Monthly Archives: July 2016

Vivense’s Beylikduzu showroom

I visited our furniture retailer Vivense‘s newest showroom earlier this week. Vivense’s latest showroom, in the Beylikduzu neighborhood of Istanbul, is its fourth showroom. It follows the company’s first showroom in the Sisli neighborhood of Istanbul, second in Ankara, and third in Izmir.

The new showroom is different from the others on two dimensions. The first is its size. At four floors covering 800 square meters of space, it is Vivense’s largest showroom to date. Now that the company knows what works and what doesn’t when running its showrooms, and is able to get them operational at a low cost and fast pace, it has the confidence to launch increasingly larger showrooms.

The second distinction of the Beylikduzu showroom is its location. Whereas the other showrooms are located in the downtown areas of their respective cities, the Beylikduzu showroom is on the outskirts of Istanbul, close to the Istanbul Ataturk Airport.

I hadn’t been to Beylikduzu before and, since I don’t have a car and get around by a combination of public transport and taxis, I was initially hesitant to take the long journey to visit the new showroom. I ended up borrowing my wife’s car for the day to make the trip and I’m glad I did. Although Beylikduzu is on the outskirts of the city, it’s an area bustling with residential buildings. The Vivense showroom is in the middle of these residential buildings, in close proximity to the stores of home improvement retailers like Koctas and Bauhaus. It’s a great place for a furniture retailer.

Here are some pictures to give you an idea of what the showroom looks like. If you’d like, you can visit it at this address.

Giris kati

Birinci kat

Ikinci kat

Why is Thiel supporting Trump?

The fact that Peter Thiel, co-founder of Paypal and VC fund Founders Fund, and an early investor in companies like Facebook, SpaceX, and Lyft, is supporting Donald Trump’s candidacy for the US presidency perplexed a lot of people in the tech sector and beyond. I was one of them.

Thiel recently gave a speech endorsing Trump at the Republican National Convention (RNC), and I listened to it to see if I could find clues about his rationale for supporting a candidate whose most views, like Trump’s positions on protectionism against free trade, immigration, and minorities, seem to conflict with Thiel’s libertarian views.

After listening to the speech and thinking about the rationale behind the apparent contradiction, here’s the conclusion I came to.

Thiel has many unconventional views in areas like technology (see this post in which I covered the podcasts of Thiel’s VC fund, Founders Fund, in which they share their thoughts in areas like nuclear energy, biological engineering, robotics, artificial intelligence, and virtual reality) and education (the Thiel Fellowship gives $100K to young people who want to build a company rather than go to college) and it will be easier to bring these views to life by supporting and perhaps even working together with the unconventional Trump than the establishment candidate Hillary Clinton.

As I wrote in the post covering Founders Fund’s views on potentially ground-breaking but also risky technologies, “the adoption of these technologies each represents a big change from our current status quo.” And, because of his unconventional stance on many issues and the limited political network he has to choose his team from in the case that he wins the election, Trump gives Thiel a greater chance of changing the status quo than Clinton does.

The problem is that, if Trump is elected, it’s not just the status quo in technology that might change. The status quo in so many other areas, many of which make the US the country that it is, will be at risk.

Here’s Thiel’s full speech from the RNC.

Succeeding in VC and PE

Venture capital (VC) and private equity (PE) are two very different asset classes. Although both asset classes invest in private companies, PE invests in more mature companies with a lengthy performance record while VC invests in younger companies with a more limited, if any, operating history.

In PE, since the target companies have an established business model, lengthy operating history, and extensive financials, it’s possible to extrapolate from these to the company’s future. Although the actual outcome will be different than any individual’s projection, the range of projections is likely to differ by a small factor. The range of individual projections is unlikely to be more than an order of magnitude apart.

The target companies in VC have limited operating history and limited financials. That is if they have a business model at all. Sometimes they’re in search of a business model. As a result, the investment decision can rarely be based simply on extrapolating a prior performance record. It requires a qualitative assessment and insight rather than number crunching.

This doesn’t mean that valuation doesn’t matter for VC. It does. But the range of individual projections for a specific company are very likely to be an order of magnitude, if not more, apart. As a result, in VC you can afford to be off by a factor of 2 or 3 on the exact size of the outcome as long as you are correct in your assessment of the order of magnitude of the outcome. In PE, being off by a similar factor of 2 or 3 would be lethal.

As such, the profiles of the types of people who succeed in VC and PE are quite different. In PE, you make money by being quantitatively right. The qualitative direction is pretty clear. In VC, the accuracy of your qualitative assessment is the key driver of returns. You need to be in the right ball park quantitatively, but you make money by being right qualitatively.

Knowing whether you prefer and are good at making qualitative or quantitative assessments is key to knowing whether you’re likely to make a better VC or PE investor.

No meeting day

I decided to have a day without meetings yesterday. I wanted to have the time to think, read, reflect, and see what would come up rather than rush from meeting to meeting. I had a feeling that it would help me look at problems more creatively, see them as opportunities, and come up with potential solutions to experiment with.

Although I was interrupted by a few phone calls during the day, I was able to spend the bulk of it performing the creative thinking that I wanted to do. By the end of the day, I had sent 5 of our startups ideas on how to improve their business.

2 of the ideas were put to the shelf after debating them with our entrepreneurs. Armed with their more in-depth perspective on the market, we decided that the ideas weren’t worth pursuing.

The other 3 ideas were appreciated by our entrepreneurs and either they or I, as appropriate, have taken action to get the ball rolling on the ideas.

I’m happy with 3 potentially value enhancing new projects emerging from a day’s work. It’s more than I feel gets done in most days which are filled with back to back meetings.

Given the successful results of my experimental no meeting day, I’ve decided to make it a regular habit. I recognize that there may be some weeks when urgent meetings force me to skip it, but I’m going to try to have a no meeting day once each week.

I also recognize that being able to set up a no meeting day is a luxury that not every role provides. But if you’re in a role with disproportionate returns to creativity and insight, I strongly recommend you try to make it happen. You might be pleasantly surprised by the results.

What are you?

A question I like to ask entrepreneurs is whether their startup is a product or a sales and marketing company. All startups need to do at least a bit of both. You can’t sell without at least a working product, and how good your product is doesn’t matter if you can’t get people to use it.

However, I’ve discovered that the best startups tend to excel on one of the dimensions. For example, in our portfolio Sinemia is primarily a sales and marketing organization and Insider is primarily a product company. Globally, Uber is primarily a sales and marketing organization and Google is primarily a product company.

More important than whether I think a startup is a product company or a sales and marketing company is what the founder thinks. This is because, taken together with their business model, it informs their strategy. And founders need to be aware of this. For example, a SaaS company with global ambitions needs to be a product company, and the founders need to recognize this.

The match, or mismatch, between the type of organization that a founder sees their company as, and their stated ambitions, says a lot about the company’s eventual chance of success.

No options

I was speaking with another investor recently. We were talking about one of the companies where he’s a co-founder. Although he’s not operationally involved, he helped pull together the initial team and secure the company’s first angel funding.

When the company was first formed, the founding CEO wasn’t stepping up to the plate. He was reluctant to take leadership and was going through the motions of building a business rather than actually building one. As a result, the company found it difficult to raise money. Although they completed a small angel round, the company couldn’t settle on a business model, there were problems among the founding team members, and there was insufficient product progress being made.

Then the company’s angel funding ran out. The founding CEO was faced with two options. Either he would shut down the business, or he would personally finance it. He chose the latter approach, selling his home and putting up an important portion of his net worth into the company.

That’s when the company experienced a step change increase in its performance. The CEO settled on a business model, restructured his team, and shipped a great product. Seeing this progress, investors started knocking on the company’s door. The company has yet to become a runaway success. However, it’s certainly headed in the right direction.

It’s only when the entrepreneur felt like he had no options left that he came up with the inner motivation and resourcefulness to build his business. Necessity is the mother of invention.

Great markets pull the personal growth out of the entrepreneur

I was recently thinking about how much personal growth Melis Guctas, the founder of Modacruz, has shown over the 2 years since we invested in her company. The pace at which she has learned how to deal with cofounder issues, build and motivate a team, and balance investor interests, all while growing her business is very impressive.

Part of this growth is because of her character. You need to have a strong motivation to learn and recognize that the best way to do this is to experience as much as possible, read as much as possible, and reflect on your experiences and readings to continually improve yourself.

However, there’s a second very important contributor to learning. And this is seeing success. Experiencing and reading, and applying your learnings from these experiences and readings to the problems you’re facing isn’t enough. If you don’t see success after doing so, your motivation to learn will gradually decline. However, if you see success after applying your new learnings, you’ll embark on a virtuous circle where your learnings produce success which encourages you to learn more and achieve even more success.

So having a desire to learn is great, but its effect is much stronger if you’re in an environment where you see success. And the most important determinant of the latter is the market you’re in. In the case of Modacruz, a mobile-first second-hand female clothing marketplace in Turkey, the market dynamics are very favorable.

The large number of price conscious buyers, the large inventory of unused clothing sitting idle in womens’ wardrobes, the ease with which you can list your unused clothing using your smartphone’s capabilities, and the low degree of competition when Modacruz launched all came together to create a very attractive market. And this attractive market amplified Melis’ existing predisposition to learn.

Great markets literally pull the personal growth out of the entrepreneur.

Pokemon Go and augmented reality

It’s been less than 3 weeks since the launch of Pokemon Go, a mobile game where players use their smartphone’s camera to collect Pokemon’s at different real world locations. The game was downloaded by over 5% of all US Android users during the first two days of its release and it has set a record for the highest number of downloads among all apps in their first week on the iOS app store.

These records are despite the fact that the app has yet to be released in all countries. If you live in a country where the game hasn’t been released yet you can download it from this link if you’re an Android user and follow these instructions to download it if you’re an iPhone user.

Following Snapchat’s augmented reality filters, Pokemon Go is the second use case of augmented reality that has gained widespread user adoption.

Here’s an Andreessen Horowitz podcast which talks about the history behind the development of Pokemon Go, some of the reasons behind its success, and what lessons can be drawn for future applications of augmented reality.


Learning a new language

Yesterday evening, I was browsing YouTube when I came across some popular songs from my childhood. I spent my childhood in Belgium. Belgium’s three official languages are French, Dutch, and German.

I remember how I pushed back against my parents as they tried to convince me of the importance of taking advantage of living in another country by learning its languages. If it was up to them, I would probably speak all three languages today. Instead, I only speak one. French.

As I listened to these songs in French yesterday evening, I realized that the only reason why they’re meaningful to me is because I understand what’s being said. And if my parents hadn’t pushed me to learn French, this wouldn’t be the case.

If only I had also learned Dutch and German, I would be able to enjoy the great songs in these languages as well.

And the joys resulting from learning a new language aren’t limited to just music. A new language gives you access to all the unique content, ideas, and perspectives that the countries and cultures which speak that language have to offer.

And from these perspectives comes not just a tolerance, but a deep appreciation for diversity. Once you realize that the perspective through which you see the world is strongly influenced by the arbitrary countries, cultures, and languages that you were born and raised in, different perspectives that were once inexplainable to you suddenly become understandable.

In other words, learning a new language is about much more than learning a language.

In case you’re wondering which songs I was listening to, the first one was “Tombe pour elle” (“Fell for her” in French) by Pascal Obispo. I’m sharing the song below. The other songs came from following YouTube’s recommendations at the end of this song.

Turkey a week after the failed military coup attempt

It has been a week since the failed military coup attempt in Turkey. I don’t know the situation in other cities, but life has fast returned to normal in Istanbul. Businesses are open and people are going about their daily lives. Heavy traffic is back and that’s probably the best indication of a return to normal in a city like Istanbul.

Another indication that life has fast returned to normal comes from our portfolio. Prior to the coup attempt, 5 of our companies had received term sheets and were in the due diligence phase with investors. Following the coup attempt, 4 of the 5 investments are still proceeding. Only one investor dropped out. That’s a pretty good sign.

I think that the fact that 80% of the investments are still proceeding shows two things.

First, we’re fortunate that the Turkish government acted as swiftly as it did during and following the coup attempt. In the absence of this swift action, if the coup had been successful or if civil order had not been restored following the failed coup attempt, Turkey would have been in a far more precarious state than it is in now.

Although many individuals and foreign governments have criticized the Turkish government for the scale and speed of the post-coup detentions, we need to keep in mind what just happened. Members of the military tried to overthrow a democratically elected government. I can’t speak to the merits of each individual detention. That requires a case-by-case analysis. However, faced with the same threat, most democratic governments would respond in a similar way, and rightly so.

The second conclusion we can draw from the fact that 80% of the planned outside investments in our startups are still proceeding is that local investors as well as those foreign investors who invest in emerging markets like Turkey are resilient. In fact, several of them told me that they and the institutions they represent have done business in countries with much more volatile conditions than those that Turkey faces today.

Ideally, the coup attempt wouldn’t have happened. But, it did. So our assessment of the current situation needs to be grounded in this reality.

If you would have asked me during the coup attempt what Turkey will look like a week later, I would have found it very difficult to paint a picture as positive as today.

This doesn’t mean that the risk of civil unrest has subsided. Although it seems highly unlikely, there is also a risk of further military interventions. But based on what happened a week ago, where we are today is about as good as one could hope for.