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.

Also published on Medium.