SortiPreneur

Browser Glue

I am very interested in the smarter browser.  I am still very excited about Chrome despite its somewhat slow launch.  It may not be the killer app in this game but it's a step in the right direction.

One recent development in this area is Adaptive Blue's Glue browser extension.  I don't think there's enough context in Glue yet.  It reminded me of MyBlogRoll.  Even now that it's quite liquid, it fails to delivered promised value to the user.

The context is critical.  The second most natural company in the world to begin working on the browser is Facebook. (The first was Google.)  I also think there's quite an opportunity for Grou.ps here. Because, a group itself provides plenty of context.  The trick there is for the user to be able to separate his activities in multiple groups.

Another opportunity exists for regional markets.  If you built a browser that abstracted and made sense of Yandex, Vcontacte.ru and Mail.ru, it would be quite relevant for Russians.

How about Turkey?

Keep watching the browser.

Compensation

Roger Ehrenberg has a good post on the comp plans at the top of bailed-out banks. He takes Lehman's Fuld as an example:

For instance, consider a guy like Dick Fuld. In my scheme Dick would have been holding a portfolio of these 10 year maturity/5 year cliff-vesting options, meaning that he has 5 years of stock compensation cumulatively tied up in the company at all times. Now consider if this total compensation was weighted, say, 80-90% in these options, such that he got enough cash to live very, very well, but that almost all of his net worth was tied up in the stock. Tied up for 5 years. All the time. It is very hard to keep a fraud going for 5 years, to fool the market for 5 years. So Dick, in my example, would have lost almost everything when Lehman went down. Which is as it should be. Highly compensated traders should be paid the same way, specifically to avoid the kind of "swing for the fences" attitudes that permeated Wall Street and amplified risk to reckless levels. All in the name of current year compensation. This has been and will continue to be a recipe for disaster unless a wholesale revamping of executive and highly-compensated employee compensation is undertaken.

I agree with Roger for the most part.  However, at the end of the day, this is a supply and demand driven negotiation, where outsiders trying to regulate (i.e. mandate that banks structure pay packages a certain way) would be a disaster.  Typically, you have a board trying to hire the right CEO who will try maximize shareholder value.

Now imagine you're on the board of a bank with a $5b market cap.  You have two candidates you're considering for the CEO job and you feel one is a better fit.  You have to determine what it will take to bring on the two candidates and make a cost/potential benefit decision.  The total package cost you end up negotiating with both end up at similar ranges, but the candidate that seems like the better fit will not accept your fully-aligned comp plan (such as the one Roger proposes).  What do you do?

Given the potential impact of the right person on the market cap of the company (in this case, a 10% difference in performance would result in PV $500m of shareholder value), I think it would be short-sighted to force the fully-aligned package.  I would imagine many people had frowned on Jack Welch's package when he took the helm at GE, and there would have been plenty of similarly qualified managers who would have taken the role at a lower cost, but at the en d of the day Welch's enormous package looks like a rounding error in the shareholder value created at GE over his tenure.

I don't mean I am happy with the money made by the management at failed banks.  It's just that compensation is a complicated issue and free markets are a bitch. :)

Turkish Online Advertising

My expectations of the Turkish online advertising market have been pretty cautious.  My approach was that with the adjustment in the USD-TRY exchange rates, we may have a fairly flat 2009 on dollar basis.

Then, yesterday, after yet another panel I participated in on the Turkish VC sector, I had a very brief conversation with a friend who runs a successful interactive agency.  He quickly shared that:

• One client of his, a major FMCG company, is dramatically increasing its online spend for 2009
• Another FMCG co, with relatively minor online ad presence is starting to explore more aggressively

He said he may blog about these, in which case he may disclose who the companies are.  If he does, I'll update this post.

Music to my ears...

With Friends Like This...

"We advise against shopping on the internet due to recently increasing fraud cases.  It should not be forgotten that sharing credit card information online can result in serious consequences."

Aydın Agaoglu, President of Turkish Consumers Union (Tuketiciler Birligi)

The above quote was in the Turkish press last week (thanks, Caglar).  I wondered who these jokers were and browsed their website, Tuketiciler.org.  Not surprisingly, the site is not much more than fear mongering and calls for vairous boycotts. 

I invite the Turkish media to be a bit mroe selective in responding to PR requests.

Euro VC

I participated in two separate VC events last week.  One was a private conference organized by Brains to Ventures, and the other was the Venture Capital Forum organized by EVCA (European Venture Capital Association).  At both events, I was a panelist discussing the VC environment in Turkey.

The B-to-V event was a private event so I can not go into detail on the topic specifics. One could definitely sense the tense mood created by the stressful few weeks in the financial markets, and the recession the global economy is experiencing, yet the conversation was focused on investment opportunities and the upside.

At the EVCA VC Forum, the mood was much more gloomy.  First, I was surprised by how different European and US VC communities are.  In Europe, most VCs come from private equity, banking or accouting backgrounds, whereas in the US, you meet many former entrepreneurs.  The European VC mindset seems focused on down-side protection rather than building great businesses.  Of course I realize I am generalizing and there are some who fall outside of this stereotype, in general, European VC industry appears as if the professionals were primarily picked by prioritizing "those we can trust with our money".

Moving to Shorter and More Frequent Posts

The way I spend my day has changed quite a bit over the last year, since I have joined the iLab Ventures full-time.  I am now a part of a normal office set-up, with a minimum half-hour commute each way.  One of the consequences has been the decrease in my blogging activity.

I first started blogging, back in 2005, treating it as a personal journal.  My main objective was tracking my interest and thoughts in technology and the internet business.  I was also heavily inspired by the prolific Fred Wilson, who turns out well-written and thoughtful posts.  With time, I started spending more time on each post.

I am now switching back to a shorter form of blogging.  My friend Scott Heiferman does this very effectively and I doubt my posts will be as concise as his.  But I have decided that I am tired of postponing (and usually never getting to) posting because I don't have enough time for it.  I'll try shorter posting for a while to see how it works out.

Supporting Small Business

Daniel Hamermesh discusses two issues in his recent blog post:

1. Incentives for businesses to shut down quickly
2. Subsidies for small businesses

I am a fan of rapid plug pulling in businesses (internet businesses, to be precise).  I think the opportunity costs of a slow death are high.  So the example Hamermesh points to in the case of Germany, makes sense to me (again, in internet ventures, not necessarily in restaurants or other lifestyle businesses, about which I am quite ignorant).

However, on the subsidies of small businesses issue, I disagree with him, when he says:

I have grave doubts about this policy and about subsidizing small businesses generally: if there are scale economies naturally, why should the government try to offset them? And it’s hard to imagine that there are too few new small businesses — or that people are so unwilling to take risks that the government should offer subsidies.

I see no good economic rationale for these policies, but they are widespread in Germany — and in the U.S. too.

I think small businesses are very efficient utilizers of resources.  Yes, there are economies of scale in business, but innovation is rarely a product of this phenomenon.  It may be true that the market should adjust and there should not be a need for intervention, but since the government ultimately benefits from innovation (through economic growth), the intervention may be a natural market move rather than an artificial one.

Let's take the tax deduction you can take in the US for equity investments in small businesses as an example.  It makes angel investment more attractive, which in turn, produces a group of companies ready for venture capital, one of the great levers of technology innovation.  I am not sure if similar programs exist elsewhere (they don't in Turkey), but I suspect they are an important factor in the success of angel investing in the US.