This Startup Investor Has Built The VC Fund With The Best Performance In European History

After successfully launching and exiting his own startup, Cem Sertoglu has gone on to manage a 200M Euro fund. From which he is looking to write other entrepreneurs their first $5M to $10M check.

On the Dealmakers Podcast, Sertoglu talked about understanding market cycles, taking on existing incumbent companies with a lot more resources, and network effects. Plus, record setting investments, the $36B company that almost every investor passed on, and more.

Listen to the full podcast episode and review the transcript here.

Growing Up In Istanbul

Cem Sertoglu was born and grew up in Istanbul. The heart of Turkey’s economic activity. 

It was a time when the internet was really taking off, and seemed to be changing the world. After high school he left for the US to study economics at the University of Texas at Austin. Then began working in consulting. 

He took the leap from this firm with two colleagues to start their own professional social network. Then suddenly the capital markets and public stocks crashed. Term sheets they had on the table vanished. 

They managed to successfully pivot to avoid running out of money, and ended up being acquired by Oracle.

Sertoglu has now lived through several of these market cycles, and has learned to temper his emotional state through them. He says that “when everything looks great, it’s rarely as great as it looks. Then everything looks bleak, it’s rarely as bad as it looks.” Lessons that he has carried forward to what he is doing today.

After selling his shares in that company, he moved his family back to istanbul. 

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From Founder To Fund Manager

Back in Turkey he began meeting early stage companies and internet entrepreneurs. He was excited about the potential of all the companies he began looking at. 

He saw great potential for local companies to become market winners, rather than global companies trying to move in. With the size of the economy there, he saw great investment potential. 

While he admits that he could have done some things better, some of those early angel investments he made turned out to be great winners.

Although you’ve got to be optimistic to consider investing in startups in the first place, Cem told the Dealmakers audience that he was perhaps too pessimistic when it came to writing those initial early checks. Trying to balance risk, with bigger checks for ‘safer’ investments, and smaller checks to limit exposure to losses in riskier ventures. Today, he says it would have been better to stay consistent with check sizes across his personal investments in startups.

Over his first 6 years of solo investing in startups he made around 15 investments. Looking back he says he is horrified that he was investing so slow, across so few companies. He should have been going two or three times faster. 

Still, he admits that any small startup winning against the likes of incumbents such as Walmart, Amazon, or Google is a miracle. Yet, it does happen. Young companies can be more innovative than large ones. When they are able to create a virtuous upward spiral of growth on network effects they can really compound their gains. 

Those that are able to just continue to execute on this consistent growth, without needing huge breakthrough moments can be very profitable investments.

Bridging The Gaps In Available Funding

However, Cem ran into his next challenge as some of those early bets did produce growing startups. Being in Eastern Europe, when those companies needed another round of funding that was bigger than $10M, they often found there was no capital source for them to tap. Leaving some in a bankrupt situation, in spite of their successful growth. 

He co-founded Earlybird Digital East Fund to be able to provide more financial backing to startups and entrepreneurs in his region. 

They struck out to invest in this underserved space, with an initial 150M Euro fund. One of those investments which was passed on by just about every VC in Europe at least once, went on to go public on the NASDAQ, giving them a $36B market cap. Making that the most successful venture capital funding in European history. Returning 15x their entire fund, or 130x their investment into that company. 

What Cem Sertoglu Is Looking To Invest In Today

For those looking for funding for their own startups, here is what Cem says they are looking for among those needing that first $5M to $10M check. 

The first is needing a problem that is big enough. Which he says is probably the number one reason that they turn down pitches. It doesn’t matter if everything else about the company is perfect, if the potential size just isn’t there to deliver on investor returns. 

Next, it is about looking for signs of achieving product market fit. Any indicators that show the solution being built is being validated by customers. Especially paying customers. 

Then they look at how realistic you are being in your assessment of the resources you need to carry you through to your next milestones and stage of the startup journey. 

Then of course, they remain focused on funding the best talent coming up in emerging Eastern Europe, with ambitions in capturing large global markets as category leaders. 

Listen in to the full podcast episode to find out more, including:

• The successful investments Cem and Earlybird have made so far
• His top advice when investing in businesses
• The technical talent emerging from this region

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