Sramana Mitra: I know you read some of my writings. I’m a huge proponent of bootstrapped entrepreneurship. Having worked in this ecosystem for all these years, I’ve observed the development of different ecosystems in different parts of the world.
Bootstrapping happens to be one of the really important ways that ecosystems come up. You get a few startups that become successful in a bootstrapped manner. Then the investments start.
What is the status of the Turkish or Central European ecosystem vis-a-vis bootstrapped entrepreneurship? Are you seeing a lot of bootstrapped companies getting further along and then seeking funding?
Cem Sertoglu: That is one model that we see, especially for companies that have been around for some time. Some of the best of the best have bootstrapped their way to success. It’s a luxury in the first generation of internet business in Turkey where they started in the early 2000 and where there wasn’t a lot of competition. They had time to develop in a healthy manner. They went on to become some of the biggest successes in the region.
Some of these guys ended up raising money later on in their progression to strengthen their domination of their respective niches. They came from bootstrapped backgrounds. Today, we find that some of the best opportunities out there are companies that are displaying bootstrapped mentality but are also smart about getting their hands on enough capital to make sure they don’t slow down.
If you’re too slow or too cautious, you make room for competition, which is faster to come about these days. The lean and bootstrapped’s mentality combined with the right source of capital is probably the recipe for some of the greatest successes we’re seeing in the marketplace.
Sramana Mitra: You mentioned a bunch of case studies of B2C success from your ecosystem. Of course, Avast and AVG are both B2B security companies. What do you see in B2B in the early stages right now? Is there also B2B activity?
Cem Sertoglu: There certainly is. That’s the second part of our strategy. The first example I gave was the local champions which are mostly consumer-facing businesses. The second leg of our strategy is funding B2B businesses. We call them global innovators. This is innovation coming out of the region but going after global problems.
One characteristic that we see in these companies is that they are focused on a narrower niche in the overall enterprise technology spectrum. They tend to focus on a narrow area and try to be the best in the world at what they do. The global uptake is quite strong because the ability to go to markets wherever you may be in the world makes this possible regardless of where they come from.
We find these companies to be more technology-driven. We are very much okay taking technology risks. They tend to keep their product and R&D function in the region but take their market-facing part of the business closer to their customers. Most of the time, they’re headquartered either in Silicon Valley, New York, UK, or Germany. About half of our portfolio are companies that fit this description.
Sramana Mitra: Are these enterprise-facing companies SME-facing companies?
Cem Sertoglu: Our current portfolio is a mixture, but we are heavier on the enterprise-facing companies. That’s really a function of the background of the partners in my fund. Three of the four partners have actually built enterprise software companies around the world. We probably have more to bring to the table. We have a bit of a concentration of enterprise-facing companies. We do have one SME-facing company.
Sramana Mitra: Why don’t we talk about a couple of examples from your portfolio of enterprise-facing companies? You’ve given some examples of what’s happening in the concept arbitrage area. Give us some examples of companies coming out of your region in B2B.
Cem Sertoglu: One of the rising starts of the portfolio is a company called UIPath where we invested about two years ago with almost negligible recurring revenue. They were doing some consulting type of work for their clients. They had some revenue but only very little. Fast forward two years, the company is poised to end the year with $20 million to $30 million of ARR. It’s literally on fire. It’s in the process of moving its headquarters to the US. They have opened offices in London, India, and Japan.