In an effort to cover the Turkish Private Equity Industry - for the promotion of Entrepreneurship, the private equity asset-investment model, and the communication thereof.
Malcolm Gladwell: The Tipping Point, Blink and the TED Conference
27 September 2007
I first got turned on to Malcolm Gladwell by hearing his name among other VC Blogs. My first encounter was when I picked up his latest book: Blink: The Power of Thinking Without Thinking. Having read Blink first, I may have spoiled the effect of reading that book that he his most famous for: The Tipping Point: How Little Things Can Make a Big Difference. Luckily, I was able to find a copy sitting next to Blink on the best seller rack.
I may be behind the times only finishing it now - it being first published in 2004. However, fret not, for it is still a prudent and powerful explanation of successful businesses, products and social networks in the world of Web 2.0 - beautiful in its simplicity.
For those who haven't read The Tipping Point, the idea is a comparison of the successes in business to the spread of a disease epidemic. Think of a common flu virus that hangs around going from person to person, remaining in equilibrium in its contagiousness. But then something happens - it reaches a tipping point where the equilibrium cannot be maintained - the flu spreads like wildfire - it tips. For example: have you ever considered "yawning"? How long after reading the word "yawning" and thinking about yawning - did you yawn? You may smile later. Malcolm Gladwell can explain why this is.
Applied to business, The Tipping Point helps explain exponential growth of ideas, products, trends and concepts, and will shape the way we look at social trends for years to come. For a great overview, see the Tipping Point Wiki, or else see the Tipping Point on Gladwell.com.
In addition, For a taste of Malcolm Gladwell live and in person, I urge you to watch this video of Malcolm at the TED Conference. It is long (18 min.), but it is well worth it (as are all TED videos). (You are able to expand the video to full screen in the lower right corner button.) In it he details the problem of a tomato sauce company, where the problem was not the sauce (as previously believed), but actually how many sauces the public desired.
I think Turkish producers and retailers could learn a few things from this lesson. You could say that Efes has been following this model lately, but in my opinion, all of those beers are just the same beer. Ulker and competitors Cadbury Schweppes and Kraft (Milka) in the chocolate space could be said to maximizing this concept as well. Any others?
Middle East Technical University Metutech (ODTÜ-Teknokent) and KOSGEB (Small/Medium-size Industry Development Organization - see left sidebar) have teamed up and are holding an "Entrepreneur-Investor Meeting" in Istanbul. The Entrepreneur-Investor Meeting {Site Link} will take place at the Ritz-Carlton Hotel on Oct. 31 and Nov. 1st. A Forum will convene on Nov. 2nd to discuss, "Early-Stage Funding in Technology Start-Ups / Benchmarkings for Turkey".
For entrepreneurs of Turkey, this is exciting news, but you must hurry to register. The program includes an "Online Business Plan Preparation Training" between September 15, 2007 and October 15, 2007 where entrepreneurs are trained in the necessities of arranging their own business plan. Registration for this training will cost 450 YTL.
Then according to the website:
Technology entrepreneurs that successfully complete the training will present the business plans to be prepared by them to a team of experts in venture capital and business plan evaluation during the "Business Plan Review Board" activity to be held on October 31, 2007, where they will finalize their business plans by obtaining the opinions of experts as well.
During the "Entrepreneur-Investor Meeting", which will be organized on November 1, 2007, on the other hand, technology entrepreneurs will share their business plans with potential actual investors – business angels or venture capital companies. Our objective is to allow the minimum technology start-up to proceed on its way with new funding opportunities …
Then on Nov. 2nd, the "Early-Stage Funding in Technology Start-Ups / Benchmarkings for Turkey" Forum will take place as an all-day event. This event is open to the first 200 registrations, and is only 30 YTL, so sign up today. The Forum panel looks to include many dignataries from TUBITAK, TTGV and various Angel Investment Networks from Europe. This shall be a very interesting forum to spectate as we well see some very professional opinions on the current state of incubation and Series A Round Venturing in Turkey with models coming from Europe.
For a long time, I have always stressed the idea of good business planning and its need for an educative place in the building of Turkey's innovation and entrepreneurship. In previous interviews with Turkish VCs, I am constantly amazed by the lack of knowledge in the business planning area from the entrepreneurs part. But now, with this Training and Forum, it looks like KOSGEB, TUBITAK, TTGV and ODTÜ are finally making some choices toward entrepreneur education. While not really a fan of what the government can do with its bureaucracy and many faceted organizations that take up the Turkish R&D space, it will be interesting to see their take on this forum moving forward.
Perhaps in the future, why is it that only the entrepreneurs who take the training are able to participate in the Business Plan Meetings with investors? Do entrepreneurs usually have 450 lira to pitch their ideas? I would also encourage atleast in the future a more open submission guideline, perhaps an extra day for outside submissions and evaluations by committee.
In addition, by the look of those attending on the forum, it looks like we will capture an interesting viewpoint by leaders in the Angel Investor space. Most curiously (and poignantly), none of these angel organizations are from Turkey. Yes, I realize, per my last post, that for Turkey's incubated companies getting out of the Science and Technoparks; they are having trouble finding financing and are being lost in a "VC funding gap". Continually we are seeing more and more incubation, and non-existant VC investment and/or higher VC investments, basically squeezing out the entrepreneurs looking for that Seed-Venture round. We will have to wait and see what our friends at KOSGEB, TTGV and TUBITAK feel about this issue.
Thanks again to my friends at Endeavor who passed this on to me.
At the end of August, the European Venture Capital Association produced its quarterly report with the help of Dow Jones, VentureOne, and Ernst & Young. The highlight of the report, published here by AltAssets, is that European venture capital investment reached €1.14bn in Q2 2007 despite a drop in deal flow to 213 in Q2 2007 from 223 in Q1 and 265 in the same period last year.
While great news for investors and entrepreneurs in Europe with a venture model coming of age, the real story should be next quarters results to understand if the markets and appetite for investments remained confident after the credit fluctuations in the US and abroad. Surely the investing of private equity funds in this stage of the cycle does not stop investors from investing funds in smart companies. As of yet, we still have not seen any stagnation in fundraising either. As well, what IRRs these funds will be gaining is another area of interest in the years to come.
But I think what is most striking about this report is that the median size of venture investment round has surpassed €3 million. Here is an excerpt from the report that is most telling about this:
'The European venture capital market saw an explosion in early-round investing as €600m was poured into 126 early stage deals,' said Jessica Canning, director of global research for Dow Jones VentureOne. 'The data shows the median amount invested in a first round during the quarter was €3.2m, by far the highest total on record. Add to that a continued interest in later stage deals and the overall median for a deal done in Europe jumped 41 per cent during the second quarter to a record €3.1m.'
'The record median round size in Europe this quarter is the continuation of a trend that we have observed over the last 18 months in which investors are providing greater sums to fewer companies, allowing those companies to better compete globally and build critical mass for an IPO or M&A,' added John De Yonge, research director for the Ernst & Young Global Venture Capital Advisory Group.
Buyout funds around the world are setting records in fundraising. For example; see how Carlyle has just closed its Carlyle Europe Partners III out at a cool $7 billion. While some VCs in Silicon Valley are even complaining that the VC model is broken, some even giving money back to LPs (Sevin Rosen), we have to pause and wonder "Where is the venture model going?" Research has proven that with increased fund sizes comes increased median investment sizes and increased valuations of investments whether inflated or not, and increaing acquisition prices. The decreasing number of investments could be considered direct support for the "Venture Capital Model is Broken" Theory, and is definitely cause for concern. We have all talked about the "Funding Gap" that exists between Seed and Incubation Investment and Series A. Are we reaching a stage where incubated companies will only have banks (or possibly angels) to turn to? What should fill this gap is the true venture model.
And for Turkey, firstly we should be concerned how much of the EVCA number includes Turkey if any. We should also be concerned about the outliers in the data that constitute venture. Secondly, since the Turkish government has pinned "so much" investment toward the building of incubator science and technoparks, we must ponder about our incubated companies who will simply not make the cut when looking for that venture financing. The foci of Turkish Venture Funds is still fairly traditional - technology (with some stipulations). And if the median investment round is to increase - what then? The funding gap has just gotten larger...
Finally, once again, I'm going to send a shout out to the Turkish Venture Capital Assocation (if there is one) that is actually registered with the EVCA, and challenge them, "Where is the data?" I'm willing to work with you here. Would someone at the EVCA give them a call, please? Maybe the fault does not lie with the TVCA, but rather the reluctance of Turkish VCs toward paying dues and continuing the work of the TVCA! If you want to set the record straight on this, I urge the TVCA, the EVCA or any Turkish VC to contact this site, or comment below.
Citi plans to change Opus Menkul Degerler (Securities)'s name to Citi Menkul Degerler A.S.
According to Opus Securities' website, "Opus Securities is regulated by Capital Markets Board of Turkey and holds equity brokerage, t-bill and repo trading, derivates brokerage, leverage equity transactions, investment consultacy and short selling licenses."
As quoted in the Reuters article, "Turkey's equity market capitalisation has grown sevenfold in the last five years, and the depth of the market has increased commensurately. This acquisition provides a fast and efficient route to position ourselves in the market," said Steve Bideshi, Chairman of Citibank A.S.
hello there
i'm iann and i keep in romania a blog about media issues in south eastern europe
what is the real sotry about Medya Yayın Holding? because i dont understand what is State Deposits and Insurance Fund and hi s implication in this transaction and also the trails about the property
so if you have time to explain me a little bit the situation it would be breat
Well Iann, first of all Wordpress is still blocked in Turkey (another story), and secondly, the TMSF is a government organization that repossesses the assets of companies and individuals and are either unable to pay their bills, have defaulted on loans and declared bankruptcy or have been prosecuted for illegal practices. The case with Merkez Yayin Media is that secret contracts were signed between the owner of a seized bank and the current owner of Merkez Yayin, basically sharing ownership. These documents were later uncovered and since the owner of Etibank owed somewhere in the region of $900 million, the media assets were seized. Here is an excerpt:
Bilgin Group's approximately $900 million debt to the TMSF is due largely to Etibank. In April, following the exposure of secret agreements between Etibank's leading partner Dinç Bilgin and the head of Merkez Group, Turgay Ciner, the TMSF took over the management and supervision rights of Bilgin and Merkez Group's 73 companies showing activity in the media sector. After the TMSF had confiscated Bilgin's Etibank in 2000, Ciner purchased ATV and Sabah in 2005 by signing a protocol with Bilgin and the TMSF.
So basically, that is what went wrong. Now, for the good part, here is a a breakdown of advertising market share represented by the 5 largest media groups in Turkey as published in Sabah last week:
Market Share of TV Advertising in Turkey
GROUP
2005
2006
2007/MAY
Doğan Group
38.6
40.0
45.0
Merkez Yayin Group
22.4
25.0
21.0
Çukurova Group
15.2
14.0
15.0
Doğuş Group
10.7
10.0
9.0
Other Groups
13.0
10.0
10.0
Once again, I will restate that Doğan Group has said they will not be bidding, but speculators, analysts and the common man on the street think that they may somehow take a stake in one of the consortium syndications that sit at the bidding table. Again, we will have to see how these shake out. Meanwhile, my friends in the trading business are now bullish, going long on Doğan Group and Hurriyet equities.
Merkez Yayin Holding consists of 5 newspapers (Sabah, Takvim and others), 40 magazines, 1 radio station, 2 national (ATV and Kanal 1) and 1 domestic television channel, 1 news agency, and a publishing business.
UPDATE: As of the 25th of September, the TMSF announced that so far there are 5 prospective bidders for the assets of Turkish media firm ATV-Sabah at auction in November. The RTL Group, Rupert Murdoch's News Corp., Germany's ProSiebenSat.1, Czech CME and unlisted Greek broadcaster Antenna TV have all bought the $50,000 documents necessary to take part in the tender. The TMSF contacted Reuters with this information.
Original Post:Turkey's State Deposits and Insurance Fund announced that it will auction off repossessed media assets of Medya Yayın Holding, Sabah Newspaper and ATV on November 7th. Although Turkish law dictates that Turkish media outlets cannot be owned by a certain percentage by foreign buyers, this should provide an interesting investment opportunity for those willing to get into the space. We will have to wait until the auction to see how the investment consortiums shake out, in both the domestic and international sense. TDN covered an interesting story concerning the international speculation on prices and bidding. Apparently, the first day after the seizure, two bidders representing private equity firms called the TMSF inquiring about the seizure.
As an investor, this would provide a unique opportunity to either spin out some of these outlets for instant profit-taking. Managers at ATV should also be scratching their heads, pondering a prospective MBO opportunity. ATV is one of Turkey's major televison channels that garners a large market share of advertising revenue and possesses a long list of contracted actors as assets. These features alone could provide very interesting collateral for private equity firms to make use of debt in leveraging this buyout. Cash flows should be at such a rate to make this a very lucrative gearing opportunity. Needless to say, their are immediate opportunities here for spin-outs and turnaround of investment.
The Doğan Group, the owner of competitors Hurriyet newspaper and other media outlets, will not be bidding for the group. If they were, it may raise eyebrows at potential monopolistic tendencies.
PERMISSION TO SPEAK FREELY, SIR?
Quite frankly, both Hurriyet and Sabah are paparazzi rags that are more interested in exploitation of what sells rather that objective news gathering. This is another reason why Sabah would be such an interesting opportunity because its popularity was certainly gaining on the Hurriyet and they very well could surpass them as the leader, given the right changes (albeit good or bad).
UPDATE: A fellow reader sent me an email and asked for a little more information:
hello there
i'm iann and i keep in romania a blog about media issues in south eastern europe
what is the real sotry about Medya Yayın Holding? because i dont understand what is State Deposits and Insurance Fund and hi s implication in this transaction and also the trails about the property
so if you have time to explain me a little bit the situation it would be breat
best regards
iann http://aluiann.wordpress.com [romanian]
Well Iann, first of all the TMSF is a government organization that repossesses the assets of companies and individuals and are either unable to pay their bills, have defaulted on loans and declared bankruptcy or have been prosecuted for illegal practices. The case with Merkez Yayin Media is that secret contracts were signed between the owner of a seized bank and the current owner of Merkez Yayin, basically sharing ownership. These documents were later uncovered and since the owner of Etibank owed somewhere in the region of $900 million, the media assets were seized. Here is an excerpt:
Bilgin Group's approximately $900 million debt to the TMSF is due largely to Etibank. In April, following the exposure of secret agreements between Etibank's leading partner Dinç Bilgin and the head of Merkez Group, Turgay Ciner, the TMSF took over the management and supervision rights of Bilgin and Merkez Group's 73 companies showing activity in the media sector. After the TMSF had confiscated Bilgin's Etibank in 2000, Ciner purchased ATV and Sabah in 2005 by signing a protocol with Bilgin and the TMSF.
So basically, that is what went wrong. Now, for the good part, here is a a breakdown of advertising market share represented by the 5 largest media groups in Turkey as published in Sabah last week:
Market Share of TV Advertising in Turkey
GROUP
2005
2006
2007/MAY
Doğan Group
38.6
40.0
45.0
Merkez Yayin Group
22.4
25.0
21.0
Çukurova Group
15.2
14.0
15.0
Doğuş Group
10.7
10.0
9.0
Other Groups
13.0
10.0
10.0
Once again, I will restate that Doğan Group has said they will not be bidding, but speculators, analysts and the common man on the street think that they may somehow take a stake in one of the consortium syndications that sit at the bidding table. Again, we will have to see how these shake out. Meanwhile, my friends in the trading business are now bullish, going long on Doğan Group and Hurriyet equities.
Merkez Yayin Holding consists of 5 newspapers (Sabah, Takvim and others), 40 magazines, 1 radio station, 2 national (ATV and Kanal 1) and 1 domestic television channel, 1 news agency, and a publishing business.
Publisher: Jon H. Black TurkVCAnalyst: With 10 years experience working and studying in Turkey, an MS in Financial Economics, Jon H. Black is a published writer of multi-sector industries in oil & gas and banking & finance. In addition, he has offered due diligence services, dealflow sourcing and aiding private equity professionals entry into the Turkish market through entrepreneur and industry introductions.
For information on services, questions or suggesions, please contact: Location:
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. Having read Blink first, I may have spoiled the effect of reading that book that he his most famous for: 
. Luckily, I was able to find a copy sitting next to Blink on the best seller rack.
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Publisher: Jon H. Black
