Monthly Archives: May 2016

From platform to boutique

In the close to 3 years since I started working at Aslanoba Capital, we’ve been a platform investor offering functional services to our startups. These have included support in the areas of HR, marketing, tech, and accounting.

When we launched our platform strategy, I was very optimistic about it. And the strategy has indeed produced a lot of great outcomes. During the past 3 years, roughly three quarters of our Turkish startups have used, and most of them have expressed their appreciation for the functional support we provided. We’ve seen our services help our startups attract and retain talent, scale their customer acquisition, solidify their IT infrastructure, and keep track of their financials.

However, there’s also a drawback to implementing a platform strategy. Specifically, startups that use an investor’s platform services can be less motivated to build these capabilities in-house. When you have an external HR manager helping you out, you may delay hiring a much-needed in-house HR manager. The same is true for other functional areas. And using external support and thereby delaying the development of in-house capabilities produces two disadvantages.

The first is that an external provider of functional support needs to allocate their time across multiple companies rather than just one. Since less time usually means less output, you get less output from the part-time work of a platform service provider than the full-time work of an in-house employee.

The second is that it’s more challenging to integrate a functional manager into a large organization than it is to place them into the same organization when it’s smaller in size. In the former, the manager needs to fit into the existing processes and culture of the organization. This is more difficult than the latter case where they can help shape these elements.

In the end, the platform strategy has clear advantages and disadvantages. It was a great experiment for the last 3 years. However, now that the members of our platform team have moved on to other roles, we’ve decided to run a new experiment. In particular, for the next few years, we’re going to serve as a boutique investor that doesn’t provide specific functional support.

In addition to keeping track of the pros and cons of the boutique model relative to the platform model for our startups, we’re also going to evaluate the personal fit of our characters for the different models. After this second experiment, we’ll have a pretty good understanding of what model works best for our startups and for us.


I wrote about Buldumbuldum, our investment in the mass customized products space, in earlier posts here and here. In these posts, I described how Buldumbuldum is augmenting its traditional e-commerce business with its B2C marketplace (seller-designed gift products, t-shirts, mugs, …) and B2B (stationery products like business cards, pens, and agendas) segments which will be the drivers of future growth.

It’s coming up on a year since the B2C marketplace and B2B segments launched and the results are very promising. The combined B2C marketplace and B2B segments already account for over 30% of Buldumbuldum’s sales, with the B2B segment showing slightly faster growth than the B2C marketplace segment.

In addition to the B2B segment’s faster growth, business customers are exhibiting different pre-purchase behavior than individual consumers. Since business customers purchase their stationery products in bulk rather than on a one-off basis, they look to receive offers for and negotiate prices based on the size of their order. This is in contrast with B2C customers who accept predetermined list prices for single unit orders.

In order to respond to the fast growth and different pre-purchase behavior of the B2B segment, Buldumbuldum decided to launch KaliteliPromosyon (translated “high quality promotion” in Turkish), a website dedicated to serving its B2B customers.

While you can still order B2B stationery products at predetermined prices within the B2B category on Buldumbuldum, you might want to check out KaliteliPromosyon if you enjoy Turkish-style bargaining.

Drone use cases and regulations

I listened to an Andreessen Horowitz podcast about drones this week.

If you’re looking for a great overview of existing use cases which are better served by drones, new use cases made possible by them, and their implications for safety and privacy, I encourage you to listen to the podcast below.

The podcast raises at least as many questions as it answers. The early days of commercial drones resemble the early days of the commercial internet. There are valuable use cases like infrastructure monitoring and inspection, cargo delivery, and search and rescue. However, it’s going to take some regulatory problem solving for us to ensure that commercial drones are able to deliver their benefits while we also minimize their risks.

Even when these concerns are addressed, it’s going to take time for people to get psychologically comfortable with commercial drones. But, just as we did with the internet, I’m confident we’ll get there.

Technology in soccer

Something interesting happened during the friendly soccer game between England and Turkey earlier this week. England scored in the 2nd minute of the game to go up 1-0. However, the goal should have been disallowed by the referee as the scorer was in an offside position at the moment when his teammate passed him the ball. If you’re not familiar with the rules of soccer, this basically means that there was only one opposing team player (in this case the goalkeeper) between the player receiving the pass and the goal at the time when the pass was made. This places the player in an offside position and this is against the rules in soccer.

Video recording and replay technology didn’t exist in the past. It therefore wasn’t possible to identify such infractions immediately after they took place.

However, even after the advent of video recording and replay technology, the world governing body of soccer, FIFA, decided not to use it to correct referee mistakes. Although using it would allow referees to immediately identify the mistakes they made and correct them, FIFA argued that this was against the spirit of soccer. This basically means that FIFA chose to continue letting referees make mistakes rather than promote fairness in the game. The latter is what’s actually against the spirit of soccer, not the former.

But now, in addition to video recording and replay technology, we have smartphones that let you immediately broadcast and watch these videos on platforms like YouTube. As a result, everyone can see whether a referee’s decision was correct or not within minutes of the decision. In the absence of YouTube, you had to wait for the TV channel to show the replay as it saw fit.

Turkey’s soccer coach Fatih Terim took advantage of a smartphone to show the game’s referee a video recording of the offside incident minutes after the goal. You can watch the series of events in the video below.

By not adopting video recording and replay technology to improve the decisions of its officials when the technology first emerged, FIFA used its centralized power to preserve the status quo and delay progress. Now that this technology is available to everyone in the heat of the moment, the power is shifting from FIFA to the fans. I think that the fans will eventually vote to preserve the true spirit of soccer.

Personal privacy and funding lawsuits

Yesterday, news emerged that Peter Thiel from the Founders Fund financed wrestler Hulk Hogan’s lawsuit against Gawker Media to the tune of $10M. Hulk Hogan sued Gawker Media for invading his privacy after the media company published a sex tape of him, and since Hogan didn’t have the money to finance the lawsuit himself, Thiel financed it. Thiel’s motivation against Gawker Media is the result of a 2007 article in which Gawker Media revealed that Thiel is gay against Thiel’s wishes.

There were a wide variety of reactions to the news. Most people on my Twitter feed, which may not be representative of most people overall, appeared to agree that Gawker Media had overstepped the boundaries of Thiel’s personal privacy. But most people also took the view that Thiel’s response was misplaced as it may set a precedent for rich people to limit the freedom of media organizations in the future.

Here’s my take.

I agree that Gawker Media invaded Thiel’s personal privacy. As long as someone hasn’t done something wrong and doesn’t threaten to harm other people, media organizations should respect that person’s privacy. Thiel’s sexual orientation doesn’t harm other people. And Thiel explicitly requested that his sexual orientation not be revealed. We don’t know the specific reasons for the request, but since the request doesn’t harm anyone, I respect his decision. Gawker Media should have done the same.

However, I don’t agree that Thiel’s response was misplaced. His response will hopefully set a precedent to prevent other unjustified invasions of personal privacy in the future. Notice that I said “unjustified invasions of privacy”. That’s different than setting a precedent to limit the freedom of media organizations overall. If someone has done something wrong or threatens to harm other people, that’s no longer an unjustified invasion of personal privacy. In that case, media organizations have the freedom, and in fact the responsibility, to cover the act. Thiel’s goal was to set a precedent to prevent unjustified invasions of personal privacy by the media, not to limit all media freedoms. I therefore support his action.

The problem isn’t the action itself, but the money required to carry it out. If Thiel didn’t have $10M, he wouldn’t have been able to finance the lawsuit. For every person whose personal privacy is unjustifiably invaded by the media who has $10M, there are hundreds who don’t have that money. Hulk Hogan is one example.

This means that the US legal system is currently designed to protect the privacy of rich people and people who aren’t rich but who are lucky enough to have attracted the support of a rich person. And that’s a problem.

Wrong person or wrong role?

Good employees tend to have three characteristics. They are intellectually honest, care a great deal about what they’re doing, and get things done. So if an employee falls short on one or more of these dimensions, it isn’t surprising if they don’t last long at your company.

However, just because an employee has all three attributes doesn’t necessarily mean that they’re going to succeed. In addition to having these three attributes, they also need to be in the right role.

Each of us has our strengths and weaknesses. And different roles require people with different strengths and weaknesses. For example, if you place someone who isn’t analytical in a digital marketing role, they’re unlikely to succeed. But this doesn’t necessarily mean that you should part ways. Sometimes they’re just in the wrong role. As long as you continue to believe in their three core attributes, you might want to give them another chance in a role that better aligns with their strengths and doesn’t showcase their weaknesses. For example, if the employee finds it easy to build relationships, you might want to give them a shot in a sales role.

Sometimes employees fall short on intellectual honesty, care for what they’re doing, and getting things done, and do indeed need to be let go. But sometimes they’re simply in the wrong role. Being able to distinguish between the two is an important skill.

Before letting someone go, you should ask yourself whether they’re the wrong person, or whether they’re the right person in the wrong role. If it’s the latter, repositioning them in the right role is a great way to increase your company’s output without the adverse cultural and financial costs of letting people go.

Competing startups

I regularly receive emails from entrepreneurs sharing the business plan of their company which is in direct competition with one of our startups. It wouldn’t be right for us to fund a startup competing with an existing portfolio company for two reasons.

First, helping one company would hurt the other. This wouldn’t be fair to the entrepreneur running the company that we don’t help.

Second, we would be exposed to information from both companies. Although we could refrain from sharing this information in theory, it would be much more difficult to do so in practice. While we wouldn’t share the actual information, it would inevitably influence our thinking and recommendations for the strategies of each company. Taking this a step further, armed with this knowledge, entrepreneurs would be motivated to stop sharing information with us altogether.

Because of these reasons we don’t invest in startups that are in direct competition with an existing investment. Entrepreneurs pursuing such a business therefore don’t need to waste their time by applying to us for funding.

To see if your business is in competition with one of our companies, you can browse our investments on our website. A very small fraction of our startups request to be kept private and the remaining 95%+ are public.

Accessing autonomous electric vehicles

The combination of car access, autonomous cars, and electric vehicles are coming together to have a big impact on the transportation industry.

The way in which we get around is likely going to look very different in the near future than it does today. The three most important dimensions along which change is going to take place (if it hasn’t already) include whether we own a car or access one, whether we drive a car or are driven by one, and what form of energy cars use to move forward.

These changes pose a threat to traditional car manufacturers. As a result, they present big opportunities for startups that develop a view on the end game and navigate these changes with a view of bringing about that end game.

My personal view is that although most people will opt for car access, some people will stick with car ownership as a way to express their identity.  It’s difficult to express your identity through car access because a car access network needs a lot of liquidity for cars to be able to reach customers in a short period of time. For people to be able to express different identities, you need to have different tiers of cars in your network and this lowers the liquidity and increases the estimated arrival times of each tier.

Most people will prefer autonomous cars in order to be able to spend their commute time doing other things. A minority will want to have the choice of driving themselves to enjoy the pleasure of driving. However, this may not be an option, or it may be restricted to separate roads, because cars with human drivers are more dangerous than autonomous cars. People who get around in autonomous cars therefore won’t want cars with human drivers on the same road.

And the vast majority of cars will be electric as electric vehicles allow for lower operating costs than gas-fueled cars.

In a recent episode of the Ventured podcast, investors from Kleiner Perkins share their thoughts on what the end game may look like.

Supervoting shares and protective provisions

I was recently thinking about an investment we made where the founder has supervoting shares. In this case, each founder share carries 10 votes relative to a single vote for each investor share. Basically, such structures are designed to give the founder control over the company’s shareholder decisions even if they don’t have a majority of the shares.

Although this wasn’t the case here, a founder can apply a similar structure to gain control of the board even when they’re outnumbered at the board level.

On the other hand, investors almost always negotiate to establish protective provisions, share lockups, and vesting schedules which let them oversee the actions of founders and gain greater control over their investments.

On one hand, investors agree to give a founder almost total control. On the other hand, they act to limit that control as much as possible. How do you explain the existence of both types of investments?

There are two answers to this.

First, the terms of an investment are a reflection of supply and demand. If you have a lot more supply of capital than demand for that capital from the founder, the founder may be able to negotiate supervoting shares. If the reverse is true, they may need to accept many protective provisions that constrain their actions.

The second answer, which influences the first, is that the founder’s reputation and integrity matter. If a founder is ethical and has great judgment, giving them supervoting shares won’t hurt investors. In fact, it may even be to their advantage as the founder won’t have to deal with the potential misguidance of investors.

The corollary to this is that if a founder is unethical, no amount of protective provisions is enough to save investors.

The truth

Barack Obama recently gave a speech at the Rutgers University graduation ceremony. Part of the speech was dedicated to the importance of knowledge, facts, reason, and science. Here are some of the thoughts that Obama shared:

  1. Ignorance is not a virtue.
  2. Qualities like kindness, compassion, honesty, and hard work often matter more than technical skills and know-how, but they shouldn’t come at the expense of facts.
  3. The rejection of facts, the rejection of reason and science, is the path to decline.

I first came across the idea of the often occurring tradeoff between the truth and happiness in college, after reading this quote by utilitarian John Stuart Mill: “It is better to be a human being dissatisfied than a pig satisfied; better to be Socrates dissatisfied than a fool satisfied.”

As Mill points out, sometimes the truth (as attained by knowledge, facts, reason, and science) doesn’t conform to our romantic ideals. It paints the picture of an imperfect world with shortcomings (including our own) that we don’t want to face. However, not facing this truth doesn’t change the reality. It simply obscures our view of it. In doing so, it turns us into fools of our own choosing.

After reading Mill’s quote in college and thinking about how I want to live the rest of my life, I made a conscious decision to prioritize the truth independent of how pleasant it is. As Mill points out, it sometimes leads to short-term dissatisfaction, but it’s an end in and of itself. And the short-term dissatisfaction eventually turns into learning which prepares you for even higher truths.

You can watch the full excerpt from Obama’s speech below.