there during the same years, our paths never crossed. It’s going to be fun to share our best memories of the city, laugh at the overlaps, and build new memories together.

We’ll then be heading to San Francisco. There, I’ll be doing most of the showing around as I spent several years living there and my wife visited the city once in the past.

After my wife heads back to Turkey, I’ll be sticking around in San Francisco for two weeks to meet with our local startups, new entrepreneurs, and investors.

I’ll continue posting on this blog in the mornings but due to the time difference between Turkey and the US, the posts will appear around 7 to 10 hours later than usual each day.

New customer acquisition versus existing customer retention

I was talking to the founder of one of our marketplace startups recently. The company operates in a highly competitive market with several well-funded players. In light of this competition, we were debating the pros and cons of a growth strategy centered on new customer acquisition versus existing customer retention. Should we grow by getting more people who haven’t used our service to use it, or should we grow by making sure our existing users keep coming back to use our service, and ideally use it more frequently as time goes on?

There is no single right answer to this question The right strategy depends on factors like the stage of your company, the ratio of your service’s contribution margin to customer acquisition costs, and the competitive environment.

All else equal, startups that have achieved product market fit among their existing user base will benefit from scaling their growth by acquiring new users. If your product has proven that it delivers value to existing users, it’s likely to offer similar value to new users. However, if you haven’t achieved product market fit yet, it’s probably better to focus on tweaking your product and user experience to establish a more loyal user base. Otherwise, chances are that the incremental users that you attract won’t stick around.

The higher the ratio of your service’s contribution margin to customer acquisition costs, the lower the number of times you’ll need to serve a customer to justify their customer acquisition cost. So investing primarily in customer acquisition makes more sense if you’re operating in a market with a high ratio than a low one. If you have a low ratio, you’ll need to serve customers many times for them to be profitable and you’ll therefore need to focus on retention.

The competitive environment will also impact your growth strategy. If it’s a highly competitive market and you’re well funded, you may want to invest heavily in new customer acquisition. But if you have less funding than your competitors, keeping existing customers using your service and getting them to use it more often will likely be a cheaper source of growth. A side benefit of this strategy is that your focus on improving your current service level to keep your existing customers will make them more likely to recommend your service to their friends. These positive recommendations are a free customer acquisition channel.

These are just some of the factors you’ll want to consider when deciding what strategy is right for your company. There are likely other factors that you’ll want to evaluate given your specific context.

In the case of our startup, we decided to focus our resources primarily on retaining existing customers.

Tech celebrities

Stephen Colbert’s Late Show, a late night talkshow in the US, featured three US tech company CEO’s as guests in the past week.

First up was Elon Musk of Tesla and SpaceX, then Travis Kalanick of Uber, and finally Tim Cook of Apple.

Although the interviews don’t contain unique insights that haven’t been covered elsewhere, they’re an important reflection of the significant mainstream interest in what tech companies are doing in the US. An interview on a business channel shows that tech companies appeal to people who follow the tech sector, but an interview on a late night talkshow shows that tech companies appeal to everyone. Technology is part of the population’s daily lives and this has transformed the leaders of the companies building these technologies into celebrities.

We used to have sports stars and movie stars, and now we have tech stars. Stars serve as role models for the next generation, so the rise of tech stars is a great signal for the future of the tech sector.

I believe that the trend of tech celebrities will only grow stronger as technology touches more and more of the daily lives of an ever growing number of people. I wouldn’t be surprised if we start seeing tech leaders on late night shows in Turkey as well. I believe that the next generation of Turkey’s youth would be well served with such role models.

Time to think

I read a post called The Death of Thought by Google Ventures partner M. G. Siegler this morning. Basically, M. G. talks about how access to the internet and all the services it provides (search, Twitter, Facebook, email, …) lets us fill in all of our spare time with the acquisition of new information. In doing so, we take away from the time that we used to spend thinking, or processing that information.

I agree with M. G.’s assessment and have three strategies to overcome the problem.

The first is writing this blog each morning. As M. G. points out in his post, writing forces you to reflect on existing information you’ve acquired and draw conclusions from it. It’s a great way to think.

“So, again, I go back to the process of writing. I believe one big reason I enjoy it so much is that it’s a forcing function to get me to think. I enjoy sitting here, coming up with thoughts seemingly out of thin air, and jotting them down. It’s the process of creation.”

The second is to close my laptop and turn off my smartphone’s ringtone and vibrate function whenever I need an uninterrupted period of time to think during the day. I don’t do this as frequently as I should but clearly see its value each time I do it. I need to do it more.

And the third is to disconnect at least an hour before I go to sleep each evening. I use this uninterrupted time to write about my key learnings from the day, read from a book (this is a great way for me to think as I read while letting my mind wander rather than with the goal of finishing the book), and talk with my wife about whatever happens to be on our minds that day. Each of these activities helps me bring scattered pieces of information together to make sense of it.

Founder equity vesting

One of my first posts from 2013 was on how founders should allocate equity among themselves. In summary, I stated that dividing founder equity in equal amounts according to the number of founders is rarely fair. A healthier approach is to evaluate the responsibilities and relative contributions of each founder to the business and to allocate equity accordingly.

That post looked at one dimension of founder equity, namely the amount of equity that each founder receives. This post will look at a second important dimension regarding equity allocations: the timing of when founders receive their equity.

Many startups choose to give each founder their full equity stake the day that they join the company. For example, if a founder owns 25% of the company, they earn the full 25% the day they start working.

The problem with this approach is that on the day that they join the company, the founder hasn’t put in any material effort towards the business yet. In theory they’re receiving equity for the future contributions that they will make, however in practice their equity is granted before they make any contribution.

As we have seen in several of our startups, there can be many reasons why a founder does not make the future contributions necessary for them to earn their equity ownership. The founder may have health problems, may voluntarily decide to pursue an outside opportunity, or may simply not be fulfilling the role’s requirements. In these cases, if a founder has already been given their full equity allocation, it’s challenging to get them to return part of their equity so that it can be used to motivate future contributors to the company.

In order for these challenging situations to not arise in the future, founders need to make sure that they earn the right to their equity only as they contribute to the company across time. This is a practice called vesting. A healthy standard is for the founder to earn their equity quarterly across 4 years, without earning any equity until they have completed their first year of work. This is called 4 year vesting with a 1 year cliff.

For example, if a founder owns 25% of the shares of the company, they earn 25% / 4 = 6.25% of these shares each year over the next 4 years. They earn the first 6.25% of their shares when they complete their first full year of work as this minimum time commitment is required to really begin contributing to the company. A founder leaving after less than a year of work is unlikely to have had enough time to make an important contribution to the business. After their first year of work, the founder earns 6.25% / 4 = 1.5625% of their equity on a quarterly basis over the next 12 quarters, earning their full 25% equity only after 4 years have gone by.

Vesting is necessary to align a founder’s equity ownership with their contributions to the business. However, many founders encounter the practice for the first time in their investor discussions, and their initial reaction is to think that vesting is a way for investors to hold back equity from founders. This is very far from the truth.

In reality, vesting helps founders just as much, if not more, than it does investors. When one of your cofounders needs to or chooses to leave your startup or is simply not performing at the level that’s necessary for the business to be successful (these situations occur a lot more often than founders think they will), vesting makes it much easier for you to agree on the terms of their departure. Since the founder hasn’t earned all of their equity, the company simply takes back the unvested equity which reduces the number of shares outstanding in the company, or uses it to reward other existing or future employees. The faster you can organize a healthy departure for your cofounder, the more time you’ll have to focus on your real goal of building a successful company.

Embracing your unique character traits

I came across the post below on Twitter this morning. Basically, it states that the unique character traits that made you different, and that you perhaps even wished you didn’t have, as a child are also the ones that, if applied correctly, are likely to be your unique strengths that make you succeed as an adult.

As a child, I was very quiet in class. In fact, my teachers’ most common complaint was about my class participation. Now I realize that while others were talking, I was observing their actions. Reading people and the implicit messages behind their explicit actions is an important asset in my current role.

After school each day, I would either have practice for a sports team, or come home to study from the class books that my parents had brought over from Turkey to our home in Belgium. The material taught in Turkish schools was much more challenging than that taught at my school so it required long hours of study. While my peers would go home and have plenty of free time, my schedule was always packed. This helped me learn to be disciplined. Today, this discipline manifests itself in my daily writing of this blog, my exercise schedule, and many areas of my work.

And I rarely went out on Friday or Saturday nights. While most of my peers were partying, I would prefer to stay at home to read and think on my own. In middle school, I thought that going out made me cool so I actively forced myself to do so. But come high school, I realized that I was doing so not because I enjoyed it, but to fit in. I started going out much less. My enjoyment of reading and independent thinking turns out to be a very important asset for an investor.

You can either try to change yourself to try to fit what you believe the world wants, or find the unique role in the world that fits you. If you want to be happy and increase your chance of being successful, I recommend the latter.

The internet in 2035

This table requires little explanation. Just imagine what 2035 will look like.

One observation: With the exception of Apple, the 2015 names are all different than those in 1995. Depending on your role, therein lies the danger and the opportunity.

Your story

I was reviewing one of our startups’ investor presentations recently. The content of the presentation was all there. The startup described the problem they were solving, their solution, what they’ve accomplished so far, how they’re different from their competitors, what their future plans are, and the funding they’re looking for to execute on these plans.

However, the presentation felt like a series of disjointed pieces of information. While each individual slide conveyed valuable information in its own right, there was no unifying thread. Successful presentations tell a story and this one didn’t.

The reason why your presentation needs to tell a story is because this is how humans think. We want to know the why behind the strategy and the resulting numbers. Seeing the why helps us evaluate the extent to which we believe in the what. And you need to believe in order to invest.

I don’t have a methodical approach for how to create a story. I’m sure such approaches exist, just like there exist different common plots for books and movies. For example, a common plot is for an intrinsically well meaning person to make a mistake, face hard times, learn from the mistake, and recover to come back even stronger than before.

A less methodical approach to creating your story is simply asking yourself why you’re doing something. What do you believe that makes you pursue what you’re doing, and how has this belief guided your actions at different stages of your company?

If you answer these questions before building your presentation, that mindset will be reflected on each of its pages. It’s one of those things that you’ll know when it’s there. It’ll be a story rather than just content. And that’s something that others just might believe in.