Investing in Emerging Europe and AI w/Enis Hulli
Today’s guests — Enis Hulli, General Partner @500 Startups
Summary
In this conversation, Alp Uguray interviews Enis Hulli about the impact of AI on the investment landscape and the changing role of founders in the rapidly evolving space. They discuss how the focus of investments has shifted towards DevTools and AI/ML tooling, and how founders need to adapt to the changing landscape. They also explore the role of AI in different industries and the challenges and opportunities it presents for startups. The conversation touches on the importance of founders having an open mindset, understanding customer feedback, and staying disruptive. They also discuss the impact of macroeconomic conditions on startups and the role of regulation in Europe.
Takeaways
Investments have shifted towards DevTools and AI/ML tooling
Founders need to adapt to the changing landscape and stay disruptive
AI is an enabler in many industries, but distribution can still give incumbents an edge
Startups in Europe often look to the US for growth due to regulatory challenges
Founders should have an open mindset, understand customer feedback, and continuously improve
Chapters
00:00 - Introduction and Catching Up
02:00 - The Changing Role of Founders in the Investment Landscape
03:10 - The Impact of AI on Different Industries
06:14 - Adapting to the Changing Field of AI
09:07 - The Opportunities and Challenges for Founders
14:48 - Understanding Customer Needs and Feedback
17:16 -he Role of Regulation in the European Startup Ecosystem
“Whenever these shifts or reflections are happening, it is a great time to invest in a lot of companies because there are a lot of new industries and categories being defined. Every single industry, every single use case, it’s just a matter of time.”
Transcript
Alp Uguray (00:02.021)
Hi everyone, welcome to Matters of Automation. Today I have the honor of hosting a long time friend, Enis. Enis, welcome.
Enis Hulli (00:12.332)
Well, thanks for having me, this is fun. We haven't seen each other for a long time and now we're shooting a podcast together. It's going to be great.
Alp Uguray (00:19.405)
This is going to be great. It's going to be both a catch up and going dive deeper into what is new. Last time we talked, it was before everyone was talking about AI.
lot changed.
Enis Hulli (00:32.706)
And just to break you there, that's why you never published that episode. You didn't like it, you think AI is not cool enough, so you didn't publish it. And now like a year later you're like, shit, there is AI.
Alp Uguray (00:43.601)
I should change the name to Masters of AI from Masters of Automation to for a nicer pivot. But yeah, I mean, last time we discussed a lot of things, right? Like your personal story that led you to become an investor. You actually hinted on like, chat GPT inception and one section of it. But the way I want to start this one is
Enis Hulli (00:50.574)
Do it.
Alp Uguray (01:11.769)
throughout the years, the fund grew, right? Like now you live between London and Istanbul. Everyone knows about Emerging Europe. And then you actually created the team of, know, Emerging Europe is a mindset for all the founders and everybody. But I think this started also a lot of startups.
Enis Hulli (01:28.428)
Dude, don't cringe me, I'm getting cringed when you say that, but okay, that's good. Yeah.
Alp Uguray (01:41.253)
getting started as well, right? Like right now hundreds of companies are incepted with OpenAI's API and now other incumbents coming into play. Let's start with like, how did your role change? Like how, what's happening now in your
Enis Hulli (02:00.844)
It changed so much. mean, when you look at investing, obviously investors have their own theses as to what they want to invest in, but that's largely, at least for us, that's largely shaped by what entrepreneurs are doing, what we see as the best.
Enis Hulli (02:15.534)
categories, tech inflections, customer demand or adoption inflections, it doesn't matter. And then we try to follow them, we try to see what great people are doing and then mimic whatever they're doing. So from a fund perspective, if you asked me three, four years ago, would we have a specific focus on DevTools or AI ML tooling? would say not necessarily. We're an agnostic fund. We invest in anything, right? But looking back over the past three years, 70 % of our investments have been, and it's kind of equal split between the two, but either DevTools...
or AI ML tool against that because we've seen great tech inflection and we built a thesis around it and now we invest into a bunch of companies. That wasn't the case. It was more like we followed great entrepreneurs and then they put us into those buckets, which turned out to be the right bucket. So I think from a macro perspective, whenever these shifts or reflections are happening is a great time to invest into a lot of companies because there's a lot of new industries and categories being defined.
And then from a venture capital perspective, obviously we've seen a big slump since 2022, but thanks to AI, we're so back, I feel like, at least on pre -sidency, we're just so back thanks to
Alp Uguray (03:22.785)
And there are like different companies too. think there are like three categories now. They're the one of them is the takers that takes on a foundation model and then builds a wrapper around it and it becomes a company. And then the second one is the foundation model creators itself, like OpenAI and et cetera. And then the third is takes the model, makes it super specialized in one vertical.
and then makes that work super good. What do you see in terms of founders? Well, how they're approaching this and what do you think they should change their thinking so chat GPT won't eat them next?
Enis Hulli (04:07.148)
I feel like it's a pendulum swing. So if you look at it over the past, say three, four years, let's say since GPT -2, I'm saying GPT -2 because I think that's when a lot of these initial gen AI companies had their explosions in terms of AR, R &R revenues came in. There was an open source competitor to GPT -J and so a bunch of companies leveraged that as well, but powerful source. But ever since then, I guess this was the past three years, it's been a pendulum swing where it's like, now you actually don't have to use open AI. can build your own model or use
open source models that are out there, but then, no, that's just not right. You should actually rely on open AI. But the next thing you know, there are other companies who are building their own foundation models where you can actually almost be more agnostic and sit on top of them to get whatever suits you best. And then it's like, small language models. Perhaps you can actually either build your own model or build on top of an existing model. so what I'm trying to get to
It's more like the initial times of big bang, like a big explosion happened that we don't know what the right strategy is because it changes. It's very contextual depending on who launches what. And obviously Facebook and Llama is a big game changer on that as well. So there's no one right size fits all approach. We have some portfolio companies that are building their own foundation models, some that aspire to build it along the way after they get access to more proprietary data and then they want to build the model on top of that proprietary data. That's more vertically focused.
AI companies. And then we also have some wrappers, as you would call them, where their proprietary technology becomes how they integrate into the workflow. They mimic more like the vertical SaaS approach of, say, 10 years ago, but to tap into places where vertical SaaS wasn't able to penetrate. But now with AI, it can actually create that adoption of the user level as well. So depending on the use case and what AI is going to automate, what the right move changes along the way. And even see some companies pivot from one to another, a company
doesn't want to touch infrastructure, now wants to touch infrastructure as well. Company that doesn't want to build its own model, next thing you know, are actually building and deploying their own models together with the other models that they were using. So it's a pendulum swing where I don't know what the right answer is, to be honest
Alp Uguray (06:14.01)
And it's a lot about how the field is shaping, like nobody knows how things are going. And then from the perspective of the founders, how can they stay disruptive and how can they continue to understand their customer base versus being a solution junkie? Like being so obsessed with open AI versus being so obsessed
the customer and solving their problems. How do you think the portfolio companies' customers are adopting the current solutions? Like what is the mismatch in understanding of what AI can do and should do for them?
Enis Hulli (07:04.472)
I think the initial question is how are you going to become 10x better than whatever competitor that was out there. But then the other question is how are you going to stay 10x better than that competitor. So a lot of the or some of the AI companies that we see who are trying to fix a problem that's already been fixed, but just do it better. And it's 10x better thanks to AI, not thanks to the technology that you've developed yourself, but rather the technology that you're building on top of are the ones where it's tougher for them to build a competitive mode and that
difference between the, say, legal legacy competitor that owns the distribution might fade away along the time and it does happen a lot. And then there are some of them that are either going to more untapped categories where things that weren't feasible before with AI but are now feasible thanks to the lowering of costs or adoption that never came in into that vertical or into that industry. But that is going to come now thanks to AI because AI also creates this big adoption inflection on the user base perspective. So you actually don't have any player that owns distribution.
that you try to penetrate the market fast enough to become that player that has the distribution. And then there are some, they do these huge platform counter positionings where AI is not just an overlay, it's not the future, it reshapes the product from scratch. And if that's the case, then you building your platform on top of your AI capabilities, obviously, make it a big platform counter positioning so that the other competitors, sure, they can incorporate AI here and there, but they can never have an AI native solution.
I think it's important for the founder to understand where they stand on that spectrum so that there's going to be a sustainable mode as opposed to a larger company coming and building the AI that you've built as a future and eating your cake. And that happened with Adobe, with ConFi, et cetera, where we've seen these categories, these companies who got to tens of millions of ARR in a very short amount of time get eaten by these incumbents who just incorporated AI futures.
in a couple of months and they were just lagging by a couple of months which was a good opportunity but that's not that big of a window to you know disrupt these players.
Alp Uguray (09:07.97)
And then do you see which which were to those do you see that waiting to be disrupted like we have customers support a lot healthcare is also It's part of the discussion. But what do you see based on the founders you you work with what they're trying to target?
Enis Hulli (09:27.404)
I think, so AI is going to be everywhere, right? So I think from an AI penetration perspective, every single industry, every single use case, it's just a matter of time, so it's matter of if, you know? But then which of these are going to be so massively different than what was there before, so much so that it's going to build its own unicorns or its own deca -corns in those categories where others haven't tapped into? I think Haltech is definitely a good example of that. I completely agree.
same with, by the way, construction tech or product tech, industries that weren't digitized before were trying to get digitized by cloud, but again, didn't get digitized. Then mobile, again, wasn't enough to push adoption, and now AI is pushing adoption. So it's almost like there's a lag of like couple inflections there, which creates this room of opportunity and hopefully the winner takes it all effect if the adoption penetration just goes fly. So all these legacy industries, what adoption never happened from a decision perspective.
I'm really big on that. And then there are these industries and HuffTek is also an example of that same with drug, pharma, bio, et cetera, the incremental value that can be created is just so massive that it's worth it for AI to penetrate all these small niches and even small niches are big enough, not because the number of users there are, the number of companies there are a lot, but more so that the value there is so much that they'll be willing to pay a lot just for that and investing into different.
Companies that want to their own foundational models in those industries makes a lot of sense as well. So that's kind of our thinking right now, but that thinking changes every three months. If you asked me this a year and a half ago, you'd see me talk about different wrapper solutions, which is why you would call them or I would call them now, but they did get to put them on some revenue. If you were talking about this, say six months ago, I would be going more into small language models, companies building their own foundation models in small.
in certain niches. Three months ago, we talked about more rank type solutions and the infrastructure layer of that because we were expecting a big boom there. It really changes. I think that the place is just so nascent and that's the best thing about it, right? That's what makes it exciting.
Alp Uguray (11:38.287)
And from an investor standpoint, like the space is changing a lot, the solutions are changing a lot. like, then the biggest thing becomes the founders and like how founders adapt, adopt to that change. What are some of the skillset or some of the criteria in a founder that you look for that makes you believe in them that they will survive this rapidly changing space?
Enis Hulli (12:08.3)
Whenever we're looking at an opportunity, it's all like, as I've told this to you before, probably, it's a very founder -led decision. We only go from zero to one for the founder and everything else that's out there can only make us go from one to zero. We try not to get conviction on the traction, on the premise, et cetera. It's only the founder or the competitive landscape. It's only the founder that gets us from zero to one. But then what gets us from zero to one on the phone? That founder parameter changes depending on...
the company or where the company operates. So whenever we're looking into opportunity, the more Red Ocean the opportunity is, and from an AI perspective, it would more be like you trying to compete with incumbents who already there by being more AI native. So from an industry perspective, it is Red Ocean. There are billions of dollars of revenue every year spent on that problem. There are some existing software companies that have been doing this for decades. They have the distribution power and you're trying to become the innovative player and hopefully be the AI native player too.
kind of eat their cake or grow the cake and eat it. So if that's the case, we're much more bullish on the executional capabilities of the founder. We want to see more momentum because I think in those markets that are more red ocean, you try to take big bold bets where you these large sums of investments into companies or founder or teams that you think are actually killing off the competition that already exists. So you take big bold bets.
On more blue ocean markets, which would be the fields where you see less of a competition, less of a penetration, it's more so the new use cases that are being enabled, new categories that are being created. We don't have a Gartner report on it. You don't see these billions of revenues per year on that category, but hopefully you're taking a big market risk there. Maybe that market is never going to evolve to be a billion dollar category, but at the same time, you're not scared of competition. There, the entrepreneurial mindset of iterating fast enough, getting these small
feedback, short feedback, group small validations all around the place so that you iterate and pivot as a founder becomes more critical rather than your execution moment, which was the case on this Red Ocean example. But here we tried to be more early on, precede idea stage, we give more weight to the founders entrepreneurial skillset because that's core, that ability to become core skillset for the founder and we take a lot of bets. So there we try to take not big bold bets, but more like small bets in a lot of industries because you don't know which category is actually going
Enis Hulli (14:20.846)
be there in the long run. going back to your question, I think in both of these cases, we look for unique skill sets and unique know -how of the founder, but then their organizational capacity, execution of capacity is more important than these red ocean part and their ability to pivot, ability to ideate creativity, being nimble, short feedback with that sort of becomes more critical on this blue ocean.
Alp Uguray (14:48.018)
So then it becomes very important that they have an open mindset to what the customers say and then iterate towards that versus being so stuck on this is what I want, this is what the market thinks and be too much stuck on MomVision.
Enis Hulli (15:06.658)
Definitely, and in these red ocean markets, it's easier to get customers because the demand is already there, the category is created, so you can actually pinpoint the demand. So it's much easier. There are these low -hanging fruits, but it's competitive. There's a ceiling to that. Product might not be that differentiated because it's a market that everyone sees anyways. It's out there. Whereas in these blue ocean markets, it's tougher to find the demand because the customers even don't know what they want. So you're kind of creating that demand or the awareness for that product.
And then the initial customers become very critical because they shape your product. You can't benchmark your product to another product or understand. You can't talk to a hundred mature customers who know their needs and then build a product for them because it's almost like you know what the product should look like more so than your customers. And you're just stress testing that is what happens over here. But in both of these ends of the spectrum, you have to be close to the customer. It's just that the type of customer and then the way you validate what you think changes.
Alp Uguray (16:05.061)
And where do you think the founders struggle most when they hear a feedback? Because there is a feedback and there is a feedback. Like some feed, not all feedback are equal.
Enis Hulli (16:15.21)
Exactly. And it's tough. I mean, trying to put myself in their shoes, especially getting feedback from VCs is bullshit. You can get fundraising advice from VCs, but I think that's about it. You shouldn't let the VC play the customer. I really don't believe in that. But then getting feedback from the customers, you should listen to all of it,
It might not be your ideal customer profile and oftentimes especially in red ocean markets Also in blue ocean markets actually wrong customer wrong ICP can actually push you to mediocrity You have this big product vision or what you want to build that what you think the future is gonna look like and that might be Contrary, which might be a good thing But then the customers that you're speaking with might not understand it that push you to their current needs Which might push you to become similar to the competition which you don't want to? so I think
coming back to what you said, I think the question there is who you're getting the feedback from, rather than what the feedback is, should make you think different and should push you as a founder to validate different parts of your thesis.
Alp Uguray (17:16.113)
It is a tough problem to think about because if you're a contrarian, then by default, the feedback, it will be against that contrary vision. So it's like a constant feedback off. I guess that's when the conviction comes into play in a founder that like their vision is going to really change the lives of the people for good. So I have
Enis Hulli (17:41.4)
But then the questions are more important than the answers. I think the way a founder asks the question and what he she is trying to validate, which should be different depending on the segment or the ICP that she's speaking with, becomes vital. So the way you ask the question is more important than the answer. And the question shouldn't be asked the same way to a whole different type of ICPs.
Alp Uguray (18:06.937)
Just like being curious and then staying curious instead of being too much stuck on one way to think about it. And that shapes the question too, as well in a way. It is interesting. I right now, let me ask this question because right now, I mean, the world has some macro changes that are happening, especially in Eastern Europe and things of that sort.
From a fund perspective, how did that impact the way you guys look at things? And how did that impact the way entrepreneurs live? When it comes to funding availability or like innovation for them still trying to be hopeful to explore different fields.
Enis Hulli (19:01.228)
I don't think it made a change. So let me start with this. think what makes emerging Europe different than all of the other emerging markets is that if you look at the emerging Europe, unicorns, none of their revenue comes from Eastern Europe or Turkey. None of their financing comes from the region. Their down the line &A doesn't come from the region. So from a value chain standpoint, yes, their talent is based here. Their talent is based in Poland, Lithuania, Hungary, Turkey, et cetera.
But everything else is purely, mostly either a global or US first play. So it's different than all the other emerging markets because if you look at Africa, Latam, Southeast Asia, MENA, et cetera, that's definitely not the case. All the unicorns from these other emerging markets are very regional companies where you would have companies go from Singapore, expand into Malaysia, Indonesia, from Dubai to Saudi Arabia, Egypt, et cetera, right? So they would actually get impacted by whatever is happening in the region from they have all these exposure.
out there, which is definitely not the case for founders from Eastern Europe. It's more like them trying to mimic the Israeli startup model across 20 countries around the region. It's the only emerging market where you can actually do that. All of the other emerging markets would have different, would have similar characteristics to each other, as I pointed out. So going back to your question, is something like that happened in all these other emerging markets? It might create geopolitical issues, currency issues, financing issues, &A issues.
just because of the chaos and the ambiguity that it brings. But it's not the case for the Baltics, Eastern Europe, or Turkey, just because if you look at our Fund One, there's probably $1 .5 billion invested to date, 99 % of which came from the US. The total portfolio revenue is probably $800 million. 90 plus percent comes from the US. Sure, talent is here, but I don't think it's affected as much. Might even be an entire fragility, to be honest with you,
the more concerning geopolitics become in this region, it pushes more talent towards tech because of this rigidity of tech and this anti -fragility. It might push down your costs and pushing down your costs is not that important in and of itself, but it pushes the founder to do it, it pushes the founder to go for more blue ocean market. So your US competitor doesn't have time to wait. Your US competitor cannot wait for four years and then have a bunch of product and wait for the market.
Enis Hulli (21:18.766)
matured to be able to sell it. No, but you can actually do that just because your cost base is much lower. So it's not the cost base in and of itself, it's rather the quality of talent that that brings, the retention of talent that it brings, and then those two combined would push it to go for more blue ocean markets which can potentially yield larger outcomes when the market becomes
Alp Uguray (21:38.425)
And that's very important. That's a huge point of defensibility that the startups do not get impacted by the macroeconomic conditions. It actually, in a way, helps them to stay, be more disruptive, continue to look for different areas to innovate. To that end, I'd like to ask a few questions. So these will be, so every guest,
that I host, I asked them a question about what they want to ask to the next guest on the podcast. So I'm going to ask you the question first that a previous guest want me to ask you. so it goes like this and then you can answer it in any way you want. So if you were 13 years old right now
you and looking at how the world is changing, would you be optimistic or pessimistic? And if you were to be optimistic, what would you be studying and what would you want to be when you grow
Enis Hulli (22:54.926)
13 years old, my first advice to myself would be that I shouldn't drink so much out my bar, but passing that, I'm an optimist by the way. Like I really don't believe in this pessimistic vision. I think being pessimistic is just very populist. It's easy to be pessimistic and you I have my theories on that, but I'm more of a maval -esque kind of person where I like to be rational, optimist, factual, etc. So I'm an ever optimist.
Alp Uguray (23:00.475)
you
Enis Hulli (23:20.488)
And now looking from that lens is I studied civil engineering, was a horrible decision. Obviously, I would study something more technical, more around software engineering. So that's given. And then I also believe that this bridging to the US, bridging to the US is almost trying to play an away game in the US where you're getting all the advantages of the US in terms of equity markets, enterprise software budgets, greater early adopters, venture capital, et cetera.
But at the same time, you're hedging yourself against the disadvantage in the US, is talent churn, talent attention, talent costs, being able to build up corporate memory because of that, low retention in talent, et cetera, by employing talent back at home. I really believe in this bridging. So if I was 13, obviously I would have to build that technical skill set, but then probably get awake early on that I should kind of try to facilitate that project myself and start earlier on.
So instead of becoming the venture capitalist in 2016, I would perhaps start investing into the startups even way before, maybe by 2009 when I actually moved to North America for college.
Alp Uguray (24:25.361)
And that's interesting too, because if you're 13 years old and by the time you're let's say 25, that's like almost 12 years. And from that lens, that will mean after 12 years, the generative AI will explode. So maybe software engineering will change or maybe the way people design things will change.
Enis Hulli (24:47.854)
I misunderstood the question. So you ask, what if I were 13 now, what would I do? Still, man, think you have to know the language of computers to operate in this world. It's going to get even more drastic. Sure, AI can eat a portion of it, but understanding it is still critical. It's like saying that AI can write while you learn English kind of stuff. People can translate. There's these automated translators. You don't even have to learn English from now on. It's like a similar analogy. I really don't believe in that.
Alp Uguray (24:53.541)
Yes, right now.
Alp Uguray (25:18.523)
Yeah, I mean, it's, it is crazy that even when I was in France a few months back, that I was trying to communicate with one of the people there, I was just using a translator in between to translate what she was saying to me. I was to them. And it's like, was just thinking about that elementary thing working so well, and then changing the life is huge for businesses as well. Because then they can accommodate
any customer anywhere in the world without the restriction of who works in their front desk. It actually enables everyone to speak the same language in some shape or way or form. So I have some speed dial questions to you. I'm going to hit you three questions and then you tell me, don't overthink, just tell me what comes to your mind.
So the first one is which founder from your portfolio companies moved you in a way that was personal, that changed the way you thought about
Enis Hulli (26:32.014)
I think it's OHSUN from Billion to One. So Billion to One developed this AI molecular counting technology. That's the tech inflection that they're riding on. But then they were trying to find use cases as to how to build on top of it. And the initial use case was prenatal testing. Now it's liquid biopsy. But the way he portrayed the vision of the company in 2017 by first of all, going to this unmit.
medical need, which is a lower hanging fruit. There's a cap in that market, but he can actually build a solution, build a distribution channel, ramp up the company and then go for liquid Y -Op, which obviously has a much larger time and it's more of an unsolved problem from a technical standpoint rather than finical testing. And then he executed perfectly. So he both has a technical skill set because that did grad school plus PhD in the space, but also commercially speaking, he had division and every single quarter in the board deck, you look at the numbers,
he always over hits them. He sets the expectations high enough. We think the expectations high as the investors and then he just overshoots them all around the place. And I think he's also creating a huge impact for the world and he's gonna continue to do so. So if this wasn't a VC fund where every fund has an end life where you have to close the fund, if that wasn't the case, I'd rather stay with the company forever basically.
Alp Uguray (27:54.225)
That leads to my next question, because if you were to go from being an investor to the startup world, what would you start today?
Enis Hulli (28:06.632)
Ooh, so first of all, I think I'm too risk averse to be a founder. think I have self -reflecting on why I didn't become a founder. I was too risk averse was the main reason. I tried being a founder, it didn't work out. I couldn't even become one. We raised pre -seed, but never able to raise seed. And then I never tried again, just thinking that I'm not good enough. I think I'm good at sales, good at people relations, have zero technical skillsets, have zero unique knowledge. I'm not in love with the problem that I
forever, plus I'm too risk -averse, don't think I would be the best founder. So that's why if you push me to become a founder, and I think everyone can become a founder, it doesn't have to be a startup founder, can be more like an SME, because everyone of us who were a founder 5 ,000 years ago, everyone was doing their own business. What I would do would probably be either around heating ventilation, air conditioning, AI, tech enabled services companies, somewhere around there.
where the upside is capped, but downside is also protected because it's easy to make revenues, because it's an established market where you're just trying to get more wall and share in the industry that already exists, or more around AI, VC, PE, data due diligence, because I just think that there's a lot of good use cases there. Again, the upside is not that big, nothing big would, I think, come out of it, but downside is also fairly connected, which makes me a bad entrepreneur, I guess.
Alp Uguray (29:23.537)
Do you see just a follow up question to that? Do you see like AI coming into have a strong play within the due diligence space? just being, especially checking data, public and private market data.
Enis Hulli (29:41.464)
For pre -seed, think for pre -seed that level of due diligence is more like a red flag check. You don't build your conviction of it. You just try to make sure that there are no red flags into that market or industry or premise, right? So the answer is no. It would actually enable us to do it faster with less labor costs, but that's it. So it's not a 10x difference. It's more like bottom line
But later down the stack, I think it might become critical. So the way I see it is on preseed, it's an access game. If you have access to great entrepreneurs, then it's easy to pick them. But the more later stages you go, series A, B, pre -IPO, IPO,
doesn't become an access game, everyone knows about the companies, they can get information on public equities, you can get every single information that's out there, it's rather a picking game, and that's where due diligence becomes much more important than being able to use AI to create that alpha, I think has more of a room there because it just increases the upside, it optimizes the top line, it's actually optimized for the bottom line, which would be the case for a fund like us on pre -seed. But we do use it, I just don't think that it matters a lot, it's just...
save some costs and makes us do it faster.
Alp Uguray (30:48.86)
It's like a tool, it's just a tool on the side to accelerate things. So my next question is the company you missed, what is the company you missed investing and then regretted later? It could be for any reason, right? It could be because they 10xed, it could be because they were such as having a social impact or they are solving a very big problem that
Enis Hulli (30:51.958)
Yeah.
Alp Uguray (31:18.481)
Was maybe a moonshot in the beginning and they went ahead and solved it. So it could be one of those
Enis Hulli (31:23.662)
It's so not going to be the case because I'm going to talk about a gaming company. Dream Games early on spoke with them a bunch of times. We tried to invest, we couldn't because the round was always subscribed and our fund was only a $10 million fund. the amount of money we can invest was like a hundred K, which I think in the grand scheme of things wasn't useful for the founder, but the company basically became a unicorn two to three years later. And I think...
If we pushed harder, we could have invested a smaller ticket either from the fund or personally and the yield, the return there would be spectacular, but we completely missed on that. It's not an impactful company. It's not your AI moonshot that you envisioned. It's simply a mobile gaming company.
Alp Uguray (32:06.617)
I mean, it is still like if it impacts people's life, people play a lot of games. And my question is like in the emerging Europe, there are a lot of video game startups that really were very valuable. Why do you think that is the case?
Enis Hulli (32:26.734)
technical founders who suck at sales. So I think if you look at good companies say $100 million plus in valuation in our region and putting the ones that are more local or regional like local e -commerce and Poldem etc aside, it's either highly technical founders going for technical products and that's more so in the DevTools category most of them are open source some are not but
they're all DevTools, they're selling to developers with a bottoms up DevTools motion, either open source or not, doesn't matter. But these are people who don't want it, they want to bottoms up adoption and then sometimes top down sales after series B and beyond, know, because they don't feel native trying to sell the product at the early stages because they're not good enterprise sellers themselves. That's one type of a founder. The second would be bottoms up, SaaS companies, low tickets, a lot of users.
talk to the customer before selling them. Again, you try to be away from the customer, make sure they buy your product, build a good product. All these product -based growth companies will be in that category. And then third would be gaming, B2C, mobile apps, putting all of them into one bucket because again, you can create technology, build the best product, don't have to deal with sales because the distribution is pretty much taken care of. When it's performance marketing, you don't even have
You still have to understand the customer iterator on the product. You just don't have to do pushy face -to -face sales, which is not probably their core strength. You asked about founders and why we invest in certain founders. When you look into founders, and if you have to put their parameters on a spec,
We try to stay away from okay or above average ones. One thing needs to stand out. One thing needs to be 12 out of 10. And other things can be very bad, but you can compliment that we did with other co -founders, early employees, as long as the founder has the awareness that they lack that portion. And more often than not, that's sales. I don't think the experience is there in the region for that.
Alp Uguray (34:22.891)
Awareness is an interesting thing as well. They have to be aware that they suck at sales to accept that they suck at sales so that they can be taught. What are some of the things you look for that identifies
Enis Hulli (34:39.986)
Sometimes, by the way, unique experiences there for a founder. They've anchored themselves to a problem definition that's also there. We think that they know the space and they're qualified to do it, et cetera. But then there's an awareness mismatch. The way we feel about the co -founders, co -founding teams, complementary skill set, or the marketing general, et cetera, we were
very distant, we're like worlds apart. And then we try to meet a couple of times to align and aligning is important, not because of what we think is right, or if that is wrong, but it's really important for us to understand their line of thought so that it resonates with us and we make sure that there's no awareness mismatch, but sometimes there is. And we do sometimes not move forward with some investments where we were, we built conviction on these couple of steps initially, but then fall off on this like third or fourth step of awareness.
Alp Uguray (35:33.583)
And they need to always keep a mindset of continuous improvement and understanding themselves to be able to be able to
Enis Hulli (35:40.63)
or set the bar high so that you would seem low for yourself. mean, when you're trying to understand whether your current ability or your potential ability can actually come to that level, you need to set the bar so high to be able to see whether you would actually ever reach that or whether you're currently there or not. And sometimes they don't set the bar high enough thinking that it would be easier than they would imagine, which again is an awareness discrepancy between an investor and a founder.
Alp Uguray (36:08.689)
And it tells too. So my next question to you is actually for you to ask to a question to the next guest. So I have a guest coming up and I typically don't reveal who it is, for, let's say if you were to ask a question to the next guest and within the world of entrepreneurship, AI, automation, feature of work, what would
your question. And to make it easier, what are you curious about these days that people are not answering?
Enis Hulli (36:53.974)
Because you said AI and automation, I'll go for that. And then I'll, in Vutendo, I'll go for AI. I think a big distinction to make is from a distribution versus innovation standpoint, whether you can actually have an AI native product to kill off the existing player who has the distribution or whether the company that has a distribution can actually mimic your innovation and,
before you actually penetrate the market, would kill themselves. So my question becomes in which industries, use cases does she think that AI is more like an enabler where the players with distribution actually have an edge against the newcomer and now which industries is AI building such a
platform counter positioning that being AI native in and of itself is a good reason to build a sustainable differentiation for enough of long time so that you penetrate the market faster than the competitors that can sometimes cannot mimic you. So which some analogies would be good which companies would fall into that bucket which companies or categories would actually fall into this other bucket
Alp Uguray (38:00.827)
That's a great question. And it's interesting when it comes to the unknowns of it. then like my previous guest, Tatiana, she's just starting her own startup. She used to work at Salesforce and Amazon. She set up the opportunity management platform and et cetera. And she made this comment.
that I found really interesting. And then I will ask that as a question to you. So she was saying that the user interfaces in the internet are very sales driven, right? Like, so you enter into a website, they will tell you this, like this pop -up comes out, give me your email. And then after that, you scroll down, futures, use cases, this and that they will buy your attention all the
So if we imagine a world where AI is the intermediary between you and the internet, right? Like you would go to chat GPT to ask that question or perplexity or whatever new company is coming up. In your intuition, what would be the future, like human to computer interaction be? Like rather than going to hundred websites to find
contact us warm to their futures. How do you think that will reshape?
Enis Hulli (39:33.934)
So I think, obviously, AI is going to be embedded into every single product, which is happening right now. But now what you're referring to is AI becoming an extension of every single interface, and then them integrating with us, which potentially means that I would have an AI extension that kind of even understands, or I tell it before I need some information to go and talk to it. But then the website would also have an AI interface, which means that even my browser is going to have an AI interface so that all of them complement each other. In that futuristic...
scenario. I guess I don't even have to show that intention because that intention is understood by AI that's surrounding me and I think that that future is going to come sooner than anything that has to do with neuroscience or brain activity etc. I think those are going to be further along the line.
But when that future is going to happen in terms of AI surrounding every single interaction and being the main interface before the actual deeper interaction happens, because a lot of interactions with any product is shallow 90 % of the time, and goes deeper only 10 % of the time, so AI I think can cover all that 90 % exposure landscape. I think that's going to happen in the next five to 10 years, that it's going to have a fast enough adoption.
Alp Uguray (40:49.199)
I think so too. so to tie that point and then as the final question that I have is a lot of the startups and I think the investors that I spoke to express that like Europe has a regulatory climate that is tough for startups. And how do you
startups work with it, work around it, and how can investor community from your side support that innovation?
Enis Hulli (41:32.974)
Europe definitely has way too much regulation and everything. mean, the Eurocrats are definitely leading the world and being the frontier in terms of regulation. And that pushes a lot of the founders, whether from Western Europe or obviously Eastern Europe, to instead of selling to European companies, building companies in Europe from both front of oscillation perspective, legal perspective, but also from a customer base perspective, they'd rather do that in the US because you know, startups...
More often than not, they don't ask for permission, they just apologize later. And I kind of like that mindset, I'm going from that camp. And it pushes them to do that in the US, which I like. So I think it's a problem for Europe and European economies, but at the same time, it creates this whole opportunity for entrepreneurs from France, from Germany to build in larger market, which is the US and initially build the product there, use it as a test ground, scale it there while employing talent back at home, et cetera. And I think
much more money to be made doing that, both for the founder, but also for local European economies. So I think it creates a problem that can easily be solved and that hopefully that would create greater yield.
Alp Uguray (42:42.742)
And kinds of those like, in a way, two sample tests, like when the one in US no regulation, winner takes it all, but also getting sued and things of that sort. Whereas in Europe, it's like, let's go very cautious and controlled. it's around the two sample experiment in a way, especially for European founders.
Enis Hulli (43:06.722)
There are hundreds of experiments of that, especially in the drug space. was just reading a book.
Enis Hulli (43:14.99)
I don't remember which one. Shit. That gave examples as to how Europe tried to pre -regulate a lot of medicine that eventually got approved. But just because the time lag is like 2 3x compared to the US, and this is like a century ago, the penetration wasn't fast enough. That gave to a lot of deaths or people with illness, et cetera. So I think that this cautionary
behavior or the tendency has been the case for a while in Europe.
Alp Uguray (43:46.039)
And then sometimes it serves well. Sometimes it doesn't like, for example, for food in US, there is zero regulation in what we eat. So it's a lot of pesticides and things of that sort. Like you can even show up to a pharmacy and ask them to buy drugs in the US. Same as it is like gums. Same applies to gums as well. Whereas I think in Europe, it's maybe one reason it's a little healthier. But that said,
Enis Hulli (44:07.618)
Yeah.
Enis Hulli (44:12.375)
Yeah.
Alp Uguray (44:15.643)
Thank you very much for joining. We could go for hours. Maybe it'll be great to have you again. Thank you very much for sharing your insights and joining.
Enis Hulli (44:27.32)
Well, thanks for having me man, this was good.
