27 November, 2011



Mike Cassidy: How to build a $500M company in 500 days

Posted: 26 Nov 2011 02:30 PM PST

Mike Cassidy 500 millionNo one embodies the classic, sniff-it-out serial entrepreneur more than Mike Cassidy, who has now built and sold four companies (Stylus Innovation, Direct Hit, Xfire and Ruba), some of them with very impressive exits.

Last week, Cassidy traveled to Turkey for a start-up event, and he talked about how he does it. Below right is one of the slides he showed to the audience of about 200 entrepreneurs and investors. It documents the milestones he hit while building DirectHit, which he sold 500 days after he started it, for $532 million to AskJeeves.

How to build a $500M companyMIke Cassidy's slide on Direct Hit milestones, on way to $500M exit

I've been soaking up the lore of Silicon Valley for the past ten years, but something about Cassidy's talk still grabbed me: With infectious energy, Cassidy take the classic tenets of entrepreneurship and douses steroids on them. For the uninitiated, Cassidy’s recommendations look a tad perverse, but the results, like former SF Giants' Barry Bonds' home-runs, are effective.  To be sure, Cassidy’s is not the recipe used by folks like Mark Zuckerberg, Jeff Bezos, Larry Ellison and Bill Gates, who think especially long-term while building their companies. It’s the recipe for the extremely quick exit. It’s the second of two dominant strands in company-building.

So let’s turn to Cassidy’s philosophies, which he encouraged the Turkish audience — largely a group of early entrepreneurs — to try to emulate if they want to succeed.

  • Raise funds in a single day: Most outrageously, for the inexperienced Turkish audience, Cassidy said it is important to try to raise funds in a single day. He wasn't joking. To create a sense of urgency, you should ask the investors you're talking with to make sure they have all the decision-makers in their fund present during your pitch. You round up all meetings with investors in a single day (Cassidy calls this "sychronized timing”) and give them a deadline by 5pm to give you a termsheet. He backed up his point, and he does with his other points, with examples from the companies he's launched. He's gotten a termsheet on the same day he presented to VCs in seven of the eight times he's raised a round.
  • Idea in two weeks: Entrepreneurs should limit themselves to two weeks to formulate their business idea, he said. Anything longer, and the entrepreneurs risk talking themsleves out of it. Better to launch quick, and to iterate, than take too long perfecting something that will bomb later because it hasn't been tested.
  • Team in two weeks: Entrepreneurs should take only two weeks to put their core team together, another provocative prescription, considering it can take some entrepreneurs months to make core hires. Cassidy wasn't apologetic. The excitement and urgency you create by offering someone a job on the same day that you meet them, and forcing them to give you an answer by 9am the following day, leads to significant momentum for the company, he said. And if they don't work out? Well, you can fire them just as quickly. Cassidy talked about some of his tricks: He invites candidates over to dinner at his home — the same night as the interview — with himself and his wife. And once the candidate has accepted, Cassidy makes sure they get all the HR paperwork and agreed-to task-list signed before they even start. That way, they hit the ground running. This contributes to warp speed.
  • 3.5 months to launch: Once you've settled on your idea, it shouldn't take any longer than 3.5 months to launch your product. By launching your product, and iterating on a quick schedule of every couple weeks, you're more likely to surge ahead of slower competitors and bigger companies.
  • Deal with hard deadlines. On deal-making, Cassidy's recipe for success is to drive partners to decisions by pointing a virtual gun at their head. Either they sign a deal by a hard deadline, or he walks. This also helps drive things quickly. A deal's chances of closing declines by 10 percent every day it doesn't close, according to Cassidy’s rule of thumb. So he may be bluffing a partner when he provides a deadline, but it's worth the risk, he says. If a partner is unwilling to sign a deal by an appointed deadline, the chances of it closing are declining anyway. And it's good if you can use these deals to drive funding decisions too. Cassidy's second company, Direct Hit, once found a way to accelerate a search results by rendering a URL 50 milliseconds faster than competing search enginse. By convincing a major search engine to sign an binding agreement to use the technology — before the deal was full approved by lawyers — Cassidy was able to present  the agreement to investors. This convinced the investors that Direct Hit was worth investing in, and at a higher valuation.
  • Raise smaller rounds. Cassidy recommends raising smaller amounts of VC funding, because they can propel you quickly to the next step in your business, with minimal dilution. You can raise money later at higher multiples. The results speak for themselves: He sold Stylus Innovation for $13 million after he and his founders put a total of $1,500 into the company to start with — a near 10,000 times return, he notes. With Direct Hit, he took about $1.3M in funding in his first round, and produced $532M the eventual exit in a year and a half to AskJeeves. With Xfire, he raised $1M, and sold it to MTV/Viacom for $110 within two years. With Ruba, he raised a first round, and Google bought the company within two years after he launched it, but he isn't saying for how much.

To be sure, his Turkish audience was left scratching their heads.

Cassidy’s slide presentation below.

(See my related story about the emergence of Turkey as an e-commerce hotbed.)

Filed under: VentureBeat

This posting includes an audio/video/photo media file: Download Now

20 Turkish startups — hot and heavy on e-commerce, but light on marketing

Posted: 26 Nov 2011 01:03 PM PST

Here are the startups that presented at the big Turkey start-up-investor event 4ki Istanbul last week.

I saw some great technology, but one consistent weakness was on the marketing side. Many Turkish entrepreneurs are so focused on building their product (a good thing!) that they often give short shrift to how they present or market themselves. Many of them are still in incubation phase, so we got merely sneak peeks at what they’re doing.

One thing is for sure: It’s a great time to be launching an e-commerce startup in Turkey (see my accompanying piece).

I also met with at least ten other start-ups while I was in Istanbul, outside of the 4iX event. My hope is to invite at least three companies overall to launch their products at Demo, our big global launchpad event in April). Thanks to BootCamp Ventures, which helped organize the event, and paid my way to go there.

Following are the four most interesting companies I saw of the 20 that pitched officially at the event.

Emlakjet — A marketplace for real estate buying and selling. Remarkably, there is no dominant Turkish company doing this, in another sign of how nascent the Turkish market is. Founder Emrah Yuce comes across as savvy. The site is producing articles about real estate too, to help drive SEO.

Efiyat — This company provides sales leads for ecommerce sites and helps consumers shop by giving them better information. It offers price recommendations for consumers for just about any product they want. We’ve seen a lot of such companies in the U.S., and there are three players bigger than Efiyat in Turkey already doing this. But Efiyat’s focus on creating a massive database, comprehensive product reviews, videos, rating schemes, along with web spidering technology, seems convincing.

Istanbul R&D — This company has a pretty amazing claim to have devised a new kind of wind power technology.  The company has designed an early prototype that uses huge sails, instead of the massive propellers you find on conventional wind turbines. The entrepreneur, Fatih Yildiz, said it promised to be cheaper and more efficient, and could store more energy, than conventional turbines. The entrepreneur seemed vague under questioning about the technology, so while intriguing, investors will have to go a lot deeper before giving him the $100 million or so he says he needs to bring this to global scale. The company says it can generate power from wind speeds under 3 m/s, and can reserve energy in a way that offers uninterrupted power production for several days. (More here and here).

Hazelcast — This company presented convincing evidence that it has built some cool database memory technology that can serve gaming, finance and other large-data consuming companies. The companies need to perform superfast queries (often on terabytes of data), and Hazel cast makes it easier for them to do that. It uses a NoSql, clustered, distributed cache technology, and boasts several major customers after 18 months of development, including Mozilla. It competes against Oracle, IBM, Terracotta, Infinispan and Gigaspaces, among others. It’s pushing an open source model, and wants to sell security and elastic memory services to enterprise customers to make money.

Here are the rest of the companies that pitched. Many of them are also promising, but need more baking.

Armador has a cool app depicting the tourists sites of Turkey, including the country’s lovely mosques. The company says it is the only deal provider operating in the tourism vertical. Turkey is more significant as a tourist destination than I realized: 7th most popular in the world, and 9th in terms of revenue. The app, called “Mytourkey,” is for all local and international tourists of Turkey. It plans to have a field presence at all major tourist attractions, due to its partnership with city administrators. I really liked the rich visuals of the company’s applications (I saw the beta versions, it’s on the iPhone, but not yet released on Android) as I visited the Hagia Sofia mosque area in downtown Istabul.

Bilgi Kurdu has created a messaging platform, called "Informmatic" for large organizations such as banks, retailers, holdings, enterprises doing both B2B & B2C businesses. It allows sending instant information to employees & customers independent of email or instant messaging. Using Informmatic, companies save time by sending the right information to the right target audience at real or scheduled times. They also share, within the message, streaming videos, music, images, text files like word, excel or pdf, animations, as well as applications like e-surveys.

Ceviriofisi (means "Translation Office" in Turkish), and says it provides a high-quality, fast, 24/7 professional translation service using a powerful instant pricing engine along with the easiest checkout procedure within a competitive pricing scheme.

Gomob  says it is Turkey's first mobile location based deals and advertisement platform. Gomob will reach SMEs via partner distribution
channel network.

Gruppal.com aims to become a leading daily deal site in Turkey. It publishes the best daily deals on different categories from various cities in Turkey. It focused on local business owners, to give them an easy and cost-effective marketing tool to attract new and loyal customers. More than 48,000 deals have been sold since Gruppal was founded, and the company says members have saved $4.5M. After just a few months, and no backing, the company said it is making $140,000 a month, with 20 percent margins. This is great, but the company wasn’t clear how it plans to offer long-term value, or how it is different from the other deal sites already larger than it is (see my note about how Turkey is very bubbly).

InfoDif — InfoDif aims to provide image processing services to companies who have expertise in their respective fields but require image processing/video analysis capabilities. The company develops software frameworks rather than end-products. InfoDif targets software development companies and system integrators who do not possess image processing capabilities.

Inomera offers a cloud based self-service platform for creating and deploying mobile and web 2.0 services. The PaaS platform provides services and tools for developing, deplyong, and monetizing content and social media.

Mappiness — Mappiness enables users to score their happiness on a 1 to 10 scale. Users relate their own happiness to fiends, places, products, services, events, etc. Data is analyzed to enable users to understand their own happiness trends and triggers. Moreover, users can track friends’ happiness and compare it with world trends. Mappiness aims to become the largest active-users community, measuring global happiness in real-time. Mappiness says it “will have the most reliable answer to a large number of profitable questions.”

Mobilhediyem — MobilHediyem is an instant gifting service for consumers and corporations that delivers physical gifts (such as pizza) in
real time without needing a delivery address using text messages. provides a service to both senders and merchant. Sender pays a service fee and merchant pays a sales commission. Orders paid for and not delivered provide additional revenues. MobilHediyem handles payment
processing for credit cards and mobile payments.

Montagraph is a free online platform created to allow users to share photographs, photo effects and montages. With the company’s proprietary image editing tools, users can create and share photo templates online. Special features include face recognition capabilities, drag and drop, animation, geolocation-aware technology to make photo effects easiers and user-friendly for the masses.

ThirdCultured is an online platform that aims to connect individuals who were raised with exposure to multiple cultures and therefore identify with more than one nationality. The company aims to become the leading social network aimed at a specific vertical market defined by multicultural customers.

Tish-o lets users put photos, symbols or text on products such as t-shirts, mug, hoodies, clocks and pillows. All products are produced in Istanbul. Tish-o's services increase attractiveness of specific products by introducing customization, thereby enhancing the products' value to customers and capitalizing on sentimental consumption. The company will seek to increase the breadth of products offered in the coming quarters.

Tum Firsatlar aggregates daily deals to display the best offers in one location. Tum Firsatlar aims to help users save money and time, and generates actionable leads to partnered companies at no direct cost. The focus is on user experience, rather than deal acquisition, enabling cash efficiency and allowing the company to provide a highly reviewed platform that will further our market advantage.

Wedecide helps organizations crowdsource ideas using a virtual idea stock market game. Employees, customers and other stakeholders contribute and collaborate to develop products, processes, strategy, improve customer service, and make decisions via a social online idea market game.

Wissdom — Wissdom is a social platform where people with the same or similar issues meet to communicate and share their experiences anonymously. Wissdom.com aims to become the first place you think to go when you face a personal issue.

Wudya produces high-quality, Turkish themed social games. Wudya aims to be one of top three social game developers in Europe by 2014 by understanding what excites game players and creating games that meet those needs.

[Photocredit: Flickr, Kivanc Nis]

Filed under: deals, VentureBeat

This posting includes an audio/video/photo media file: Download Now

Why Turkey is the next raging e-commerce hotspot

Posted: 26 Nov 2011 12:29 PM PST

Turkey investmentLast week, I visited Turkey, and discovered what a lot of people are saying about this fascinating country: It's the next developing hotspot for technology startups, especially for e-commerce.

The sector is exploding: The Turkish e-commerce market hit $10.6 billion in the first six months of the year, compared to $16.3 billion for all of 2010.

And after years of neglecting Turkey, U.S and other investors are now starting to flock there. Investment capital isn’t gushing full-bore yet, as investors assess this still-emerging market. But 2011 is the year when the spigot was first turned on.

Until this year, Turkey looked like a backwater. Silicon Valley regularly sees private companies valued in the hundreds of millions — even billions — of dollars by venture capitalists who invest in them. But in Turkey, no private company had been valued as high as even $100M, according to Sina Afra, co-founder of one of the largest e-commerce companies in Turkey, Markafoni, and a seed-round investor.

Turkey tech investmentBut in 2011, that all changed: First, eBay acquired 93 percent of Turkey's largest auction site, GittiGidiyor — in a deal rumored to value the company at $215 million. Then Russian media conglomerate Naspers acquired 70 percent of Markafoni, one of Turkey's largest private shopping companies, in a deal valuing Markafoni at about $200 million, a value confirmed by my sources. Markafoni is also owner of Zizigo, the largest online shoe retailer in Turkey (yes, an a self-acknowledged copycat of the U.S. shoe retailer, Zappos).

The list of “firsts” this year continues: Kleiner Perkins, one of Silicon Valley's preeminent VC firms, made its first deal in Turkey, pumping $26 million into Trendyol, a large private shopping site. Tiger Global joined Kleiner in that investment. Intel, the chip giant, also made its first Turkey investments this year, initially backing a leading online media company Nokta, then a week later, a group shopping site Grupanya. Finally, hot social gaming site Peak Games, attracted $11.5 million from EarlyBird Venture Capital, Hummingbird Ventures and an unnamed investor. (Here’s an outdated list of Turkish start-up investments so far.)

Naturally, there’s great excitement here, and it was palpable at a the 4iX Istanbul investors conference I attended in Istanbul last week. The event's producers, BootCamp Ventures, said it was the largest entrepreneur-investor gathering so far. It attracted investors from a dozen countries. In e-commerce, it feels a little frothy, even. By one count, there are 200 daily deal sites in Turkey — far more than in even bigger European countries.

turkey e-commerceTop 20 Turkish e-commerce companies. Average growth since Oct 2010 was 60%. Source: Comscore

Why is this all coming together now? Well, it helps that Turkey has got its act together at a time when everyone else seems to be fumbling. Turkey is on pace to grow faster than 6 percent this year. It’s gotten its relatively high rate of inflation under more control, and its debt is low. It still has more work to do (mainly on the political and social fronts, and it has some weird censorship policies), but it remains relatively unscathed by the mess going on in the EU to its west — and the main progress indicators point upward (see our recent piece about Turkey’s restructuring and mobile boom).

The prime minister Tayyip Erdogan’s swagger, underscored by his assertiveness abroad, has boosted national pride too, even as he has concerned liberals suspicious of his pro-religious agenda.

Specifically, though, Turkey has got great fundamentals for Web start-ups. Turkey has got one of the youngest, most dynamic populations in Europe. Some 35 million people are Internet users — 12th in the world, and fifth largest in Europe, after Germany, UK, Russia and France. The median age is 28. Turks spend more time online than the average European. And they’re more interactive when they do get online: They're the fourth most active in the world on Facebook, up from fifth a few months ago.  They’re the eighth most active on Twitter.

Markafoni’s Afra points to two fundamental drivers of the country’s e-commerce boom:

1) One prerequisite of e-commerce is a credit-driven economy, and Turkey has this big-time.

Turkey has an astonishing 62 percent credit-card penetration rate among consumers. My trip was limited to Istanbul, which is a relatively modern city as far as Turkey cities go, to be sure. But almost anywhere I went, even the smallest shop-owners accepted credit cards. In the free-wheeling Grand Bazaar, I bought a pair of jeans from a small vendor, and he took my card gladly, as did a small shop where I bought a ceramic bowl. Even a small, dilapidated snack stand, where I bought a bottle of water near my hotel, welcomed credit cards — and they did so without the wince that you often get from small U.S. business owners when you pull out a credit card. Turkey's credit penetration rate is second only in Europe to the UK. But I've got the feeling Turkey might overtake the UK soon. Businesses seem more eager to take cards than in the UK. I say this more anecdotally, to be sure, but it hit me when two relatively established grocery merchants in respectable north London declined to take my credit card (one of them did accept a debit payment) last week.

2) Another e-commerce prerequisite is logistics: And here, too, Turkey has a grouping of shipping firms that can deliver products anywhere in a radius of more than 350 miles around Istanbul within 24 hours.

Markafoni’s Afra credits this factor for of his company's own success in penetrating countries outside of Turkey.

The Turks have one major weakness when it comes to e-commerce, and that's marketing, Afra told me in an interview. While Americans have experimented with behavioral targeting for at least five years, Turkey has barely started. Still, this void represents a great opportunity for investment, Afra said.

And Turkey domestic market size is limited, and so startups need to be clever about their expansion plans — a drawback suffered by other European countries. Startups can use Turkey to test out their products and services, but the tendency is for entrepreneurs to rely on that home market, and not think big enough, several investors told me. Companies that do go global often take the route first through Eastern Europe, Russia and even Asia before going after the U.S. — a uniquely Turkish recipe, Mae Ozkan, an investor in the seed fund Golden Horn Ventures, tells me.

Ozkan, one of the earliest seed investors in Turkey, said Turkey needs to build a vibrant ecosystem of managers, repeat entrepreneurs and other professionals before start-ups can be truly competitive with U.S-based startups, and she's been working hard to foster that. Her work has apparently started to pay off. Other seed investors are starting to pile in: Murat Aktihanoglu, a Turkish investor now based in New York, said he refused to invest in Turkey three years ago because there was "too much country risk." But now, he told the audience last week, he's back and snooping around, and other U.S. investors are asking him for tips.

[Update: Just posted about 20 more Turkish start-ups.]

Image credits: Top: Kivanc Nis/Flickr, lower right: Trendyol.

Filed under: VentureBeat

This posting includes an audio/video/photo media file: Download Now

AT&T willing to divest more of T-Mobile’s assets to ensure merger

Posted: 26 Nov 2011 10:05 AM PST

att deathstar

Telcom AT&T may divest a significantly larger portion of assets to ensure that the company’s merger with T-Mobile is completed, according to a Bloomberg report that cites unnamed people familiar with the matter.

AT&T and Deutsche Telekom first announced plans for AT&T to acquire T-Mobile USA for $39 billion in March 2011. T-Mobile, which is the fourth largest wireless carrier, has struggled to compete against Verizon, AT&T and Sprint. So, selling to a competitor for a large sum is an attractive option, while AT&T is interested in swallowing up T-Mobile to improve its wireless network infrastructure.

It’s unknown exactly what AT&T is willing to sell off to ensure the merger still happens, but it could be as much as 40 percent of T-Mobile USA’s assets, according to Bloomberg’s report. It’s thought that a divestiture of this size could change the minds of the Department of Justice. Since lack of competition in the wireless carrier market is a main concern of regulators, I’m not really sure how effective AT&T will be.

The merger has faced plenty of criticism, which led the companies to withdraw their application for the sale from the Federal Communications Commission on Thursday. In September, Attorney Generals from seven U.S. states joined the DOJ in filing a federal lawsuit against the merger. More recently, the FCC announced that it's seeking a hearing on the merger before giving it approval. The deal also faces a lawsuit by third-largest wireless carrier Sprint on the grounds that it would eliminate competition.

[Image via Android NewsPad]

Filed under: deals, mobile, VentureBeat

This posting includes an audio/video/photo media file: Download Now