Great, fun video from the team at Foundry Group.
All of this attention is obviously triggered by the tremendous year Turkish internet industry has had. We have enjoyed a landmark period where we've seen two large exits in the $200m range to global strategic buyrs (GittiGidiyor-eBay and Markafoni-Naspers), and numerous investment rounds from top VCs like Tiger Global, Kleiner Perkins, Intel Capital, ePlanet, Earlybird and Hummingbird.
The interest is certainly not limited to the names mentioned above. I have probably had more conversations with global VCs about Turkey in the last 6 months than the last 6 years combined.
Sina does a good job going through some of the reasons why Turkey is so hot. He focuses on:
I fully agree with all of Sina's points, and I won't spend more time on these. Turkey's getting all kinds of investor attention in every asset class and I think the country's merits on the macro level are evident to most.
However, I do want to point out some additional key actors who have contributed to the growth of the internet sector in Turkey.
First is talent. There is an increasing number of young, smart, well-educated entrepreneurs launching technology ventures in Turkey. For the best and the brightest,with plenty options in traditional careers, launching or joining a startup is much more of a viable career path today. SocialWire (aka Iletken), Peak Games, Gezlong, and KonutKredisi.com.tr are a few examples that quickly come to mind.
Second is the growing diaspora of Turkish entrepreneurs, investors and professionals around the world, interested in and supporting the Turkish internet sector. They understand the dynamics and the promise of theTurkish market and their influence, experiences and conections have been helpful to many Turkish ventures.
Third is the Turkish interent user. When you observe the meteoric growth of Turkish ventures like Grupanya, Markafoni, Trendyol, YemekSepeti and Nokta, you realize that the Turkish internet user is hungry for high-quality offerings, both in media and services. If a venture is able to offer first rate service, the uptake is extremely fast. Sometimes the recipients of this attention are global players, but local ventures almost always get a first shot at attention.
I continue to believe we are in the early chapters of the Turkish internet story. I look forward to helping build the next generation of Turkish internet winners.
UPDATE: With this post, I realized I'd missed Ari's post on the same topic last week.
Pictures of 2008 are flashing back in my mind. I spent the bulk of 2008 to execute a fairly hairy deal in an effort to raise $50m to invest in my vision of Turkish internet back then. Had it not fallen apart at the nth hour in December 2008, it now looks like it would have created monumental returns.
So forgive me if I get a bit upset when the headlines are screaming apocalypse again. I get upset because barely 2 years after the apocalypse cries, and RIP: Good Times memos, we were watching our trading screens looking at LNKD's $10b market cap and 2,400 PE ratio. And then, apocalypse again.
If I have learned anything in the last two years it's that it is mostly noise. As humans, we are in constant need of narrating the world around us. The explosive growth of media and the proliferation of channels that deliver us that narrative has exponentially grown the amount of noise.
To an entrepreneur, the noise can be paralyzing. Best entrepreneurs I know have taught themselves to tune it out, except maybe a few trusted sources to keep an eye on macro factors, while maintaining an intense focus on the work at hand: the KPIs, strategic imperatives and the general landscape in which their venture operates.
I just thought it may be the right time to remind my readers (myself?) of this.
Angel investor Naval Ravikant has a good post on the Venture Hacks blog, focusing on the potential conflicts of interest when an entrepreneur is engaged with an investor. This is an issue that comes up frequently in my experience, so I think it would be useful to note here.
Naval's post lays out a good framework to think of the issue, and he sums it up by what I think is the key take-away:
Consequently, the best entrepreneurs display a lot of chutzpah. They aren’t fazed by the competition, nor do they see shadows in every corner. They are their own biggest competition.
I could not agree more.
PS. The title of this post is a quote I hear attributed to John Doerr. I always read it as "where there's no conflict, there's not interest". I am not sure that it makes sense to me but I figured it makes a catchy post title.
However, this piece of news that crossed my screen today (via webrazzi) tipped me over to break the silence:
The Turkish broadband market has reached almost 7.5m subscribers in 1Q2010 and has grown at an amazing 21% rate YoY. (Source: BTK)
I don't have the time to look it up, but this must be the fastest growth in Europe. It certainly is the most encouraging news relating to my investment thesis on Turkish internet, since the comScore online engagement news about a year ago.
I am reading Jeff Bussgang's book and came across a great quote. If you are an entrepreneur talking to a bunch of VCs and trying to make sense of the process, or trying to decide if you can be partners with that guy across the table from you, I don't think you can go wrong this line of thinking from Twitter's Jack Dorsey:
Is this guy fun to work with? Is he going to challenge us? Is he smart? This person was going to take a seat on the board. I viewed it as a hire that we could never fire.
Clay Shirky does not write very frequently, but when he does, it's often worth paying attention to. His latest post is no exception.
Sriky is pointing out the changes in the media business and the inability of old media to comprehend them. He summarizes his point in a fun way:
To pick a couple of examples more or less at random, last year Barry Diller of IAC said, of content available on the web, “It is not free, and is not going to be,” Steve Brill of Journalism Online said that users “just need to get back into the habit of doing so [paying for content] online”, and Rupert Murdoch of News Corp said “Web users will have to pay for what they watch and use.”
Diller, Brill, and Murdoch seem be stating a simple fact—we will have to pay them—but this fact is not in fact a fact. Instead, it is a choice, one its proponents often decline to spell out in full, because, spelled out in full, it would read something like this:
“Web users will have to pay for what they watch and use, or else we will have to stop making content in the costly and complex way we have grown accustomed to making it. And we don’t know how to do that.”
What Clay Shirky is identifying for the media industry, can be attributed to the Turkish business environment in the broadest sense. It even includes businesses who were born to the connected economy.
My investments are built on one simple thesis: That Turkey has lagged comparable markets in the transition of economic activity to the connected platforms. I think there's enormous profit potential in this situation, if the right exposure is attained. And part of it comes from the behavior of incumbents in the Turkish economy. I will be thinking more about specific examples and try to document them in this blog.
I have made investments both as a VC and as an angel investor. The distinction for me is whose money I am investing. If it's my own, usually in smaller amounts, I view it as an angel investment, even if it is a part of a round with institutional investors.
It is quite frequent that I find myself in an investment conversation that does not fit the investment vehicle I am representing at that point. This usually happens in early rounds where the amount of capital required is too small for a VC, or the terms offered are not strong enough. In these cases, I can think about an angel investment, but in my scope of activities, this can sometimes pose problems. The primary issue it brings up is whether it hurts the alignment with my investors. I try to avoid situations where it can lead to a "front-running my investors" scenario. So far, I have been successful at that.
So the ideal solution is forming a structure where a VC can participate in these types of angel rounds. Ben Horowitz has a great post on the issue and I don't need to spell out the points he already makes. I basically agree 100%.
I also think it's a great idea to utilize the Series Seed type documents in these types of deals. My latest angel investment, CivicSolar, used this set of documents which made the process considerable faster, and I presume, less expensive for CivicSolar.
My friend Auren has a good post on a very important responsibility for entrepreneurs: the expedient killing of stuff that is not bringing value. He summarizes the issue:
Being able to kill things early is essential to the long-term growth and success of any company. But recognizing that you should be searching for things to kill is the first step to building a better company.
As your company grows, you’ll have more things – both big and small – that either weigh down growth or are not core to long-term success. The companies that work proactively to get rid of these issues and devote resources to the areas that matter are the ones that will be able to remain nimble, innovative, and win.
This is also interesting to me as a VC. Usually, we are not in a position to make the killing decisions at our portfolio companies. So, our job is to prod our entrepreneur partners in their constant pruning of their organizations, and provide the necessary encouragement for them to take action.