E646 | Alper, Agave Games & Enis Hulli, e2vc: Pivoting Models & Building Global Gaming Success from Turkey

0:00Welcome back everyone to the European VC podcast. Today I have the pleasure of bringing on a friend of Enesys who hates being on stage. He just revealed that he declines and is 9 out of 10 times. And I said this was the Andreas effect because this time he accepted. Before we start the show, a quick note. If you're building or running a fund, you know it takes the right partners. At EUVC, we only work with sponsors we truly believe should be part of your tech stack. Please do take a moment to hear about them. And if you do, reach out, mention EUVC. It's the best way you can support what we do. Thank you so much.

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2:49This show is not investment advice, and the hosts of this episode may be invested in the funds and companies featured. Alpert, thank you for coming on the podcast. Thank you so much, Andreas. It's great being here. What's sad is, so we're going to have this session with Alpert today. We'll be on a panel together in three weeks' time. We had the panel a couple of months, a year back, and he's only accepting one out of every 10 times I asked. It just shows how many times I've been asking. It's kind of a pity on my side. Enes, maybe you'll set the frame a little bit here and say why you thought Alper was such a great guy to bring on the path.

3:31Yeah, I'll start with gaming and then come to Alper because gaming is a fun subject. Alper is the boring part of it. But Turkey has been amazing in gaming. Turkey has created two unicorns in gaming and one of them was Peak Games. Out of that came 80 studios and that splurge that wave of entrepreneurs is still continuing to this day for the past five years. I think Turkey has been the center of mobile gaming. So we've been very active. we've invested into four gaming companies. The third fund, our first ever investment has also been in mobile gaming. And Agave has been one of the greatest success stories of last year with their game Find the Cat.

4:10And now they launched the second game as well, which we're going to shed more light on. And I want to be a golfer because of a great person who hates to be on podcasts and you want to bring people who hate to be on, who hate being on podcasts. Second is how much the company has grown over the past year. And then the way we sourced the deal was also pretty interesting where I met Alper, you know, like I guess almost a year back, a year before he actually started the business. And I thought it was an interesting story. Actually, on that note, I can tell you, I did an episode with Jim Polcrono from IMD just the other day.

4:45And he had done a study where he found that you have a U-shaped graph when it comes to how do people source, how do VCs source, where you have a lot of the new guys sourcing primarily from outbound and then all the super experienced guys sourcing primarily outbound. And I thought that was the thing about you when we're talking about outbound sourcing, Enes, because I think you're the master of that. And it's so true. I have this LinkedIn post that I want to do, but I haven't yet. It's called Anti-Data-Driven Sourcing. It tells about our data-driven stack because we crawl GitHub, we crawl product.

5:23I'm not sure if it's legal, but we crawl GitHub, we crawl product. We crawl LinkedIn to get signals as to who's becoming a founder. But if they've actually already become a founder, it's already too late. So that becomes almost like an anti-sourcing mechanism where these are the people we want to make sure we don't invest into because if they're good enough, we're already too late. We should have met them a few years back. Go all the way back to the beginning here, Alpa. But actually, the beginning is almost before you founding the company because here in the frame of this conversation, it's you and Enes and how you end up becoming a partnership in terms of Enes backing you.

5:57So maybe tell us first and foremost, how did you come to meet Enes before you founded Algave? Correct me if I'm wrong, Enes, but I think you reached out. We had a brief call. We just chatted about me, myself, maybe like potential partnership in the future, stuff like that. But more and more interestingly, I think I knew Enes from Common Friends as well. So at the time, I wasn't really into kind of like the Turkish startup ecosystem. But like after kind of like getting back to Turkey, kind of like living at the ecosystem, I learned that there was more in common between two of us. There was a lot of people that Ennis knew before.

6:33So with the common people, I think it was more easier for us to start building that relationship. And when you do cold outbound to be founders, people who are thinking of being a founder in the next six to, say, 24 months, there's a post of self-relection where if they reply back to you, it means that they're considering being a founder, and you as a VC, you want to meet them. Whereas the point after they actually become founders, if they're replying to your message, it's more the case that they're more in need they're starting to fundraise there's almost that negative self-selection or you want to push people who don't reply to your messages after they become founders you want to push people who are replying to your messages if you're reaching out to them before they became founders How does it feel Alper to hear someone talk so cynically about coming to founders?

7:21I don't know, I think I got used to it It's been a fun journey so yeah, at first I think it was hard to kind of like, not hard, but interesting to kind of like get to more of this. But now I think everything is like going great. I love venture dynamics. It's such an interesting thing to dive into. Okay, but then let's talk Agave. Tell me about how did you end up founding the studio? What's the whole ambition? Anyone that hasn't played one of your knockout games, maybe also explain that to people. So yeah, I was actually coming from a non-gaming background. I was doing consulting, data science consulting in San Francisco.

8:00So the, I think, main driver that brought me into the gaming ecosystem was having solid friends. So all of my kind of like small circle from high school, they were experts in the gaming space and they really eased my way in. So kind of like having some initial thoughts, bringing ideas together with them, shaping up what we can do was kind of like the initial initial process of starting off agave and then one of those guys that my friends old son decided to quit his job i also did the same and we started to kind of like start really be diving into into what to build and how to kind of shape agave's future together.

8:42Everyone pivots. You also did so. You explained that you started out wanting to bring a different publisher model to the world of gaming, but you pivoted away from that. What was your initial insight and what did it take for you to realize this was not the path? I think at the time, publishing was the right fit for us because of my background as well, because as I said, I'm coming from a data science background and the growth of a mobile game is really data-centered. So kind of like seeing there, I was like, yeah, I can make an impact on this area, you know? So that's why I think the growth part, like the publishing part was like a perfect fit for our goals and everything.

9:25And at the time, I think most publishers were not doing a hands-on approach. They were kind of like the studios were not receiving the attention that they wanted and the publisher approach was more leaning towards quantity over quality, we thought that there was this opportunity where we can kind of like change this kind of perspective about publishing. And that's why we decided to kick things off on that direction. But shortly after, I think what happened was we wanted to get more skin in the game, you know, like we wanted to get more involved in the product cycles and everything. although we were being super involved in that publishing structure it didn't perfectly align with our kind of like long-term visions so I think at that point we thought that it like when we kind of like consider the future of the of the company like looking two years ahead we thought that it was kind of like not the not the approach not the vision that we want to kind of like continue moving on and I think that's when we decided to pillage and start building games in-house.

10:33I think from a VC standpoint, while we were looking into Argave 1.0, we were really impressed by both of the founders. For us, it's always about the founders. I mean, any conviction building that we have as a team is more based on the founders and then we look at everything else to check whether that those things like competitive landscape, etc. are going to get us back from one to zero. But we were at one after meeting the founders. We have to back these founders. But then on the publisher model, we felt like they knew the pains really well inside out. It's just that first the space got really saturated and now the space was dying down.

11:03So although the pains are there, the problems are there, the opportunity is not there. So all the problems on that quantity versus quality and the studio relationships, etc. are definitely, there's room to grow in that value chain. It's just that ventureable room to grow. So we felt like we should back these hunters who are going to eventually build games and find their way into something that has more of an upside potential but this can be the interim thing immediately. Did you know when is at the time that this model wouldn't be, the publisher model wouldn't be sustainable venture scale? You're smiling already.

11:37Yeah we had these calls with these discussions with Ines and Okun after we put it as well and yeah I think it makes sense. It was obvious and I think we've looked at a lot of different new gen publisher models. Some of them raised good funding, but none of them actually worked out. And the more legacy publishers, which gained heat after 2016-17 and were at their peak in 2019-2020, were also getting saturated, margins getting lower, then able to find these hit games as much as they used to. And then the growth of the casual site was still going on. It's just that the publishers, I guess, were getting squeezed in between.

12:14And a lot of the hyper-casual studios were also being self-publishing slowly, at least the high-quality ones, which is again, squeaking the margins for a publisher. And even us, we also thought that this was going to be a bridge for us to kind of like build something in-house, you know. I think we didn't have the resources in terms of talent in-house at the time. We didn't have the core founding team ready in place. And I think at the time it was the right fit. But looking back, I think we also didn't have that clear vision about going into publishing in the long run at that time as well. And what are the big learnings here, do you think, for people listening in when it comes to pivoting and BChat markets maybe not being as you necessarily need it to be all the way through, from inception all the way to the IPO or whatever you want?

13:03That's kind of always the case. I mean, we had Gurkham, who's also a good friend of Alprea as well from Shal AI on the podcast. They're this AI inference infrastructure company. For those who don't know, they also put it six times. They were a data science tool. They were trying to build this Python library on top of DBT, which is a very shallow layer, tough to build a ventureable business auto-intensive center. But eventually they found this model where they grew to 40 million ARR in a year. Our first unicorn from Fund One, Carbon Health is a health clinic network. They start with a patient engagement tool.

13:33They were like the software piece that's going to do patient engaging for clinics. After five pivots, they became a brick and mortar business launching clinics around the US. So it's kind of in the game. When I started venture, I was 25. It was 2016. I knew that founders are the most important thing in an investment decision. It became after 2020, it became almost like founders are the only important thing in an investment decision. You look at everything else more of a red side view perspective. Definitely, you're betting on pivots, nothing else. And there isn't that many examples where a company's vision stays the same until, you know, they become unicorn, whatever.

14:06It's never that linear. Is that, I'm also curious to hear your perspective, Alpa, from the founders, you know, in your community, your own journey as well. Do you feel this backing is normal, this understanding of the importance and primacy of the founder? And here I'm, like, is that general? And do you also want to see that from your co-investors and maybe the ones that you're not co-investing with? by design yeah for sure for sure i think um i think everybody really values founders uh especially in the early rounds you know uh seed precede but of course there's this one time uh like there's this time where you want to you need to have some productions you know after that of course the founding team and then the product and then the outcomes also take role but up until that point i think everybody really values founders which was which was really crucial for us i think we always met the right people that aligned with our vision as well.

15:05And that really boosted our confidence throughout the process. So if I set the context for my question, I always say super provocatively that you can kind of divide VC. So by definition, just as founders live on an exponential curve where you have some that make it big and some that absolutely do not. Unfortunately, we have VCs on the same type of curve, which to me definitely means, okay, there's some people hit and some people don't, but there's probably also some that have the right perspectives and those that don't. And I definitely find that there is a chasm between how some invest and others invest.

15:44Yeah, I think it really goes to a financial model and the return theses of the fund. Our fund is more of a high risk, high reward type of a fund where we think that our winners are going to give us 50x if not 100x so they're going to become unicorns if not hopefully fingers crossed deca cores and that entails a certain founder profile who can you know at least potentially at least has a one percent chance of getting there you know and also from a regional perspective all of our investments are either us focused or inherently global from day one gaming companies would be in the category of inherently global from day one it's it's not the case in a lot of emerging markets if you look at investments in modern america southeast asia Africa, Middle East, you would try to find best founders in the region.

16:25Whereas what we're doing is we're trying to find the best founders globally who are for whatever reason they have are based in the region. So it's even more of a finance tool that we're going for, which makes in our investment decision making founders tenets more important than investing into more. If you were an emerging markets fund for Latin America, where I invest into proven business models executed regionally by the top founders in the region, I think it would have been much easier to select founders. The pool would have been larger, but also the weight, the parameters of the weight that is assigned to how we value the founders would still be a lot, but it would be 80 % of the decision.

17:0320 % would be other things. Currently, it's like 120%. Back in the game days in the journey of your past fund, so to say, or at least past iterations of the fund, you did have a slice of the fund dedicated to these regional winners. So what you just spoke about is very well described on the back of where you have seen both the opportunity for E2VC compared to where it is today. Now you're seeing, I guess that's also branding, positioning thing that now you're at a place where you can go only for the top echelon founders. In Turkey, for sure. It's an access question because the founders that are really high quality like Alprea, the number is really finite.

17:45In Turkey, it would be six, five per year. And then out of them, hopefully, one of them is going to become to Agave scale a few years down the line. And then there's obviously a competition to get access to that. We are strong in Turkey because we have 35 founders that also backed our fund. We're strong because we backed two unicorns over the past eight years. So that's how fulfilling profits are, this spiral effect that's going into our advantage. not the case in Eastern Europe. So if I have to shed more light into that finite pool of great entrepreneurs in Eastern Europe, Poland would be equal to the size of Turkey, like six.

18:16How many of them can you win? One per year. We're losing five. Estonia would be five. We'll lose all of that five. Hungary, for example, there's two, I think, one to two. We'll win that one for the average strong bread of Hungary. So it's very siloed and different in terms of what Eastern European markets you look into, but none of them are as strong as Turkey for us for the obvious reasons. And from a founder's perspective, I think in Turkey, there's like a few hubs, you know, and Istanbul is like the biggest hub for startups, for founders. And the hub in Istanbul is actually a really small network.

18:48People talk, people kind of like have a really accessible network within the founders as well. So everybody knows NSRN and it's kind of like a word of mouth influence as well going on. Do you agree that there's always this debate about can founders always reach funding wherever they are? Funding from great VCs. There's notorious statements like those by the A16C guys that say, if you can't find your way to the best VCs as a founder during your first round, you're not going to make it anyway. So gone and done with. Is that a statement you like? Alper or do you think that it's not capturing the nuance of some entrepreneurs being more deep tech oriented, not extroverted, not sales oriented, and for that reason, like, or they're in a remote ecosystem, so for that reason, they can't access it.

19:45Do you think there are too many falsehoods in this statement? Or do you think it's absolutely true? I think there are some truth inside it, not fully aligned with it. But I think for pre-seed, I don't agree, because in the pre-seed, it's like an exploration phase, you know? You're just like building your ideas, your team and everything. So at that time, I think for us, giving example from our journey, we didn't even have a solid business plan, you know? It was, we just wanted to kind of like get things going. And at that time, I think it was like a perfect match with Ennis, like the two EC guys and everything.

20:17And we just wanted to get things going and explore things on the way. So at that, I guess, storyline, it would be really tough to kind of like find those kind of like maybe top feces, like those accesses early in the game. So not super aligned with that, but I think moving on for the later stages like Seed, Series A and onwards, I think I'm kind of aligned with that approach, with that statement. Obviously it really depends. Our thesis as a fund is that the best of the best entrepreneurs exist everywhere in the world. It's just that their number might be different. In London, you might have 100 per year.

20:52In Istanbul, it would be five per year. In Estep, it would be 2 ,000 per year. but above that bar of quality, the upside potency is pretty much equal. And as a fund based out of Turkey, we can index the best of the best, whereas as a fund in SF, cannot. There's too much competition. You can pick a slice of the pie where some of them are the best of the best, but some of them belong to part, and you try to make portfolio construction with that slice of the pie. Not the case for us where we can index best of the best. That best of the best, I agree with that statement. I think they can fund funding wherever they are irrelevant.

21:23and they can go to Mars, they'll find funding in Mars. But there's a lot of money to be made below that bar as well. There are great companies that can be built. And then there's lack of funding definitely in places like Turkey. So in a market like Bay Area, it's not only the A players that get funding, it's the B players, C players, D players. And there's always that current ability versus potential ability. And put in the right environment, people seize that to grow. And you don't give people that fair chance at the price. if you don't background there's that caliber as well to replace that turkey if if peak didn't have that influence in turkey i think none of those gaming uh company startups would get funding early in the days uh i think someone setting up the tone for turkish ecosystem really helped all of us in terms of funding funding as well so even if we were kind of like super ambitious super successful with proven track record if we didn't have that track record in turkey in history history I don't think we would easily be accessed to the capital.

22:26But courage is contagious, right? I mean, I was speaking to Shai from Moonactive. He told me like Playtica laid off 300 people from their office in Finland. They also laid off 50 people from Israel. Out of that 50 people came eight studios. Out of that couple hundred people in Finland came zero studios, which shows you the appetite and the way of entrepreneurship or what it kind of is. And I think Finland has been going down for the past five years in terms of mobile gaming. compared to say a decade ago. For Turkey, it's been like 80 studios coming out of a company that only had 100 people up until a year before the exit.

22:59So that multiplier effect, I think, is crazy from everyone, from talent being able to pull talent into that direction to breeding entrepreneurs, to getting funding from international sources. Okay, now I want to go dive 100 % in on Agava Games and cracking the code, the success of finding the cat. I'd love to ask you, chart this journey for us because you picked the niche category and then you scaled massively, hitting almost 200K in daily revenue. I guess you're far above that now. And I'd love to understand the scaling mechanics, the marketing strategy behind this. It would be good if I start from the company strategy, company vision.

23:38So what we try to do is we try to look at underserved areas and kind of try to generate genre-defining gains in those underserved areas. and Hidden Object was one of those areas and we were kind of like keen to learn more and understand the pain points of the genre. We thought that the mechanic, the Find the Cat mechanic really addressed the pain points of the genre pretty accurately and it was like an easy decision for us to kind of like be super bullish on the game. The first day we kind of like thought about the idea. At least for the co-founders and also for Akon, I think, who's you also met Icon and Jess from Arcadia Ventures.

24:18You also had an episode with him. For them and for Icon because he's a gaming entrepreneur as well, it was so obvious that they have to put it to the fifth gear and pushes as hard as they should. Because I think when things are not going well, a lot of people are resilient. A lot of good entrepreneurs are resilient. But it matters when things are going well, how tough you push, how aggressive you push your arm. Founders have that mentality and Icon also have that mentality. I think if anything, us as investors were the coward ones in that equation as the team was scaling Find the Cat. I guess this was the time where we were split in the board as well.

24:51Like people, there were some pros about Find the Cat, some people that really not super bullish about the idea. But I think us as founders, we were all super bullish and we kind of like made it happen. What metrics do you look at? What do you look at when you're looking at this game, you're saying, okay, we've developed a game where you have to find a stupid cat. And it seems like it's taking off. What are the things, the moving parts that you're looking at to make that decision? Initially, it's about intuition. Especially with a game like this, you cannot have some competitor metrics. Because the mechanic is innovative.

25:33And you cannot really benchmark. Of course, we're benchmarking with hidden object games. But it's a risk that we wanted to take by executing this game. but then I think one of the things that really excites me about gaming is with some small cohorts you really can predict and understand how the game is going to go and of course like the metrics that we're looking are retentions, row losses and the game really had a strong start from day one and it was really easy to kind of like get that motivation to kind of like scale it to the genre defining, genre leading game with those metrics start off with.