Monthly Archives: March 2016

When developing markets lead

In an earlier post, I wrote about how our taxi hailing app Bitaksi introduced a number masking feature well before its international counterparts like Uber, Olacabs, and GrabTaxi.

It turns out that number masking isn’t the only feature that Bitaksi introduced before its global counterparts. Last week, Uber announced that it is partnering with prepaid debit card provider GreenDot’s GoBank to give drivers a debit card from GoBank that will let them access their earnings immediately. Prior to this partnership, drivers had to wait for up to 4 days for payments to hit their bank account.

Bitaksi has been offering its drivers a similar service through its partnership with prepaid debit card provider Ininal, where we’re also investors, for about 2 years. Bitaksi drivers with an Ininal card are able to access their earnings on the same day that they perform the service.

The reason why Bitaksi and Ininal partnered to offer this service much earlier than Uber and GreenDot is because of the greater demand for such a service in Turkey than in developed markets. A smaller fraction of taxi drivers in Turkey have a bank account relative to drivers in developed markets, and these drivers operate on a much tighter budget which requires that they be able to access their daily earnings in order to pay their medallion owners.

Fred Wilson recently wrote about how people in developing markets have very different needs that can be met with a smartphone than people in developed markets. Many innovations in the types of services that are offered through smartphones are therefore likely to be created by developing market entrepreneurs.

This is true not only for services offered through smartphones, but all services. The partnership between Bitaksi and Ininal is a great example.

Inside the mind of an investor in the region

I participated in an investor panel entitled “Inside the mind of an investor in the region” at the Startup Turkey event a few weeks ago. The panel was hosted by Forbes contributor Federico Guerrini and the other panelists were Cem Sertoglu from Earlybird, Yavuz Kaynar from EBRD, and Sasha Konoplyasty from Buran VC.

In the panel, we cover a wide range of topics including:

  1. What we look for in the startups we back
  2. The key opportunities and challenges for tech startup investors in Turkey
  3. The services which we offer our startups beyond capital

You can watch the full video below.

Bill Gurley’s thoughts on entrepreneurship and venture capital

Bill Gurley from Benchmark Capital has led investments in Uber, Zillow, and OpenTable.

In a 2013 interview with Pando founder Sarah Lacy, Bill shares his views on a wide range of topics pertaining to entrepreneurship and venture capital. These include Bill’s following beliefs:

  1. The VC business is an artisan business that doesn’t scale easily. As a result, Benchmark refrains from offering platform services to its startups.
  2. Every time a VC opens their mouth, they’re marketing to entrepreneurs. What VC’s say in public should therefore be taken with a grain of salt.
  3. Missed opportunities hurt VC’s a lot more than bad investments. This is because when a VC makes a bad investment their loss is capped at 1X, but when they pass on a great investment they lose the potential for a much higher multiple return.
  4. Many founders are better off not taking venture capital and instead shooting for sub-$75M outcomes where they retain a large fraction of the company, as these are more attractive corporate acquisition targets.
  5. Founders can mistake factors that have nothing to do with success (like getting an uncapped convertible note and having a pet friendly office), as well as factors which emerge as a result of achieving success (like having nice offices and giving Mac’s to each employee), for the causes of success.

You can watch the full interview below.

The human, not the myth

I’m going to share a simple yet powerful quote from Steve Jobs this morning:

“Everything around you that you call life was made up by people that were no smarter than you. And you can change it, you can influence it.”

As children, we have role models that we aspire to be like. These may be people in the real world who we know (like our parents), people in the real world who we don’t know (like businessmen, politicians, athletes, and celebrities), and superheroes from movies and books. We endow these people with a mythical status and see them as almost faultless legends whose performances we can never come close to achieving.

As we grow older, we first realize that the people in the real world who we know aren’t faultless after all. For example, our parents make mistakes just like we do. Just like us, they’re simply trying to do the best job they can in an uncertain world. They’re not myths, but humans.

At a somewhat later age (probably somewhere in our 20’s), as Steve Jobs realized, we realize that the same is true for people in the real world who we don’t know. We may not know the founder of the world’s biggest tech company, a superstar athlete, or the leader of a country, but if we did, we’d realize that they also have strengths and weaknesses. They’re not myths, but humans. And as humans ourselves, we can do things similar to what they did if we have similar endowments, care about what we’re doing, work hard, surround ourselves with complementary people, and are a bit lucky.

Even most superheroes from movies and books have extreme weaknesses that accompany their extreme strengths. After all, they’re figments of the imagination of human authors who build them with the expectation that they should have shortcomings just like the humans that they’re based on.

Once you internalize the fact that we’re all humans, not myths, many of your fears and worries go away. You realize that you’re actually much closer to achieving your aspirations than you may think.

On-demand businesses

Rob Kao is a co-founder of ValetAnywhere, a monthly valet parking service in NYC where we’re investors.

ValetAnywhere started off as an on-demand valet parking service and switched to offering only long-term monthly parking after it couldn’t get the unit economics of on-demand parking to work 5 months into its launch. This was back in December 2014, and Rob shares the thinking behind this decision in his Medium post on the economics of on-demand businesses.

Another valet parking startup, Zirx, also decided to shut down its on-demand service in February 2016. And Luxe Valet, the other big player in the market, pulled out of Boston and Philadelphia months after its launch in these cities. Each of these moves is an indication of the challenging economics of offering on-demand valet parking.

Most on-demand services are great for customers. Customers are offered a premium service in very little time, at a cost that rivals or beats the traditional version of the service which existed before the emergence of on-demand enabling smartphones. However, just because a service makes customers happy doesn’t mean that you can build a profitable business around it. You need to be able to make customers happy at a price point where the economics of the business also work out. ValetAnywhere had the foresight to realize this very early on.

Speaking up

I was recently in a meeting with an entrepreneur and his team. We were talking about how to solve a problem that the company was facing, and most of the discussion was taking place between the entrepreneur and me. The team wasn’t speaking up.

I therefore turned around to the team members, and said that I wanted to hear each of their thoughts on the issue at hand. Unsurprisingly, they had a wide variety of opinions including valuable approaches to the problem that the entrepreneur and I hadn’t thought of.

The reason why they weren’t speaking up was because they thought that they didn’t have the right to speak up. They weren’t a founder or an investor and were therefore shy to express themselves. They saw founders and investors as being of a higher social standing than themselves and therefore believed that we would have all the right answers.

This hierarchical way of thinking about the world is dangerous. It is a barrier to the cognitive diversity necessary for different perspectives to be voiced, each perspective to be judged based on its merits, and the best decision to be made. In fact, in its absence, it’s very easy for people of a similar social standing to uncritically agree with each other’s proposals in order to not appear like they’re threatening their counterpart’s equal social standing.

More often than not, the reason why someone has a higher social standing in an organization is simply because of the number of years that they’ve been there. This can be correlated with knowledge, but it’s also correlated with a belief in a certain way of doing things that can be outdated.

So break the social norms. If you’re the junior in the room, speak out. Remember that each senior in the room was once a junior feeling exactly the way you did. After you speak up, be comfortable with the knowledge that those who are looking at you critically don’t matter, and those who matter appreciated hearing your ideas.

And if you’re the senior in the room, get the junior to speak out. They’ll be grateful for the opportunity and be motivated to work that much harder.

Apple and the FBI

You’ve likely read about the court case between Apple and the FBI. Basically, the FBI is asking Apple to help it unlock the contents of a terrorist’s iPhone. Apple has refused on the grounds of the personal privacy of its users and the follow-on effects of taking such an action.

If Apple builds a backdoor for outsiders to access the smartphone content of its phone owners, outsiders with bad intent could also use this backdoor. Although the FBI’s request is designed to protect people and therefore has good intent in this case, an outsider with evil intent could use the same backdoor to harm people. Hence Apple’s current stance and desire to build future phones that no one other than the owner (that is not even Apple) can access.

Among all the articles I’ve read on the topic, this one by Firefox founder Blake Ross best lays out the clear tradeoff between giving control of entry only to those on the inside (that is the phone owner), versus also giving control of entry to those on the outside (that is organizations like the FBI). As the article points out and I agree, the latter can do more harm than it prevents. My current thinking is therefore that the former is the right solution.

It’s also a funny piece.

Onboarding new users

Getting users to experience the magic moment of your service is crucial for retention. If your users register for your service but don’t experience the value that you’re delivering, you’ll lose them.

For our on-demand goods delivery app Kapgel, this magic moment is when a user is delivered their first order. And in order to be delivered this order, they first need to place the order in the app. So Kapgel spends a lot of time thinking about how it can get users to place their first order.

There are two parts to this. The first is the user experience of the app. It needs to be easy for a newly registered user to understand what the app does, find the products that they’re looking for, and order them. Ideally, you want your newly registered users to place an order immediately after registering.

However, this isn’t always the case. Some users leave their initial app session without placing an order. For these users, you have to give them reasons to return to the app. The combination of these different triggers represents the second part of what Kapgel does to get users to place their first order.

Orhan Ceylan from Kapgel does a great job of outlining these triggers in his post entitled “How Kapgel onboards new users“. Through a combination of emails and push notifications that inform users about the types of products that they can order on Kapgel (basically anything that a courier can physically carry that’s also legal) as well as the different ways in which they can place an order (selecting from the product list, requesting a custom order, and ordering via chat), Kapgel looks to get its newly registered users to experience the service’s magic moment.

Controversial views on entrepreneurship and venture capital

Andy Rachleff is a former partner at Benchmark Capital and co-founder and Executive Chairman of Wealthfront.

In this interview with Jason Calacanis, Andy shares several unconventional views on entrepreneurship and venture capital. He also talks about Wealthfront but I found his insights on entrepreneurship and venture capital particularly valuable. Here are 3 controversial views that resonated with me:

  1. 90% of the value added of the venture capitalist is making the right investment decision. Investors can help companies that would return 3X return 6X, but the 20X outcomes that are necessary for a successful portfolio will be 20X outcomes even in the absence of the investor.
  2. People are meant to be either investors or operators. Although Andy co-founded Wealthfront, he states that he was meant to be an investor.
  3. You need to get to early adopters first before going to the early majority because the early majority make their usage decision based on references. Attempting to go directly to the early majority is unlikely to succeed because the fact that your product would actually solve a problem for them if they tried it isn’t enough for them to actually try it in the absence of references from the early adopters.

You can watch the full interview below.

Non-consensus and right

I like reading Tim Urban’s posts which distill complex issues into their fundamental parts in order to arrive at informed conclusions on a particular topic. Tim writes at Wait But Why and I strongly encourage you to read the posts that are interesting to you. Just make sure you dedicate at least an hour to each post as it takes a while to read the post, let your thoughts settle in, and internalize the post’s conclusions.

The most recent post I read is about why you should stop caring about what other people think about you. Tim does an excellent job of dissecting the reasons why it made some sense to care about this in the past, why even in the past the degree to which people cared was greater than what it rationally should have been, and why it makes much less sense to care about it in today’s world.

Not caring about what others think is a very important trait for successful entrepreneurs and investors. The best companies emerge when you’re non-consensus and right, and Tim’s post does a great job of showing you the rational thinking behind why you shouldn’t be afraid of being non-consensus if your authentic voice tells you that you’re right.