(Photo: demo of a proximity-sensor based marketing platform from office hours)

I’ve just spent a week in Istanbul, attending conferences, hosting open office hours for two days, meeting with local investors and hosting another Entrepreneurs Roundtable event. I was stunned by the amazingly high levels of energy, enthusiasm and activity. From my observations over the past 20 years, we’ve hit the inflection point for startups where things are now starting to take off exponentially.

Entrepreneurs
Turkey is in the ‘building the first generation of entrepreneurs” phase and will soon transition into the next phase as some of these successful founders will exit and start angel investing and their startups will start spawning groups of successful entrepreneurs just like the ‘paypal mafia’.

I was given an office by Bosphorus for three days at Bahcesehir University and had open ‘ofice hours’. The quality was off the charts. The companies that are applying to ERA have very strong global ideas and they have startup experience from existing successful startups.

The passion for entrepreneurship is in the air.

Educational institutions
Education is very strong in Turkey and especially highly qualified technologists are coming out of universities in droves.

And large educational organizations such as Bahcesehir University as well as Sabanci, METU, Ozyegin and Bilkent are fully focusing on entrepreneurship. I taught a very interactive ‘startup workshop’ at Bahcesehir University to a full auditorium, which was a lot of fun.

At Bahcesehir University, they are identifying and mentoring promising young entrepreneurs and enabling them to pursue their passions by sending them to take classes at Stanford over the summers.

Investors
Qualified investors are starting to increase, like Baris Aksoy of Intel Capital, who moved to Istanbul from California earlier this year.

New funds and early-stage programs are also starting to proliferate, creating a great support environment for local entrepreneurs.

Popular culture
The TV program “You have an idea?” is the Turkish version of “Shark Tank” and doing very well on TV. Entrepreneurs and investors are being featured all over the press. Students are growing up wanting to be entrepreneurs, instead of bank clerks.

Diaspora
Turkish entrepreneurs and investors with extensive startup experience who are living abroad are coming back to help and get involved with the local scene, like Baris Karadogan, Aydin Senkut, etc. The local culture is being shaped very positively thanks to the involvement of these extremely savvy entrepreneurs/investors.

Ecosystem
While five years ago it was a barren land when it came to getting support for startups, now qualified startup lawyers, co-working spaces, consultants and sponsors are easy to reach. Turkish Economy Bank who also sponsored Turkish Technology Network, is very involved and supporting the ecosystem.

Community building
Local entrepreneurs are organizing and networking through a multitude of events while
Didem Altop at Endeavor is doing wonderful things for entrepreneurs. Also global startup events such as Startup Weekend are making stops in Istanbul as well as regular hackathons, meetups, etc. We have also been organizing Entrepreneurs Roundtable events in Turkey for the past 3 years.

Conclusion
Landing back in New York, the first thing I thought was how excited I got back in Turkey meeting with all the amazing entrepreneurs and investors, more than ever before.

I think it’s all about the approach and the beginning.

If a local 34-year old rapper from Korea can make the second-most viewed video on Youtube, your startup can also make it globally. Psy had no apparent previous successes before Gangnam Style, but pushed everything with his single to the limits to be a huge success: a global dance beat, 3 celebrity cameos, funny dance moves (that can catch on like the macarena) and humor that made everyone smile. He did shoot for the stars and became a global sensation.

It’s all about the starting point and the approach.

If you start in your local language (with no plans to expand to other languages) from the beginning and only target your local market with no plans for global expansion, you will always stay a local startup.

It’s all in your head.

Aim high, and start with being a global success in mind.

I get asked a lot what it means to be a global startup. Here are some examples of Turkish startups that had the right approach from the beginning (there are many, these are just some of them, sorry for missing out the other great ones):

SocialWire:

SocialWire is a user acquisition platform for Facebook. Their service uses Facebook Open Graph to help retailers market their products efficiently and effectively on Facebook.

Great founders, that had a global vision from the beginning. They’re now based in San Francisco, have great Silicon Valley investors and a world-class team.

HazelCast:

A highly-scalable data distribution platform for Java, used globally by large corporations and enterprises. From the beginning the founders had the vision for a global product and thanks to that, they got customers such as Apple, Ericsson, Morgan Stanley, etc. and now they are expanding further globally.

Gideros:

A mobile game development platform with a global customer base and a very engaged developer community. The amazing founding team had the global vision from the beginning and did everything with a global user base in mind and achieved success.

Botego:

Intelligent virtual agents using natural language processing technologies. This is a startup with a very heavy dependence on the language, which was initially Turkish, but even then, the strong founding team had the vision for global expansion and now they are expanding to the US with an office in New York already.

If you are a global startup and believe that you can benefit from our upcoming Accelerator program, please apply here: http://eranyc.com/apply

I will be in Turkey next week (November 12th – 18th) to meet and screen Turkish startups for our Winter 2013 program (http://eranyc.com).

A convertible note is a short-term loan that doesn’t get paid back like a typical bank loan, but converts into preferred shares when the company raises an equity round of financing.

So, instead of a full-on equity round, investors loan money to a startup. And instead of just getting paid back with interest, they end up getting preferred shares upon the next equity round with some perks (like interest and discounts) that provide the incentive to do so.

There are tons of details and opinions on convertible notes, but here are the basics that every founder should know:

Conversion Discount:

A conversion discount is a mechanism to incentivize the investors for the convertible note, which enables them to receive more preferred shares than their money’s worth at the time of conversion. Discounts range from 10% to 35% with most common being 20%. Thus, investors receive equity equal to their investment / (1 – discount).

Below is a simple 3 step process (Thanks to Aaron Holiday, please see the end of the article) to price a Series A round with a convertible note:

(1)  Calculate the expected ownership for both VCs and convertible note holders

1. VCs Ownership = VC Investment / Post Money Valuation
2. Convertible Note Ownership = (Investment / (1 – discount))/ Post Money Valuation

(2)  Determine total number of new shares to issue:

1. New Shares to Issue = ((VC + Convertible Note Ownership) / (1 – (VC + Convertible Note Ownership)) * Original Outstanding Shares
2. Total Outstanding Shares = Original Shares + New Shares

(3)  Price / Share = VC Investment / VC Shares

1. Notice, by calculating Debt Investment / Convertible Shares, we come up with a price that is automatically discounted by the discounted rate from the price of the round

Example 1) Seed investors put in $500K for a  note with 20% discount.

Later, the company raises $2M at $4M pre-money valuation.

Assuming 1M outstanding shares before the Series A round:

(1)  Total New Ownership

1. VCs Ownership = $2M / $6M = 33.33%;
2. Convertible Note Ownership = ( (500K / (1 – .20) ) / $6M = 10.42%
3. Total New Ownership = 33.33% + 10.42% = 43.75%

(2)  New Shares to Issue

1. ( (43.75% / (1 – 43.75%)) * 1M Shares = 777,777 Shares
   1.                                           i.    VC Shares = 592,592
   2.                                          ii.    Convertible Debt Shares = 185,185

(3)  Price / Share

1. $2M / 592,592 Shares = $3.37 per share
2. 500K / 185,185 =$2.70 per share (notice $3.37 discounted by 20% is $2.70)

Final cap table:

Founders                     1,000,000 shares        56.25%

Seed investors               185,185 shares        10.42%

Series A investors          592,592 shares        33.33%

Total                             1,777,777 shares        100.0%

(Notice, in this scenario the convertible note dilutes the founders but not the Series A investors)

Example 2) With everything exactly the same as Example 1 but with the company raising $2M at $6M valuation.  Assuming 1M outstanding shares before the Series A round

(1)  Total New Ownership

1. VCs Ownership = $2M / $8M = 25%;
2. Convertible Note Ownership = ( (500K / (1 – .20) ) / $8M = 7.81%
3. Total New Ownership = 25% + 7.81% = 32.81%

(2)  New Shares to Issue

1. ( (32.81%/ (1 – 32.81%) ) * 1M Shares = 488,372 Shares
   1.                                           i.    VC Shares = 372,093
   2.                                          ii.    Convertible Debt Shares = 116,279

(3)  Price / Share

1. $2M / 372,093 Shares = $5.38 per share
2. 500K / 116,279 =$4.30 per share (notice $5.38 discounted by 20% is $4.30)

Final cap table:

Founders                      1,000,000  shares        67.19%

Seed investors                116,279  shares          7.81%

Series A investors           372,093  shares        25.00%

Total                             1,488,372  shares         100.0%

As you can see, seed investors are getting less of the company at conversion as the post-money valuation of the company is increasing, which misaligns the seed investors and the company. To fix this problem, conversion caps are used.

Conversion Cap:

To provide protection against too much upside, investors put a ‘price cap” on a convertible note. This means that even if the company valuation goes sky-high in the next round, the investor gets his loan converted at the “cap” valuation. This cap is expressed in terms of pre-money valuation and effectively is a share price ceiling.

A convertible note investor will either exercise the right to buy Series A shares at the convertible note discount price or exercise the right to receive equity in the company that is equity to the implied ownership derived from the seed investment divided by the conversion cap diluted by the Series A investors.

Below is a basic 3 step process to follow to determine the price and best conversion decision for a convertible note with both a discount and conversion cap.  When following these steps, we do a side by side analysis discount price vs. cap.  An example is provided below.

(1)  Calculate the expected convertible note:

1. Ownership using the discount (see above step # 1)
2. Expected Ownership Using Cap = ((Investment Amount) / (Conversion Cap) )* (1- VC Ownership).  See step 1 above for VC Ownership

(2)  Issue new shares using VC Ownership + Expected convertible note ownership. 

(3)  Price / Share = VC Investment / VC Shares

1. Discounted price = Convertible Debt Investment / Convertible Debt Shares
2. Find the percentage decrease from price / share to discount price to find the effective discount

Example 3) Seed investors put in $500K for a note with 20% discount and a $4M cap.

Later, company raises $2M at $4M pre-money valuation.

Assuming 1M outstanding shares before the Series A round:

In this example, it is clear that the best option for the investors is to exercise the discount over the conversion cap option.

Example 4) With everything exactly the same as Example 3 but with the company raising $2M at $6M valuation and assuming 1M outstanding shares before the Series A round:

As you can see in this example, seed investors are protected against extreme downside as the company’s valuation grows.

Bonus Example 5) With everything exactly the same as Example 4 but with the company raising $2M at a much higher $10M valuation and assuming 1M outstanding shares before the Series A round.

As you can see, now seed investors and the company are properly aligned.

Interest Rate:

This is a simple interest on the amount of the loan, usually between 5-10%, with 8% being the most common. But this interest is not paid in cash on a periodic basis like a typical loan but is added to the conversion amount when the note converts.

For example, on a $500K note with a 5% interest rate, the amount that converts after a year would be $525K, which is $500K + $25K in interest(5% of $500K).

Maturity Date:

Just like a regular loan, convertible notes have a due date when the borrowed amount plus interest should be paid back, if the presumed equity round does not happen. (Equity rounds trigger automatic conversion of the note into preferred stock).

Maturity date is usually 12 to 24 months from the closing date, with 18 months being the most common.

So what happens when the maturity date is reached and the company doesn’t raise an equity round? The seed investors may call the loan and force the company into bankruptcy, but that  doesn’t really work for anyone. There are usually two outcomes in this situation:

1) Automatic conversion: The loan amount plus interest convert into common or preferred stock at a previously agreed upon valuation which is called a floor.

2) Negotiating an extension: This is more common and obviously depends on the company’s leverage and the investors’ positions.

Note: Big thanks to Aaron Holiday, who is working with ERA this summer, for major contributions to this post, as well as the great three step process he had come up with. Follow Aaron on his blog: http://www.aholidayiii.com/

Disclaimer: There are option pool adjustments, interest, multiple notes with different terms and many other terms that complicate cap table calculations, but hopefully this gives you a handle on how to negotiate and raise convertible notes. Definitely work with a lawyer. I am not a  lawyer

We started in 2007 with a simple thought: how can we be useful to entrepreneurs in New York City?

(Howard Morgan, First Round Capital, ER10)

The goal was to have a “take-away” at each event. We reversed the thinking and asked everyone: “What are your skills? What can you help others with?”

(Fred Wilson, Union Square Ventures, ER15)

Albert Wenger was one of our first speakers. He recommended that we have startups pitch to the VC speaker at the event to get feedback.

John Frankel (FF Venture, ER30)

After 50 events, 2300 applications to pitch at ER events, 250 pitches and more than half of the companies eventually raising money, apparently the idea took hold.

(David Pakman, Venrock, ER33)

  The amazing line-up of speakers, like Fred Wilson, Howard Morgan, John Frankel, Jeff Bussgang, Esther Dyson, along with the ‘let’s help each other’ approach helped us get to event #50.

(Albert Wenger, Union Square Ventures, ER38)

Of course it was the New York startup community that made everything happen. We just happened to be here and a proud member of the community that is now exploding with entrepreneurial activity.

(Jeanne Sullivan, Starvest Partners at ER49)

This month we are going to celebrate Entrepreneurship in New York with a big party on August 22nd at our partner “The Alley”, everybody is invited!

http://er50.eventbrite.com/

Notes:

Entrepreneurs Roundtable (ER) is a non-profit that helps entrepreneurs succeed in New York City.

Entrepreneurs Roundtable Accelerator (ERA) is a for-profit early-stage technology investment fund and accelerator that was born out of ER.

 (ERA Winter 2012 class)

Entrepreneurs Roundtable will have its 50th event next month in August, 2012.

We started in 2007 and hosted a “free” event every month for entrepreneurs and investors. And we launched Entrepreneurs Roundtable Accelerator in 2011. We are now in our third session with 10 great companies, with one from Sao Paolo.

We host great entrepreneurs and investors from all over the world at ERA when they visit New York City. They come from Buenos Aires, Rio De Janeiro, Sao Paolo, Santiago, Dublin, London, Berlin, Barcelona, Bologna, Genoa, Rome, Paris, Moscow, St. Petersburg, Baltimore, Miami, Austin, Tokyo, Hong Kong, Taipei, Shanghai, Mumbai, Abu Dhabi, Tel Aviv, Amman, Beiruth, Nairobi, etc.

They all have one common question for us:

“How did the New York entrepreneurial community jump-start itself?”

Here is how we thought about it and how we tried to contribute to the New York entrepreneurial community from the beginning, hoping this might help someone somewhere around the world who is trying to jump-start their entrepreneurial community by organizing events:

SPACE:
Finding space is the easiest part. Ask a university, a law firm, a large corporation that might benefit from hosting an event as business development/marketing/community building for themselves.

SPEAKERS:
Find good speakers with ‘experience’. Find good topics with them that might benefit the audience. Panels are OK if well-moderated, otherwise each speaker gets to say a few sound-bites and does not really communicate with the audience.

COMMUNITY:
Make it free if you can. Charging $20-$30 for an event is sometimes needed to pay for the venue, but make it free if possible. Respect bootstrapping entrepreneurs who already sacrifice a lot to pursue their dreams.

VALUE:
Have a take-away at the event, do not host an empty event to just make money. Make sure everyone walks away with some new knowledge, some new connections etc. Ask people after the event if they learned something and got something out of it, iterate if necessary.

CONSTRUCTIVE FEEDBACK AND HELP:
Don’t make it a ‘competition’ if you have startups presenting at the event. These competitions are mostly popularity contests and their outputs never match the long-term success of the startups. Have the speaker and the audience give constructive feedback and offers of introductions, etc. to each startup,

TURNING POINT:
Ask everyone at the event how they can help others, not what they need. This turned things around at the initial ER events and people started opening up and helping each other even more and this made ER events really useful to everyone. There definitely is karma :)

I’ve been thinking a lot recently about how the “team-idea fit” really defines a startup’s success.

After making some investments through ERA (more than 30) and being fortunate enough to see and work together with more than 250 startups that pitched at ER events over the past 5 years, I feel like I can try to be helpful to teams in search of ideas by the following tips.

(By the way, Entrepreneurs Roundtable 48 is coming up later this month, ERA Summer 2012 just launched and the next ERA program is coming up in January 2013)

Over my learning experiences, I’ve seen that when the background of the team matches the problem at hand, miracles happen.

The Lost Team

We all know someone or some team that constantly ponders the question “What shall we work on?”. They want to start a company but they just don’t know what idea to work on. They are a great team, capable and hard-working but they just cannot seem to find that one idea that will propel them right into an IPO (not that one ). They constantly brainstorm, go to hackathons, talk to everyone, ask around about which of their 10 ideas is a good one, etc.

What I’ve seen doesn’t work:

Copy-paste: When teams pick ideas by cloning other startup-du-jour’s without considering their own backgrounds. Example:
* “Words with Friends” but with a minor little twist.

Duds: When teams pick ideas that assume the distribution power of Google or Facebook, again without thinking about their backgrounds. Example:
*A “new” social network where everybody enters their wishlist, and friends vote on the wishes and you get pink unicorns when you make the most-voted wish happen.

Mismatches: The team picks an idea in a very specialized area that needs vertical expertise and they don’t have it. Example:
* We will change the home services industry by aggregating all user demand and supply and charging a commission on both sides. Go to market strategy? SEO/SEM.

Intractable behemoths: The team picks an idea that assumes large amounts of movement on supply and demand without a clear way to get there, again in an area that doesn’t match their backgrounds. Example:
* Local businesses list all their inventory online and users sign up to receive alerts when the products they want go on sale or in stock.

What I’ve seen works:

Solve an existing industry problem: The team “recalls” a problem they have seen before in an industry. They personally had this problem and that they are intimately familiar with it. They build an MVP around it and work towards product market fit easily.
Example: See problems with credit card loyalty programs while at large company, leave to start a loyalty rewards startup that addresses these problems.

Spot a new opportunity in an industry: The team “identifies” a new or emerging problem in an industry they are familiary with and builds the company around it.
Example: Recognize that social bookmarking is sending more click-throughs to e-commerce websites than anything else and apply adtech industry expertise to build a company around this.

Apply expertise to new problem: The team sees a new opportunity in a new market where they can apply their existing expertise to solve it.
Example: Use previous experience in logistics to launch a wildly successful e-commerce company with a new subscription model.

Of course, there are infinite ways to come up with a great idea for a given team, I’ve just seen that the above examples work wonders and wanted to pass it along hoping it might help a team out there.

(Thanks to Jon Axelrod and Charlie Kemper for ideas and reading early versions of this.)

In addition to business development, securing partnership and local marketing, I believe that global startups can benefit vastly from visiting the US entrepreneurial centers, without having to move their operations.

Entrepreneurs Roundtable Accelerator(ERA) and Global Startups:

At ERA, we are a very global team. I grew up in Turkey, lived in Japan for 2 years out of my past 20 years in the US. My partner Charlie was born in Brazil, grew up in Mexico, moved to US for college, was a VC in Brazil in the early 2000′s. My other partner Jon worked extensively with international partners as an entrepreneur and sold his previous company to an international company.

As a result, ERA Summer 2012 program has an amazing startup from Brazil that moved to New York for the program: http://mxhero.com.

And last year we hosted 2 Jordanian startups at our offices to help them launch into the US market. (My thoughts on 10 reasons why it’s a great time to be a global startup)

We are actively looking for more great global startups to join ERA in our upcoming programs (We run two programs per year, starting in January and June, application form is here and our latest class announcement on TechCrunch is here.)

TurkTechNet.org:

(TurkTechNet May 2012 Demo Day)

I have been very fortunate to help Turkish government officials with their very entrepreneurial non-profit project: http://turktechnet.org which was graciously sponsored by Turkish Economy Bank.

This non-profit, fully volunteer-based effort brought 10 top technology startups from Turkey to New York for a week of bootcamp/training and a demo day at no cost to the promising startups. The 10 startups were chosen from close to 200 applications after a face-to-face interview process in Istanbul.

I was involved as a volunteer along with the top organizers Serhan Kara (Turkish Consulate General, Commercial Attache), Ayse Akkiraz Dagdur (Turkish Consulate General, Economy Attache), Celal Secilmis (Turkish American Chamber of Commerce and Industry, President and Executive Board Member, Chairman of the America Region Committee at DTIK: World Turkish Business Council), Sinem Uluturk (METUTECH Business Angels Network), Mustafa Ihsan Kiziltas (METUTECH General Manager, METUTECH Business Angels Network), Hursel Kendir (METUTECH Business Angels Network), Fatih Ozluturk (Patentory, ERA), Atil Erken (Chronus Health), Cigdem Acar (Acar Law Firm) and Murat Bicer (RTP Ventures).

I was fortunate enough to meet and work closely with these 10 Turkish startups:

http://www.hazelcast.com

Hazelcast is a software company specialized in scalable NoSQL solutions. Its flagship product, Hazelcast, is a clustering and in-memory big data storage solution enabling applications to scale on-demand. It is used to store and process terabytes of data in-memory. Our customers include Morgan Stanley, Cisco and Mozilla. Gartner recognized Hazelcast as a “Cool Vendor” in 2012. Contact: founders@hazelcast.com

http://www.giderosmobile.com

Founded in 2011, Gideros Mobile provides full fledged and easy to use cross-platform technology for creating games and interactive books. Gideros Mobile directly targets developers and game studios. Released in February 2012 and showed steady growth, reaching 5000+ unique users from more than 50 countries globally. Contact: founders@giderosmobile.com

http://www.zibumigames.com

Zibumi develops games for hardcore players by leveraging innovative game mechanics, based on content oriented storytelling and memorable experiences. Zibumi’s 40+ games reaches over 20 million international players on PC and Apple App Store. Contact: founders@zibumi.com

http://netmera.com

Netmera is a cloud-based Platform as a Service for developing mobile and web applications. Mobile or web developers can create their apps in minutes using our super simple API and services which include iOS and Android SDK’s, HTML5 access, and fully functional payment gateway for monthly subscriptions and virtual goods selling. The API is already been used by more than 100 mobile services in leading mobile operators of Turkey. In addition, we opened Netmera.com as a self service platform for developers, with over 100 developers that signed up in less than a month. Contact: founders@netmera.com

http://www.kadevision.com

Kade Vision designs and produces V-Count, which is an embedded People Counting Solution with a web based Real World visitor traffic and conversion rate analytics. Nearly 2000 V-Count devices are serving to its customers in retail industry  across 8 countries and helping them increase their profits and awareness on visitor traffic patterns. Contact: founders@kadevision.com

http://www.kreadirect.com

KREA Direct is a 10 year-old direct marketing company which launched a unique product in e-mail marketing in 2010 called Valuemail, that creates a NEW content generation, advertising & retargeting opportunity for senders, publishers & advertisers. We grew to the second largest e-mail marketing company in less than 2 years with a 951% growth rate in the first quarter of 2012. Contact: founders@kreadirect.com

http://www.botego.com

Botego builds text-based automated customer interaction software. Our tools answer customer questions on the web, mobile, instant messaging, and e-mail in a given domain. So we help increase customer satisfaction and reduce customer service costs. Customers include Coca Cola, Johnson&Johnson, Unilever, Group SEB, and other top brands from Turkey, where Botego is the market maker. The company has already raised $400.000 and is cash flow positive. Contact: founders@botego.com

http://www.pixofun.com

Pixofun is the leading gaming company in Turkey that designs, develops and publishes mobile and social games with sophisticated social mechanics on cross platforms. Pixofun has 44% market share in mobile games and achieved $5M annual revenue in 2011. Pixofun sold more than 10M mobile games in Turkey and has two games in Facebook with 20% engagement rate among their 2M users. Pixofun wants to expand internationally and aims to replicate its success in mobile games also in social gaming. Contact: founders@pixofun.com

http://dakick.com

Dakick is a Personalized Event Recommendation based on User Profiles, Interests, Social Graph, Proximity and User Availability. It collects contents like tv, cinema, sports, performing arts, concerts-parties, conferences, fairs, exhibitions and distributes it in a personalized way to its subscribers. Dakick raised $630K in seed stage. Contact: founders@dakick.com

http://hediyemo.com

Hediyemo is the creator and market leader for “social and mobile gifting service” in Turkey. 200K gifts sent from 25 leading retailers by consumers and corporations in 2011. Contact: founders@hediyemo.com

The Bootcamp:

At the 4-day Bootcamp leading up to the Demo Day, we tried to expose the Turkish entrepreneurs to as many New York entrepreneurs and investors as possible through panel discussions, talks, workshops and Q&A sessions.

We even had a workshop on  international funding with top attorneys in the field as well as discussions with US entrepreneurs that have recently raised money or sold their companies. The bootcamp also heavily focused on high-level business strategy sessions and improving their pitch decks. Overall the feedback from the Turkish entrepreneurs was extremely positive.

Speakers at the Bootcamp (thanks to all):

Atil Erken (Organizer of the Bootcamp and Chronus Health)

Fatih Ozluturk (Patentory, ERA)

David Silver (MedTrackAlert)

Vivek Sharma (MovableInk)

Jean-Marc Freuler (Funding Gates)

Jon Axelrod (ER Accelerator)

John Frankel (FF Venture Capital)

Christina Cacioppo (Union Square Ventures)

Brian Adams (AdMeld – acquired by Google)

Jake Howerton (Zipmark)

Inaki Berenguer (Pixable)

Ulas Neftci (CUNY Baruch Small Business Development Center)

Lucas Nelson (DFJ Gotham Ventures)

Steve Berg (RTP Ventures)

Murat Bicer (RTP Ventures)

Demo Day:

TurkTechNet May 2012 Demo Day was very successful with great pitches from the Turkish companies and great response from the US investors. The pitches from the companies were very clear, precise and communicated the company and the potential to the investors.

(Demo Day video will be available shortly at http://turktechnet.org)

Demo Day was followed by a press conference hosted by Turkey Consule General Levent Bilgen and a reception at the Turkish Embassy.

What the Startups Said They Learned:

* Startup Culture
There are definitely differences in the startup cultures in different parts of the world and the Turkish entrepreneurs said they were highly inspired by their US counterparts. Some said they will go back to Turkey with more ‘purpose’ and at a higher level of execution.

* Overall business strategy on going global
The entrepreneurs tested their main assumptions at the Bootcamp about their high-level strategies on going global and got very valuable feedback and suggestions on how to scale their local success to a global audience.

* Pitching to US investors
The bootcamp heavily focused on preparing the startups for the Demo Day, hence learning how to pitch to US investors was communicated throughout the week. The presentations that were very good to start with were fine-tuned and Demo Day was a huge success.

* Fundraising
There were workshops on forms of fundraising in the US, about equity rounds, convertible notes, warrants, and stock options. Also bootcamp emphasized how US investors invest in foreign entities (direct, through Netherlands, Luxembourg, through a Delaware C-corp, etc).

* Execution strategy
Some companies decided to structure and prioritize their businesses in a different way after the Bootcamp to maximize their chances of going global. For example, consulting parts of businesses were de-emphasized with the product portion of the business getting a new name and a separate entity and becoming the only focus of the company.

* Go to market strategy
The entrepreneurs learned heavily about how to launch their products in the US market. Listening how to do this from experienced US entrepreneurs was extremely useful.

* One-on-one mentoring
Teams had one-on-one mentoring throughout the bootcamp, which was experienced by some of them for the first time and they loved it. They said they had not experienced this before and it was extremely useful to them.

The TurkTechNet project was a huge success and I am looking forward to working with more global startups both at ERA and TurkTechNet in the future. We at ERA believe this model of bringing strong international startup tech companies to the US to gain know-how, as well as access to business development and investment dollars, is going to grow in importance. We look forward to investing in and supporting more of these global companies moving forward.

Sounds like an oxymoron, but mostly true. You have to know technology to be able to outsource technology.

Software development is more art than an exact science.

There are a million different ways of coding a solution for any given task.

For example, to draw a specific shape on the screen, you can display it as a pre-rendered image from the server, you can compose it from multiple images using javascript in the browser, you can use canvas and moveto, lineto using javascript or you can use WebGL for hardware-acceleration, etc.

Each of these methods has pros and cons depending on your application and only one of them is the most optimal solution for a given app. For example, if you are just showing a customized badge, it’s an absolute overkill to use WebGL.

If you are outsourcing all of your development and if you are not technical, you don’t know if your code is being developed the right way. And you can go developing for 6 months, only to find out at the end that you have to throw everything out and start from scratch when you hit a wall.

So it’s vital that you either:

1) learn more about technology (not nuts and bolts of programming but know what’s going on at the highest-levels to be dangerous)

2) or engage a technical advisor (for equity or pay) on your side to supervise the technical work for your startup.

Otherwise a lot of money and resources might be wasted without seeing the light of day.

Image credit: Wikipedia 

The worst thing during a presentation is to lose your audience by making all the wrong and unfounded assumptions about how your startup will take off.

Some tips to improve how you communicate your idea to others:

1) Don’t assume social media and press will cover your startup immediately and without limits.

TechCrunch is not a marketing and PR strategy. Spend time thinking how you will get people to your website and communicate that clearly to the audience.

2) Don’t assume 100% conversion rate.

If you do this, you lose credibility. Not everyone who visits your website will sign up as a user and it is OK. Communicate how you will improve your conversion rates.

3) Don’t assume the inherent utility of the service for a wide segment of the population.

Not every user will write 100′s of reviews on your website, or not every user will vote on every item on your website. Increase your believability by communicating realistic numbers and expectations to the audience.

4) Don’t assume the inherent virality of the service.

Again not every user will invite all of their Facebook friends to your service. Communicate how you will improve the virality of the service so that more and more users will invite their friends over time.

5) Don’t assume high stickiness.

Not every user will come back to your website every day or once a week if ever. Again, communicate how you plan to improve and track this aspect through cohort analysis.

Being realistic wins you the trust and the attention of the audience, making you credible. But first of all, start with this question: “Why will anyone ever use my service?”

From “How to win friends and influence people” by Dale Carnegie (first published in 1937):

The president of an important Wall Street bank

once described, in a talk before one of my classes, a

highly efficient system he used for self-improvement.

This man had little formal schooling; yet he had become

one of the most important financiers in America, and he

confessed that he owed most of his success to the constant

application of his homemade system. This is what

he does, I’ll put it in his own words as accurately as I

can remember.

“For years I have kept an engagement book showing

all the appointments I had during the day. My family

never made any plans for me on Saturday night, for the

family knew that I devoted a part of each Saturday evening

to the illuminating process of self-examination and

review and appraisal. After dinner I went off by myself,

opened my engagement book, and thought over all the

interviews, discussions and meetings that had taken

place during the week. I asked myself:

‘What mistakes did I make that time?’

‘What did I do that was right-and in what way

could I have improved my performance?’

‘What lessons can I learn from that experience?’

“I often found that this weekly review made me very

unhappy. I was frequently astonished at my own blunders.

Of course, as the years passed, these blunders became

less frequent. Sometimes I was inclined to pat

myself on the back a little after one of these sessions.

This system of self-analysis, self-education, continued

year after year, did more for me than any other one thing

I have ever attempted.

“It helped me improve my ability to make decisions

 - and it aided me enormously in all my contacts with

people. I cannot recommend it too highly.”

1. Explore a domain at: http://instantdomainsearch.com

2. Get the domain at Google Apps: http://google.com/a

3. Login to GoDaddy to redirect the domain to your server from within Google Apps.

4. Create a virtual server on your server for the new domain.

5. Develop the service ( For example, with node.js, socket.io, redis, javascript, git, python )

6. Add SEO tags to your homepage. Important ones:

<title>keywords</title>

<meta name=”keywords” content=”bla bla, bla”>

<meta name=”description” content=”this site is about bla…”>

7. Make your website iphone-friendly:

<meta name=”viewport” content=”width=device-width; initial-scale=1.0; maximum-scale=1.0;”>

8. Always force the latest IE rendering engine (even in intranet) & Chrome Frame

<meta http-equiv=”X-UA-Compatible” content=”IE=edge,chrome=1″>

9. Set up Google Analytics: https://www.google.com/analytics/

10. Set up Google webmaster tools: https://www.google.com/webmasters/tools/

 Set your preferred domain name ( www or non-www ), or otherwise Google will treat them as separate websites.

11. Create a free privacy policy at: http://www.generateprivacypolicy.com/

12. Sign up for Google AdSense ( if you’re not banned from it yet )

13. Submit your website to http://stumbleupon.com

14. Analyze your website and competitors at http://woorank.com

15. Check your website at http://www.seomoz.org/linkscape

16. Make sure your website works on mobile browsers at: http://www.quirksmode.org/mobile/

17. Read about user experience design on http://uxmag.com/design/user-experience-for-developers

18. Ask technical questions at http://stackoverflow.com

19. Ask questions and read on http://quora.com

20. Read Hacker News daily: http://news.ycombinator.com

21. Read Four Steps to the Epiphany by Steven Blank and Startup Lessons Learned blog by Eric Ries

22. Get more book recommendations at http://www.hn-books.com/

23. Create a free customer feedback forum for your product at http://getsatisfaction.com

Engage with your early users, iterate, go over your data logs, analytics and try to get to product market fit.