Overview of the Turkish Start-up Ecosystem
Before 2010, there was little to say about the Turkish start-up ecosystem, but since then it has grown in size and importance, quickly becoming a key regional hub for startups.
In the first half of the 2010s, thanks to the growth of brand new venture capital funds and angel investors, the Turkish startup ecosystem recorded annual investments of USD 100 million. During the second half, many of these new venture capital funds made exits and started working to establish their second fund. During this period, the time to exit was significantly shortened compared to the years before 2010.
As the Turkish ecosystem enters the 2020s, the presence of more experienced participants will help it reach its potential quickly. And for those who want to play a role in this growing community, the doors are always open.
Investment outlook for Turkish ecosystem
According to Treasury statistics, licensed business angels have invested an average of TRY 277,500 for an average share of 10% since June 2013. The companies in which business angels invested consisted of 92% microenterprises (less than 10 employees) and 8% companies with 10-50 employees. It appears in studies that most startups have less than 5 entrepreneurs in the founding team.
The most attractive sector for startups in Turkey is software creation and development, with more than half of the startups founded in this sector. E-commerce and data mining seems to be two other popular sectors that attract angel investors. Startups allocate half of the external funding they receive to personnel expenses (50%). Startups leave only 10% for equipment and 7% for marketing and sales activities.
The UK, France, Spain and Germany have a higher number of angel investors. The UK and France have 4,350 and 4,350 business angels, respectively, and 38 and 83 angel networks. Turkey has 450 business angels and 10 angel networks. The amounts invested by business angels are about 84 million euros and 41 million euros in the UK and France, respectively, while they are about 15 million euros in Turkey. Business angels in Turkey have funded a total of 61 companies and created 400 new jobs. The average investment amount per business angel is about €19,000 in the UK and about €33,000 in Turkey. These figures show that Turkish business angels are investing larger amounts than the UK, despite the fact that Turkey has far fewer business angels.
An environment conducive to entrepreneurship, as the state for the country’s leading business angel
The practical contribution of this research was to help policymakers promote and create an enabling environment for entrepreneurship. While weak legal protections and contract enforcement may force entrepreneurs and investors to have strong relationships, this is not an institutional solution. A rules-based institutional environment could expand the scale and scope of angel investors.
The legal environment in Turkey for the venture capital market is produced with the national law of 2013. Since then, the market has skyrocketed, as evidenced by the number of licensed angel investors, the number of business angels, and the amount of angel investments. It is widely accepted in the literature that venture capital and business angels make a significant contribution to economic growth and technological progress. Therefore, Turkish policymakers who recognize the importance of venture capital should provide strong support for the continuous improvement of the ecosystem.
While private investors are a major factor in the success of Turkey’s startup ecosystem, the state also provides support to early-stage and seed-stage startups and is frequently the top investor in these companies. In the first quarter of 2021, the Scientific and Technological Research Council (TÜBITAK) provided USD 6.6 million to 357 SMEs and research and development startups. In addition, about 31 new start-ups were established with the support of KOSGEB (The Small and Medium Enterprises Development Organization of Turkey), USD 830,000 was released for 241 start-ups and about USD 200,000 for 71 R&D start-ups.
This increase in public investment was made possible by the removal of the requirement for entrepreneurs to have a degree in order to raise funds.
Turkey, one of the most promising countries for start-up ecosystems
Turkey is one of the most promising countries for startup ecosystems, with its various startup entrepreneurs and bright minds. Even though the investment for each individual regarding startups is one dollar at the moment, this figure is expected to increase in the coming years, and reach at least ten dollars in order to compete with other economic competitors.
This means that an investment of more than $800 million should be made for people who want to own their own startup. Thanks to investors and venture capital funds, total investment in startups has grown by 66% in recent years. Funding for these initiatives is expected to be steadily increasing, which shows that Turkey is becoming a hot spot for future startup ecosystems around the world.
“In today’s world, the spread of the pandemic has shifted the consumption of goods and services to digital channels. Countries Like Turkey, with robust demographic trends but lagging behind in digitization, offer additional opportunities as the catch-up phase accelerates in this environment” Nazim Salur, founder of Getir.
In 2019, it was announced that a total of $102 million was invested in 92 different startups. With the development of the power of the internet and communication, these startup ecosystems have evolved rapidly in Turkey. Most of them continue to grow unabated as they do today. As many government-backed bank funds start to be made available to startup founders, it can be assumed that Turkey will offer a number of effective startup ecosystems from 2021 onwards. Not only is government support limited, but specific sectors are also investing and looking forward to benefiting from this ecosystem. To take full advantage of these benefits, they continue to invest in the bright ideas of people across the country to make the most of the startup ecosystem, which continues to grow around the world.
The biggest successes of the Turkish start-up ecosystem
Out of the 62 rounds of funding that raised $509 million, the biggest raises were by Getir and Dream Games. In particular, Getir, which managed to raise a total of $428 million in two rounds. The second investment allowed it to reach a value of USD 2.6 billion, becoming the second Turkish unicorn.
“We are proud to be the designers and developers of an original business model that was born in Turkey and has generated a lot of buzz. The global recognition and considerable investment that Getir has received from prestigious investors should motivate Turkish entrepreneurs and pave the way for further venture capital investments in the Turkish ecosystem.” Nevzat Aydin, Co-founder of Yemeksepeti.
Another unicorn can be added to the country’s list of achievements – a startup with a similar business model to Getir – which raised $290 million in a funding round allowing it to exceed a value of $1 billion. The similarity of its business model to Getir’s explains this investor interest and consequently the speed of its growth, as it reached unicorn status in less than two years.
Another example of this success of the Turkish start-up ecosystem is Trendyol, an online shopping company, having recently reached a value of USD 10bn after a USD 350m investment by Alibaba, which now owns 86.5% of the Turkish startup acquired in 2018. Trendyol’s app has been downloaded more than 60 million times, becoming Turkey’s leading e-commerce app.
Tuğrul Tekbulut, the founder of Logo – one of the largest software companies in Turkey – recently pointed out that the new startups that have managed to make their mark in the data sector are now among the most important nationwide. They are replacing traditional companies in the Turkish landscape day by day and Trendyol is a perfect example of this evolution.
If you would like to read more about the Turkish economy you can visit our blog.
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