Golden Horn Ventures

A Brand New World: The Promise of Globalization is Here to Stay

The cover of Economist magazine's Sept 16th issue reads "Surprise! The power of the emerging world". The articles inside are very interesting and supports Golden Horn Ventures belief in the emerging markets and Turkey in particular. There is one survey on the world economy titled, The New Titans.

Here is an excerpt from it:

"Last year the combined output of emerging economies reached an important milestone: it accounted for more than half of total world GDP (measured at purchasing-power parity). This means that the rich countries no longer dominate the global economy. The developing countries also have a far greater influence on the performance of the rich economies than is generally realised. Emerging economies are driving global growth and having a big impact on developed countries' inflation, interest rates, wages and profits. As these newcomers become more integrated into the global economy and their incomes catch up with the rich countries, they will provide the biggest boost to the world economy since the industrial revolution. Indeed, it is likely to be the biggest stimulus in history, because the industrial revolution fully involved only one-third of the world's population. By contrast, this new revolution covers most of the globe, so the economic gains—as well as the adjustment pains—will be far bigger..."

The chart numbered "2" shows that countries that were once strong, became weaker with the industry revolution and they are"re-emerging" again.

The article continues as follows:

"Emerging economies as a group have been growing faster than developed economies for several decades. So why are they now making so much more of a difference to the old rich world? The first reason is that the gap in growth rates between the old and the new world has widened (see chart 3). But more important, emerging economies have become more integrated into the global system of production, with trade and capital flows accelerating relative to GDP in the past ten years...."

"What is also new is that the internet has made it possible radically to reorganise production across borders. Thanks to information technology, many once non-tradable services, such as accounting, can be provided from afar, exposing more sectors in the developed world to competition from India and elsewhere..."

As the Internet and the abundance of information and technology has connected the emerging world to the developed world (to the distribution points, the centers/hubs of economy), there are more changes coming up.
The Internet feeds emerging markets with information and brings different communication and business rituals. The globalization itself has created know-how in the emerging countries. I have partly discussed the very same points in my previous post titled, Innovation, Technology and Emerging Markets.
What I would like to add to the Economist's article is innovation from the emerging countries and the disruption that it creates on the world economy and markets. Technology introduces many new ways of distribution and creation. It also allows the voices of the poor and far audible all over the world. The products and services of the ones in the emerging markets become available in the international markets as the barriers to entry decreases or better to say, the ability to distribute and innovate is democratized. That will result more innovation from the emerging countries, thus creating more disruption in the world economy.
As a result, the catching up to the developed world standards will be faster than we envision it will be. The way that it will happen will be disruptive. Just as startups can rock the monopolies (eg. the entertainment industry), companies from the emerging world can rock the world economy's existing equilibrium and create more prosperity for many in and outside of the emerging markets. Pretty soon the definitions of "emerging" and "developed" will change. The macro stories will be changed by "micro" successes and disruptive company/product/service names.

Wasn't that the hidden promise of globalization anyway? The promises are there for us to grab. It isn't easy, but it is here and it is the future.

What the Brand New World means for IT?
• Countries that have only been used for outsourcing start creating innovative products and services,
⁃More innovation will come out of the emerging countries as the emerging countries have piled up information and ideas and the reach of technology and building a technology company getting cheaper everyday, thus the geography of the innovation is becoming trivial,

• Local will become international more quicker than ever,

• In addition to big companies (such as Microsoft, IBM) being international and harvesting the benefits of being international, startups from the emerging countries will become international if /when there is a value (a new technology, a new business model, a new distribution model, etc.) in them (I specifically say startups, not companies, because I believe that only startups can pursue opportunities and create disruption),

• The markets are getting bigger (the transition from the mainframe to PC has created more than $300 billion wealth, the transition from PC to services will create even more significant wealth). The sharing of this wealth between the developed and emerging markets is starting to shift as innovation comes from any geography,

• New distribution models make it possible for emerging market players to become global for service businesses and digital products as broadband connection becomes prevalent,

• New business development models are rising: (Business 2.0, A VC blog by Fred Wilson) that are more independent of the geography of the company, but are dependent on the technology and usefulness and their disruptive qualities,

• New venture capital models are rising:( Venture Capital 2.0 , Early Stage VC blog by Peter Rip)
⁃"The basis for competition in the Venture 2.0 Crossover model is a focus on markets, independent of stage, geography, and risk capital instrument.",

• The disruption is happening everyday. The strong is weak when it lacks to innovate (eg. The rise of new business models, the struggle of Microsoft with advertising model vs. the software as a package),

• Innovation, disruption and links; The innovators that have a link to the centers of the economy have a global impact and influence. Disruptors that have links to Silicon Valley will effect the equilibrium of the market.

Mae Ozkan

How to Create the Right Environment for Startups and How to Link to Silicon Valley?

On my last post on Social Entrepreneurship and Startups, I have mentioned Paul Graham's essay on how to be a Silicon Valley. In the post before that, Brain Drain or Brain Circulation, I have mentioned news.com's interview with Anna Lee Saxenian. I agree with her when she points out knowledge circulates with people. When people who have worked in Silicon Valley come back to their home towns and establish similar businesses, they carry the knowledge and business experience of Silicon Valley with them.

In this post I would like to combine my thoughts on these two topics and discuss how to create the right environment for startups and how to link to the heart of technology, Silicon Valley. This post will also shed a light on why we, Golden Horn Ventures, would like to build a bridge between Silicon Valley and Turkey.

For a knowledge / technology economy or innovation, the first and most important ingredient is people. People and their visions are crucial. People and their ability to dream and the passion to execute their dreams make all the difference. With dreams humanity have built and collapsed nations, have invented and built machines, sytems, medicine, etc. Dreams have brought us from homo sapiens to mankind of today.

As Paul Graham puts it in his essay:

"What it takes is the right people. If you could get the right ten thousand people to move from Silicon Valley to Buffalo, Buffalo would become Silicon Valley."

We can't move people from Silicon Valley to Turkey, however many people who got educated and worked in Silicon Valley end up back in their home towns in Turkey. They want to work and produce as they have done before. They are used to the ways of Silicon Valley; the openness (open organizations, open discussions, open software, open ideas, etc.), the competitiveness, the venture capital, the values (to 'dare' is valuable), the business rules and the business rituals. They are used to the ways of how to innovate as in Silicon Valley, get your product out there, release early, build business partnerships early, etc.

He adds:

"I think you only need two kinds of people to create a technology hub: rich people and nerds. They're the limiting reagents in the reaction that produces startups, because they're the only ones present when startups get started. Everyone else will move."

Rich people and nerds. However, they both need to be more passionate in Turkey than they are in the US. In the US there are reference success stories. There are numbers that show that when you innovate, you succeed! In our case, the rich needs to believe in building a startup / technology economy and building a better future for all. The rich and the nerds both need to understand the global dynamics and the opportunities that lie under.

In developing countries, or in any place where there is not a startup / technology economy - where startups haven't become successful businesses and haven't generated wealth for the many- nerds end up with some work to sustain living such as fixing PCs. Eventually their ideas and their dreams die with every PC that they fix. That is why in places where there is no startup economy, the rich needs to have a clear vision of what future holds for those can innovate and those that can not and the opportunities that are waiting for those who can.

But how about the accumulated know-how, capital and talent? Just because we have 5 teams and 5 startups set up, Turkey wouldn't become the centre of technology and innovation. We need links and partnerships to the accumulated know-how, capital and talent. We need connections to the world of technology, Silicon Valley.

By connections and links, I mean people and partnerships. They will help how things get done, how technology is applied, how technology turns into a product and a business.

By the web, we all reach to information, blogs, codes, examples, theories, messages, discussions at the same time. But connections are needed to be a player, to get more of the accumulated information in the Silicon Valley case by case. With each project the teams will get smarter, understand it better, get the culture of the Silicon Valley in their DNA. Later this will accumulate in the form of know-how and talent. By every sucess story capital will add to the equation. As a snow ball, it will get bigger in every turn. Please note that for know-how and talent to accumulate 'openness' needs to be deep in the culture - open discussions and open organizations.

By the rich people and the links, the nerds will get an access to experience, capital, advise and connections.

It is the people and people only that will make the difference.

Another point that I want to quote in Paul Graham's essay is:

"A corollary is that you have to keep out the biggest developer of all: the government. A government that asks "How can we build a silicon valley?" has probably ensured failure by the way they framed the question. You don't build a silicon valley; you let one grow."

Nerds want to think free and act free! People with dreams could only be fed by other entrepreuners financially and business-wise! People who have dreams to change the world by production and innovation should be set free to do so and supported in an entrepreunerial way. In this way a healthy ecosystem will evolve for technology and innovation and startups.

Mae Ozkan

Social Entrepreneurship and Startups

Most people don't understand what a social force startups and innovation can be. There are a lot of changes that can only happen through startups. Startups are changing old business ways and shaking monopolies.

There are many social entreprenueurship projects coming out all over the world, whose goals are enabling the other half of the world with ideas and innovation. For example, microfinancing and Grameen Bank. Their story is very inspiring. Here is an excerpt:

"When we started giving out tiny loans under a system which later became known as the Grameen Bank, we never imagined that one day we would be reaching hundreds of thousands, let alone five million, borrowers."

This project created disturbance in loaning and credit systems. Banks that think most aren't worthy of a credit saw a business that is profitable and changing the world one credit at a time.

It all starts with an idea. I believe as many do, entrepreneurs' need to change the world. When you want to change the world and make a difference, you definitely succeed!

This is what Golden Horn Ventures' targets: To be a social force by supporting startups and helping them become companies that change the markets. One company at a time, innovation and information of how this innovation becomes successful businesses will accumulate in Turkey and success stories will change the society. The environment that supports it will change. More VC's will be present, more people will support more ideas. This all circles!

Technology is one of the disturbing forces in the society because it gives the ability to people to reach to information cheaper, produce faster and cheaper, etc. etc. (This is a big topic and I don't want to be sidetracked.) To create an ecosystem for technology startups requires some ingredients. I would suggest reading Paul Graham's essays on How to be Silicon Valley and Why Startups Condense in America to understand the ecosystem better. They are excellent essays!
Mae Ozkan

Brain Drain or Brain Circulation?

I read this article on news.com a few days ago. It is an interview with Anna Lee Saxenian, the dean of the School of Information at the University of California, Berkeley.

In this interview, AnnaLee says migration overseas doesn't need to be one-way brain drain, but would result brain circulation. She supports our belief that innovation can come from any geography of the world, just because of migration and how brain (knowledge, experienece and know-how) circulates.

Here is a part of the interview that underlines our work in Golden Horn Ventures:

Stefanie Olsen(news.com): What makes for a thriving technology community like Silicon Valley? Is it government incentives, cash resources or access to engineers and universities?
Saxenian: It is certainly not government incentives. Silicon Valley has evolved over the past 40 years to be a rich community of skill and social networks that allow people to come together, come up with new ideas, and implement them very quickly.
Because you have a deep base of technical skill, marketing capital, managerial skill that's been around, you also have an ecosystem of suppliers--everything from legal, design, banking, venture capitalists--so if you come up with an idea, like a new mobile media, you can pull together a team faster than any other place in the world. That's a product of learning in a community, and it's very hard to replicate.

Stefanie Olsen(news.com): In your mind, what comes close to Silicon Valley?
Saxenian: These new regions, Taiwan, Bangalore, Shanghai, they are extensions of Silicon Valley. This happens from people with deep roots in Silicon Valley, and then they take with them elements of the Silicon Valley business model--the start-up culture, the venture capital, the idea of minimizing hierarchy and creating more open organizations, which is often alien in places like India and China. Those economies have been dominated by family run firms or state-supported enterprises. And they're not creating head-on competitors to Silicon Valley; they're creating linked partners.
Those places look like hybrids, a cross between Silicon Valley and domestic institutions. They're similar, but they don't have the accumulated know-how and talent there.

Mae Ozkan