Monthly Archives: November 2016

World After Capital

Albert Wenger from Union Square Ventures published the first version of his online book World After Capital earlier this year. In contrast to books that go through an offline publishing process and aren’t revised after they’re published, World After Capital is a continual work in progress that Albert adds to and revises based on reader comments and his emerging thoughts.

In World After Capital, Albert identifies four ages in the development of humanity. These are the forager age, the agrarian age, the industrial age, and the information age which we’re currently in.

He argues that the scarce resource in each age shifted from food in the forager age to land in the agrarian age to capital in the industrial age to attention which is the scarce resource in the information age.

Now that a resource is no longer scarce doesn’t mean that everyone has access to it. It means that we have enough of that resource in total to provide for everyone’s needs. However, the resource’s distribution among individuals may still leave it inaccessible to some people, as is the case for food, land, and capital.

Finally, Albert provides specific recommendations for the actions we need to take now that we live in an age with sufficient capital (at the societal level) and scarce attention (at both the societal and the individual level). In Albert’s words, these are:

  1. Instituting a basic income (economic freedom)
  2. Investing in internet access, rolling back intellectual property rights, and rethinking personal privacy (informational freedom)
  3. Practicing and encouraging self-regulation (psychological freedom)

You can read the most recent version of World After Capital here.

Hiring and team management insights

Steve Newcomb was the founder of PowerSet, the developer of a natural language search engine which was acquired by Microsoft for ~$100M and is now part of Microsoft’s search engine Bing.

In his 29 page write-up entitled “Cult Creation“, Steve summarizes some of his unconventional hiring and team management insights. These include his suggestions to:

  1. Try before you buy when hiring
  2. Treat all candidates including those that you won’t be hiring like gold
  3. Develop and communicate a worst case scenario for your startup that’s better than the middle or even best case scenario of most other startups
  4. Set the salaries and equity awards corresponding to different competency levels for each talent type (engineering, marketing, product, …) and don’t allow for negotiations within a specific competency level
  5. Incentivize employees to live close to the office

You can read the full piece here.


Passion is a strong word, especially in the context of one’s work. It’s rare that you find someone who is passionate about their work.

But I’d say I’m pretty passionate about investing in startups. It’s the reason why I write this blog, spend most of my time thinking about how I can help our startups, respond as thoughtfully and quickly as I can to the requests of our founders, and am up-front in the feedback that I provide them.

And investing in startups is easier than building a startup.

So, for a founder to have a shot at building a successful startup, they need to be at least as passionate about building their startup as I am about investing in startups.

It’s rare that I come across a founder like this. But it feels great when it happens.

News algorithms with a human touch

3 weeks ago, I wrote about how the explosion in news content and the challenge of fact-checking this news content is leading to widespread misinformation.

The timing of the post was particularly appropriate as, following the results of the US presidential elections, reports have emerged that draw attention to how people are producing articles with false information designed to attract clicks and generate revenue, and spreading these articles on social media sites like Facebook. The argument is that these factually incorrect articles helped Trump win the US election.

I don’t agree with this assessment. These articles containing false information are just one of several factors which contributed to the election outcome. And they’re a small one at that. In addition, although perhaps to different extents, they impacted both candidates.

However, the widespread distribution of these factually incorrect articles does lead to an important question. What responsibility, if any, do social media sites like Facebook have to monitor the factual accuracy of the content that they’re helping spread?

Facebook argues that it doesn’t have this responsibility because it is simply a distributor of content. It is not a media company that produces the content.

While true, distributors of online news content have a very different role than offline distributors of newspapers. Online content is effectively infinite while offline content isn’t. This gives online content distributors the ability to influence what readers consume to a far greater extent than offline newsstands. While a newsstand could display all the newspapers available in the country, Facebook has to choose what content to display within your newsfeed. It’s physically impossible to show it all.

So far, Facebook has chosen to prioritize the content it displays based on a black box algorithm which appears designed to maximize user engagement and hence Facebook’s revenue. The problem with this approach is that few users care about the facts. Most are just looking for the next adrenaline rush. So content which meets this demand gets clicks and is pushed to the top of the news feed where it gets more clicks, irrespective of factual accuracy.

But if this isn’t the right approach because factually correct content is intrinsically valuable and this approach often directs our attention to factually incorrect content, then what is the right approach?

One possibility is for Facebook to have a fact checking team, or to work with a third party fact checking team, to only surface content that it deems factually correct. The problem with this approach is that, whenever humans have absolute power like this, it’s up for abuse. One of social media’s greatest advantages over traditional media is that it doesn’t exercise editorial influence (at least in most cases). Allowing Facebook to be the arbiter of factual accuracy would give it much greater editorial powers. This is dangerous and should be avoided.

I believe that the solution lies at the middle of these two extremes. An engagement-optimizing algorithm isn’t the solution, but a human fact-checking team that can override the algorithm whenever it wants to isn’t the solution either.

Instead, Facebook’s algorithm needs to evolve to include factual accuracy as one of the important variables which it uses to determine which articles to surface in its users’ news feeds. This is similar to Google’s search results reflecting not only the number of links to a specific page but also the quality of the sites providing these links. I don’t know the variables taken into account in Facebook’s algorithm but I doubt that factual accuracy is a variable with an important weight, if it is even a variable at all.

I recognize that what I’m proposing isn’t a perfect solution.

The factual accuracy variable will be subject to human bias, at least until we get machines to perform fact-checking for us. But even then, these machines will initially be designed by humans so they’ll also continue to reflect our biases.

And false articles that get clicks may still surface at the top of news feeds if their engagement levels overcome the weight of the penalty they receive due to their factual inaccuracy.

However, a perfect solution doesn’t exist. The best we can hope for is to reward factual accuracy as much as we can without giving the humans responsible for deciding on this factual accuracy limitless power. Enhancing an algorithm with a human touch (not a human override) is the best option available.

This leaves three questions outstanding.

First, what weight will be assigned to the factual accuracy variable?

Second, how and by whom will the variable be measured?

Third, what motivation (or regulation) will ensure that Facebook adopts a factual accuracy variable that lowers its user engagement and revenue?

Sinemia and 500 Startups

Sinemia, a monthly movie membership club where we’re investors, completed its second funding round in August of this year.

Immediately following the round, 500 Startups expressed its interest to invest in Sinemia. Given Sinemia’s plans to grow abroad with an initial focus on the US market, a global fund with a US presence like 500 Startups has the potential to be a great partner for the company.

Sinemia therefore decided to bring 500 Startups onboard and the small strategic round was announced yesterday. We welcome 500 Startups to the company.

Sinemia’s US expansion is up next.

My job

I was speaking with a founder the other day who asked me what I like and don’t like about my job. Fortunately he’s not one of our founders. Otherwise I would have suspected that he’s considering becoming an investor and I wouldn’t want this, at least not right now. We need our founders to run their companies.

I’ve been asked this question many times before so my answer was ready.

The best part of my job is that I report to a single person. Most VC’s have a wide range of LP’s that each need to be managed. In addition, some anchor LP’s demand more attention than others. So agreeing upfront on what you can and can’t invest in, updating LP’s about the performance of your portfolio, and comforting them when they see a competitor to a company you invested in emerge on TechCrunch takes a lot of time. Since we invest only Hasan’s money, he’s the only person I need to keep up to date. This is pretty easy.

Hasan is also much more optimistic than I am.  How this plays out in practice is that it’s very rare for me to recommend making an investment and for him to refuse. The reverse has taken place a few times. As a result, I’m effectively managing a single LP and reporting to a senior GP who agrees with the vast majority of my recommendations. This is fun.

The toughest part of my job is the number of companies we’re managing. We have over 60 investments across Turkey and the US. We’re passive investors in our 30 US companies which means that we read about their updates and make decisions about follow-on investments when they have secured a lead for their new round. We don’t try to influence the course of the company so this doesn’t take too much time.

However, this still leaves over 30 companies in Turkey. Ideally I’d like to spend 2-3 hours with each company every other week. This includes meeting with them, thinking about how we can help out, and performing the necessary outreaches. Assuming I spend half of my day working with existing companies and half researching new companies, I would need to work with 10 companies to keep up this pace. Clearly, something has to give.

I spend less time researching new companies by only looking at those with an existing lead investor. I also spend less time working with each of our companies than I’d ideally like to. Even with these two approaches, time is a very scarce resource.

I wouldn’t be able to keep up if I didn’t love what I’m doing.

The hero hire

Whenever a startup says that they’ve found a hero hire, a red flag goes up in my mind. There are two reasons for this.

The first is that the need for a hero implies a big problem. If you feel like you need a hero, it’s likely that things aren’t going well. Otherwise you wouldn’t be looking to a single person to save your startup.

The second reason is that a single hero doesn’t exist in real life. It’s just a romantic ideal. In reality, success calls for a team consisting of many heroes who excel in their respective roles. But when you’ve built such a team, since there’s no single individual who stands out, they’re no longer heroes but a collection of great people. They’re no longer the romantic ideal but the reality.

Investor mistakes

My partner Hasan took part in a series of Endeavor interviews earlier this year. You can watch them all here.

The one that I found most interesting is that where Hasan shares his views on the top 3 mistakes which investors make. These are:

  1. Missing big opportunities
  2. Seeking to exit investments too soon
  3. Wanting to control the companies they invest in

You can watch the full piece in Turkish below.

People shape the future

On the morning of November 10, I shared my thoughts about Donald Trump’s election as president of the US.

That same morning, 78 years ago in 1938, was the day when Ataturk, the founder of the Republic of Turkey, passed away.

Turkey has experienced a tough 2016 so far. In particular, the July 15 coup attempt was an unwelcome development that Turkey is fortunate to have avoided.

Similarly, many in the US feel that Trump’s presidency is an unwelcome development. I understand their concerns but, for the reasons I shared in my post, I don’t have the same fears.

There will always be struggle and there will always be uncertainty. The struggles of Turkey to rebuild following the coup attempt and the uncertainty which the country continues to face, and the struggles of the US during a polarized campaign season and the uncertainty which the country faces now that the election results are in, are just two examples.

But amid the struggles and the uncertainty, there is one certainty. And that is that people shape the future. Just like Ataturk shaped that of Turkey.

Looking forward to seeing and hearing from you

Most investors agree that a startup’s founding team is the most important factor when making an investment decision. I think that the underlying attributes of a great founder include authenticity, caring a great deal about what you’re doing, and getting things done.

One way to evaluate founders is to evaluate each of these attributes one by one.

Another way is to think of another founder feature which is the direct result of having each of these underlying attributes. A great example of such a feature is whether you look forward to seeing or hearing from the founder. Independent of how a startup is performing at a specific moment in time, if the founder is authentic, cares about what they’re doing, and gets things done, chances are that you look forward to seeing and hearing from them. If they fall short on one or more of these attributes, chances are that you don’t look forward to seeing and hearing from them.

Startups take a lot of time and effort to build. So it makes sense for investors to work with founders who they look forward to seeing and hearing from.

Similarly, founders benefit from working with investors who, independent of the short-term pleasure or pain which their honest feedback may provide, they look forward to seeing and hearing from. If an investor isn’t authentic, doesn’t care about what you’re doing, or doesn’t get things done when they say they will, they’re unlikely to be the right partner for you.

In fact, it’s even more important for founders to work with investors who they look forward to seeing and hearing from than for investors to work with founders who fit this profile. The reason is that a founder has one business while an investor has many. If an investor doesn’t enjoy seeing and hearing from a founder, they can spend more time with other founders. If a founder doesn’t enjoy seeing and hearing from an investor, until they develop into a later stage company with a greater number of larger investors, they have to continue dealing with their current investor.