Monthly Archives: October 2016

Supply-side variety and disintermediation

The world’s most successful marketplaces share one core characteristic. Transaction frequencies, average transaction values, and the resulting market sizes are very important. However, for the impact of these attributes to be amplified rather than contracted, one condition must be met. This is that the demand side of the marketplace must benefit from interacting with a variety of suppliers.

Passengers in a car hailing marketplace want to access the nearest car. That’s always a different car so there’s a benefit from supply-side variety.

Guests in a short-term peer-to-peer home rental marketplace need places to stay in the different cities they visit. They benefit from supply-side variety.

Diners ordering from a restaurant marketplace want different food options. Eating the same thing over and over again gets boring for most people so there’s a benefit from supply-side variety.

The advantage of operating a marketplace where demand benefits from supply-side variety is that it keeps demand coming back to the marketplace for repeat transactions. This is in contrast to marketplaces where demand doesn’t want supply-side variety. Examples of this include marketplace providers of home cleaning and elderly care services. In these examples, once demand finds a supplier it likes, it wants to continue working with the same supplier. As a result, repeat transactions are likely to take place off of the marketplace. In other words, the marketplace is likely to be disintermediated.

Marketplaces where demand doesn’t want supply-side variety can still be successful. They can achieve this by taking steps to avoid disintermediation. Examples of such steps include building tools to handle payments, scheduling, security, and communications.

However, it’s an uphill climb. And as a result of this uphill climb, marketplaces that don’t benefit from supply-side variety tend to not get as big as ones that do benefit from this variety. The latter are running downhill.

Navdy starts shipping

Navdy, a heads-up display for your car where we’re investors, started shipping earlier this week.

I met up with Navdy’s founder Doug Simpson to try out the Navdy and I really liked the experience.

But as an investor I’m biased. So here’s an independent review of the Navdy. The key phrase comes toward the end of the review: “On a few occasions I jumped into the car and started driving without placing it on the dash and instantly missed it.”

Great products are those you miss not having. I think that that’s what’s going to make the Navdy successful.

Organizational debt

Scott Belsky of Benchmark Capital recently wrote a great piece on organizational debt. Scott defines organizational debt as “the accumulation of changes that leaders should have made but didn’t”.

I like to think of organizational debt as the outcome of the obvious people decisions you know you should be making but avoid making due to short-term thinking. The key words here are “obvious” and “people”.

So a mistaken entry to begin serving an unprofitable customer segment or a mistake in your product pricing strategy are not examples of organizational debt. The reason is that such decisions are usually non-obvious and not directly about people.

Continuing to work with someone you know you should no longer be working with, or having a culture where team members avoid challenging each other in exchange for not having their own views challenged, are examples of organizational debt. The reason is that the changes necessary in these cases are both obvious and clearly about people. The discomfort resulting from addressing these obvious people issues is what makes them so tempting to put off.

You can read the full piece here.

Startup PR

When you’re a startup, getting distribution is very important. Although you may have a great product, if people don’t know about you, you’re unlikely to get much traction.

In response, many founders are tempted to go on a PR spree. For example, they start talking to the tech press and the press that covers the sector they’re in, and they start attending startup conferences. At the extreme, I’ve even seen startups record and publicly share their office conversations in the form of a reality show in order to gain publicity.

The problem with these approaches is that, while they will get some people to hear about you, they’re not targeted. If you think about the time and money that you spend on PR and the number of users or customers that it brings, it’s almost always a very ineffective use of your resources. When you’re a startup, you have the opportunity to target the innovators and early adopters who are going to convert into your users or customers at a much lower cost than if you perform a mass outreach.

Then why do startup founders still engage in these PR activities?

There are two reasons for this. The first is that it’s easy and the second is that it strokes their ego. Finding a creative way to attract users or customers free of charge, or optimizing your online marketing campaigns for specific audiences, is much more challenging than giving a journalist a few quotes, attending a conference, or recording and publicly sharing your in-office conversations. And the latter activities bring you personal recognition whereas the former don’t.

But the question you should be asking yourself is whether you want be personally recognized by people who are at best a very small fraction of your users, or appreciated for the quality of service that you offer many more of your actual users even though they may not know who you are.

If you focus on the latter, the former might eventually come. But if you focus on the former, the latter almost certainly won’t.

Fact checking

Yesterday, I read a Webrazzi article on the launch of (“teyit” means “confirmation” in English).‘s goal is to fact check Turkish news articles for their accuracy.

Since fact checking is currently a largely human activity, it isn’t easily scalable. It isn’t possible to fact check every article. To address this issue, first ranks articles based on the value which is at stake dependent on the accuracy of the article’s content. Although this is a subjective assessment, it’s the best approach available to us as of today. prioritizes those articles with a high value at stake and has its research team check the accuracy of the content of these articles. Based on their findings, researchers mark articles as being accurate, inaccurate, confusing, or suspicious, and share a detailed write-up of their findings to support the mark they’ve given.

The internet has reduced the cost of distributing content down to zero. And social media has made this content available to a widespread audience almost instantaneously. The result is an ever increasing pace of content consumption and a reduction in the cost of spreading misinformation (whether intentional or in the attempt to be the first to publish) because, by the time the misinformation inherent in an article emerges, most people have already jumped onto the next news headline.

We need to slow down. This means that we need to not only identify fact from fiction, but also keep people’s attention focused on what we’ve identified long enough for people to become aware of the facts. This isn’t easy in a world where pleasant fiction is easier to sell than brutal facts. is a great attempt to distinguish fact from fiction. Its bigger challenge will be to get people to care about the facts. I hope it succeeds.

Textbook fundamentals

Back in school, we would learn about the fundamentals of a specific field before moving forward to its applications. For example, in chemistry class we would read textbooks which describe the elements of the periodic table and their constituent protons, neutrons, and electrons before attempting to understand how atoms from different elements bond with each other to create compounds. You need to know the former to be able to understand the latter.

After leaving school, our focus shifts from textbook fundamentals to applications. In many areas, we read about compounds and their applications without understanding the underlying atoms and elements which make up these compounds.

If we’re simply a consumer of an application, we often don’t need to understand the textbook fundamentals which drive how it works.

However, if we hope to create or support the creation of an application, in other words if we’re an entrepreneur or an investor, we need to understand the textbook fundamentals. Continuing with our example, we can’t hope to come up with a new compound with a useful application without understanding how atoms from different elements bond with each other.

Although the example I outlined pertains to chemistry, the same holds true for today’s most popular fields like biological engineering, deep learning, and the blockchain.

If we hope to be creators of applications in these fields, we need to return to the textbooks. We need to return to the fundamentals.

Homo Deus

In a December 2015 post about my book recommendations for entrepreneurs, I wrote about how, at the time, I was reading Sapiens by Yuval Noah Harari. At the time, I was 200 pages into the 400 page book which covers the history of humanity. What makes the book interesting is that it’s written from the perspective of a curious social observer rather than the perspective of a historian.

Since I really enjoyed Sapiens, I was quick to pick up Homo Deus, Yuval Noah Harari’s new book. While Sapiens was about humanity’s past, Homo Deus is about our future. I’m 100 pages into the once again 400 page book and so far it has been just as gripping as the original.

In Homo Deus, Harari’s core thesis is that the biggest problems which humanity faced in the past, namely famine, plague, and war, have been reined in. Although each of these problems still exists, their incidence has declined significantly relative to the past. As such, it’s now possible to envision a world with plentiful access to food, limited disease, and overall peace.

Harari argues that, as a result of the important progress that we’ve made and continue to make in addressing famine, plague, and war, we’re now turning our attention to immortality (or at least eliminating death due to aging), bliss (basically constant happiness), and divinity (basically genetically engineered super-humans). While I don’t think that we’ll reach any of these any time soon, I think that Harari’s assessment of where we’re headed is directionally correct. And while each of these developments represents a big opportunity for humanity, each also comes with ethical concerns and practical risks.

100 pages into the book, Harari is doing a great job dissecting each development.

Turkish startup investment activity in 2016

In a talk at last week’s Webrazzi Summit in Istanbul, my partner Hasan shared his observation that 2016 has been a year where other investors in Turkey have taken over where we left off. Specifically, although the dollar volume of our investments has slowed down in 2016 as we focus the bulk of our remaining budget on our roughly 30 active Turkish investments, other investors in Turkish startups are more than making up for our slow down.

I hope to post the full video of the talk when it’s available, but in this post I want to share the data which supports Hasan’s observation, together with some conclusions from this data. The figures for the total dollars invested in Turkish startups for each year come from Startups.Watch.

In 2012, Hasan invested $2.0M (or 7%) of the total $28.3M that was invested in Turkish startups. $26.3M came from other investors.

In 2013, we invested $32.7M (or 57%) of the total $57.6M. $24.9M came from other investors.

In 2014, we invested $9.7M (or 31%) of the total $31.1M. $21.4M came from other investors.

In 2015, we invested $20.8M (or 37%) of the total $55.7M. $34.9M came from other investors.

And in the first 9 months of 2016, we invested $1.2M (or 2%) of the total $49.1M. $47.9M came from other investors.

If the investment activity we’ve seen in Turkish startups during the first 9 months of the year continues at the same pace during the final 3 months of the year, the year will close with north of $65M in total investments.

We can draw two conclusions from this data.

The first is that 2016 is on track to be a record year for the dollar amount invested in startups in Turkey. Despite the political and resulting economic uncertainties that the country has faced throughout the year, this shows just how strong and resilient Turkish startups are.

The second conclusion is that, as Hasan said, other investors are more than making up for the decline in our investment activity. In fact, the dollar amount invested by other investors in Turkish startups has grown significantly during each of the last 3 years, from $21.4M in 2014 to $34.9M in 2015 to $47.9M during the first 9 months of 2016. If this pace holds, other investors will have invested over $63M in Turkish startups in 2016.

Taken together, these conclusions make us very happy. follow up

I wrote about our online wedding marketplace Dugun‘s Middle East expansion under the brand name in an earlier post.

The Middle East’s leading tech news website Wamda recently also covered The piece shares some of the initial challenges faced by the team, describes how the team overcame these challenges, and highlights some of’s promising initial metrics.

You can read the full piece here.

San Francisco

I’m heading to San Francisco to work with our startups there and meet new ones over the next 2 weeks.

Due to the 10 hour time difference between Istanbul and San Francisco, I’ll be publishing my daily blog posts about 10 hours later than usual each day.

Beyond meeting with startups, I also look forward to seeing the on-the-ground vibe around the upcoming US presidential election on November 8. The run up to the election has been different and unfortunately more polarized than any that I’ve experienced before.

Although San Francisco is far from being representative of the US as a whole, observing the range of perspectives in person rather than over social media will help paint a more accurate picture for what the US will likely look like following the election. Although the short-term picture will be impacted by who wins, I believe that the long-term one, which is far more important, is quite independent of this year’s winner.