Monthly Archives: May 2017

Why I write in English

A reader of this blog recently asked me why I write in English rather than Turkish. Given that most of our investments are in Turkey, that’s a fair question.

There are three reasons for this.

The first pertains to the audience of this blog. Specifically, it’s read by both Turkish speakers and English speakers. However, while most of the native Turkish speakers also speak English, the reverse is not true. Most native English speakers don’t speak Turkish. As a result, writing in Turkish would mean not serving a big fraction of this blog’s current readers. That’s not something I want to do.

The second reason is the fact that the technologies produced by the tech sector serve multiple countries at once. This makes the tech industry global by nature. And this is why the industry operates primarily in English. If you want to be part of it, reading, writing, and speaking in English is an important asset. Hopefully this blog can serve as practice.

The third reason is personal. Since I think in English, I’m more comfortable expressing my thoughts in a structured way when writing in this language.

Thriving and surviving as a tribe

As individuals, we have the ability to develop a unique set of views on the world. We can believe in X about topic A, Y about topic B, and Z when it comes to topic C.

However, the problem with being an individual is that, while it gives you the freedom of belief, it limits what you can do. Doing most things requires coordinating with other people. This is why we form groups.

However, a group’s effective functioning benefits from its members holding similar beliefs. It’s more difficult for groups where the members of the group hold different beliefs to get something done than for groups where the members hold similar beliefs. As a result, some individual beliefs are sacrificed for the belief of the group. This transforms the group into a tribe.

The advantage of tribes is that they make it easier to get things done. Their disadvantage is that they do this by trading away individually held beliefs. In other words, they produce power at the expense of dissent.

In a romantic view of the world, we can each thrive as an individual. However, that’s not a steady state outcome. Due to the benefit of tribe formation on getting things done, individuals have an incentive to defect from their individuality to form tribes. And these tribes are more likely to thrive than non-defecting individuals.

In other words, game theory shows that you can’t thrive without being part of a tribe. In today’s world, you can fortunately survive. If you had lived sufficiently in the past, you wouldn’t have been able to even do that.

If this trend continues, maybe there will come a day when you can thrive as an individual.

Until then, if you want to get something done and thrive, you have to form or join a tribe.

When you do, it’s important to recognize the tradeoffs that everyone in your tribe is making in their individually held beliefs. This will help you balance the need for the similar beliefs which ensure that your tribe thrives in the short run with the need for the voicing of the different beliefs which ensure that your tribe addresses the blind spots it needs to address to survive in the long run.

Besiktas wins the Turkish soccer championship

As the beginning of the summer nears, several major sports seasons are coming to an end. Last week, I wrote about how Turkish basketball club Fenerbahce won Europe’s top basketball club competition, the Euroleague. This week I’m writing to congratulate Besiktas on winning Turkey’s soccer championship.

My dad is a Besiktas supporter. Supporting a club is one of those things that often gets passed down from father to son. However, I chose to support one of Besiktas’s rivals, Galatasaray, as a child. While this created some tension during games between Besiktas and Galatasaray when I was younger, it has since turned into effectively having two chances of being happy at the end of the season. We’re both happy whether Besiktas or Galatasaray wins.

I was on a late evening walk when Besiktas won the game that gave it this year’s championship yesterday evening. I could immediately tell by the supporters who took to the streets by foot and car, chanting Besiktas slogans and waving the club’s flags. I was happy for them, as I was for my father.

Besiktas played the best soccer in Turkey this year, so it was a season when the best team won. Congratulations Besiktas.

Parodying different roles in tech

I recently came across the following tweet from TechCrunch’s founder Michael Arrington.

It does a great job of parodying how developers, designers, project managers, quality assurance, and system administrators see themselves and one another.

I recommend taking the time to go through each entry in the matrix. The laughs make it well worth it.

Modanisa’s English ad

Modanisa is an online modest female fashion retailer where we’re investors.

The company recently aired its first online video ad in English which targets an international audience. With over 65% of Modanisa’s revenue coming from outside of Turkey, this ad firmly establishes Modanisa’s position as an international e-commerce company.

Here’s the full ad.

Investor referrals

This post is going to be short and sweet.

Entrepreneurs who we decide not to back often request that I introduce them to other investors who may be interested in their business. Sometimes this request comes after a single email exchange, and sometimes after a series of face-to-face meetings after which we decide to not invest in the company.

Independent of the extent to which we engaged with the entrepreneur in the past, I don’t think it’s right for me to refer a company that we’ve decided not to invest in to another investor. The first question I have for such inbound opportunities that I receive from other investors is whether the referring investor is investing in the company, and if they aren’t that creates a big question mark in my mind. If you’re not investing, then why should I? So I don’t take an action which I would question if I were on the receiving end of the same action.

It’s important to point out that this analysis is valid for referral requests from investors. An investor’s job is to invest in companies so an investor should be investing in the company themselves for their referral to be taken seriously. If the referral is being made by someone who’s not an investor, the referral can be taken seriously even in the absence of the referrer’s commitment to invest. In this case what matters is the referrer’s credibility based on other signals rather than whether they’re personally investing in the company.

I think that my approach is also beneficial for entrepreneurs. Although it creates a short-term challenge in that you need to find someone else to make the referral, the referral is that much stronger when you do find an investor who is also investing in the same round, or a credible non-investor, to make it.

Asking the right questions

In school we’re taught to provide the right answers to given questions. We’re instructed to assume that the questions we’re asked are the right ones. As a result, school doesn’t provide us sufficient training in the skill of asking the right questions.

However, much of our happiness and success later in life comes from asking the right questions. Some of these right questions are universal for a given domain and some vary from individual to individual.

For example, in the field of happiness, I used to think that the right question is “what makes you happy?” I then discovered that, at least for me, the right question is “what’s meaningful without taking away too much of your happiness?”

In the field of success, asking yourself “how can I best apply my skills in the context of market realities to produce something that others want?” is a better question than asking “what am I passionate about?”

In the context of venture capital investments, the right question is not “is this a good idea?” but “what will this team do with this idea?”

In the context of building startups, the right question is not “how much money do we need?” but “what do we want to achieve before hitting profitability or raising more money, and how much money will it take to get there?”

You can make substantial progress in asking the right questions by consciously reminding yourself to do so. However, sometimes the only way to get there is to first ask the wrong question, arrive at the right answer but for the wrong question, and then learn from your experiences.

Updating investment terms from offer to closing

If you’re a fast growing startup, there can be a considerable difference between your KPI’s and financials at the time when you receive an investment offer and when the investment is completed. I’ve seen companies grow their gross profit by as much as 1.5X from the time of receiving an offer until the time the round is completed. The longer this time period, the larger this change in performance is likely to be.

However, the increase (or decrease) in a company’s performance during this time period rarely produces a corresponding change in investment terms. The terms agreed upon at the time of the offer remain the terms at which the investment is completed. For a fast growing startup, this can mean leaving considerable money on the table.

The solution is to, at the outset of your investment talks, set the terms of the investment to be contingent on the company’s performance in the time period immediately prior to the closing. For example, if a company’s valuation at the time of the offer is based on a combination of a gross profit multiple and an annual growth rate, the valuation at the time of the closing would be updated to reflect the company’s most recent gross profit and annual growth rate.

Whether investors accept this approach depends on the specific investor and the specific company. If you’re a fast growing company with interest from multiple investors, you’re likely to be able to negotiate this approach with most of them.

Fenerbahce wins the Euroleague

Turkish basketball club Fenerbahce won Europe’s top basketball club competition, the Euroleague, yesterday evening by beating Olympiakos of Greece convincingly, 80 to 64.

Fenerbahce was fortunate that this year’s final four and hence final took place in Istanbul, Turkey. The location of the final four and hence final is determined at the beginning of the season and a finalist team from the country where the final is played ends up enjoying the overwhelming support of the local crowd. This was certainly the case for Fenerbahce yesterday night.

But while the crowd contributed to the large 16 point victory, Fenerbahce would have likely won wherever the game was played. They simply outplayed their opponents from start to finish.

I congratulate the Fenerbahce players, club, and fans on their excellent season long performance and well deserved victory.