Turkey's Entrepreneurial Ecosystem: More Than Just Start-Ups

Image ISTANBUL, TURKEY — As if you needed to be convinced that Istanbul is one of the world’s hottest technology start-up scenes, New York private equity firm, General Atlantic, announced on Monday a $44 million stake in Turkish on-line food order platform, Yemeksepeti. It is an investment that follows on from a series of brow-raising commitments made last year. They include a $26 million investment Kleiner Perkins and Tiger Global put into Trendyol, Turkey’s Gilt Groupe and a 70 percent stake that South Africa’s Naspers took on Markafoni, a Turkish private shopping club. Amazon, Intel and eBay also put money in 2011 into respective e-commerce platforms, Ciceksepeti, an on-line flower and chocolate marketer, Grupanya, a Groupon namesake, and GittiGidiyor, an eBay clone.
English: Ortaköy Mosque, along the Bosphorus, ...

English: Ortaköy Mosque, along the Bosphorus, in Istanbul, Turkey. Français : La Mosquée Ortaköy, sur le Bosphore, à Istanbul (Turquie). Türkçe: Büyük Mecidiye Camii (Ortaköy Camii). (Photo credit: Wikipedia)

Turkey is, without question, a tantalizing market for entrepreneurship. It is strategically located between key markets in Europe, the Middle East, Russia and Central Asia. It has a young and educated workforce. Nearly half of the country’s 78 million people are on-line, giving it the fifth largest Internet audience in Europe.  The Turkish economy, the 16th largest in the world, has grown so fast that the average Turk now earns twice as much as he or she did just a decade ago. The country’s governance, though managed by an authoritarian-prone prime minister, is reliable and steady.
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In August, I spent time in Istanbul, where I was wowed by the serious depth of Turkish entrepreneurship, which goes beyond just a handful of start-ups. There is a real and serious entrepreneurial ecosystem in Turkey. Here is a very brief overview of what it looks like:


e-Tohum: Started in 2008, e-Tohum is one of Turkey’s first start-up “catalyzer.” It screens several hundred applicants, selecting 40 to pitch to investors. Those investors identify 15 that move on to e-Tohum’s accelerator program. e-Tohum invests in those companies that show exceptional promise. “Our aim is to help these (Turkish) entrepreneurs grow fast,” says founder Burak Buyukdemir. The fund is small, only $175,000 and has made 25 seed investments.

Start-Up Factory: Housed at the privately run Ozyegin University on Istanbul’s Asian side, the Start-Up Factory provides space and services to start-ups. Backed by mobile giant Turkcell, it’s goal is to help start-ups “survive death valley.”

Founder Institute: Silicon Valley-based, the Founder Institute is opening its doors in Istanbul. It’s, according to its website, “an early-stage and global launch network that helps entrepreneurs create meaningful and enduring technology companies.”

Murat Aktihanoglu is also active in this space via New York where he is a managing director at Entrepreneurs Roundtable. He’s held a number of ER seminars and events in Istanbul.


With hordes of engineering majors, nearly all Turkish universities are focused on entrepreneurship in some way. Publicly run schools such as Istanbul Technical University and Middle Eastern Technical University are, with the government’s support through technology parks and space, focusing on innovation and technology. Private institutions are a bit further ahead with actual MBA classes on entrepreneurship. That’s happening at Bilkent, Koc, Sabanci and Ozyegin Universities. Ozyegin University rolled out the country’s first masters in entrepreneurship this fall. Still, tech transfers are a glaring gap in Turkey. Universities need to work on case studies and directly with entrepreneurs and companies to get innovation going.

High-impact entrepreneurs

Endeavor is a non-profit that supports “high-impact” entrepreneurs around the world. Started in Argentina and Chile in 1997, it works to identify promising innovators in emerging markets that are leading companies with the potential to go to scale and attract venture capital. The outfit launched an office in Istanbul in 2006. It has identified a handful of high-growth entrepreneurs that are making waves in mobile (Pozitron) and wireless technology (AirTies). Yemeksepeti is an Endeavor find.

Information brokers

Michael Arrington revolutionized Silicon Valley with TechCrunch. Arda Kutsal is trying to do the same in Turkey with his on-line tech news platform Webrazzi. The energetic 30-something who works out of a working class neighborhood on Istanbul’s Asian side profiles Turkish start-ups, providing the latest investment and buyout news – both inside and outside Turkey. He also organizes events that feature high-level speakers from around the world. The upcoming Webrazzi Summit will take place on October 4.

Public institutions

The Turkish government and other public institutions have done a good job in laying the framework for Turkey’s entrepreneurial ecosystem. Of note is the Turkish Ministry of Science, Industry and Technology. It supports technology parks and provides up to $55,000 in seed capital for entrepreneurs through the “Techno-Entrepreneurship Grant Program.” Next year this ministry plans to establish “science and technology counselor offices in various developed countries” such as the United States, Germany and Japan.

Scientific and Technological Research Council of Turkey (TUBITAK) is another government body extending grants, subsidies and other incentives for entrepreneurs. It encourages research and development.

The Economic Policy Research Foundation of Turkey (TEPAV) is a think tank looking at economic issues. It has partnered with the U.S. State Department’s Global Entrepreneurship Program to provide a platform for Turkish entrepreneurs to network with American entrepreneurs and funders.

Most impressive is the independent Turkish Technology Development Foundation (TTGV), which was established in 1991 as part of a World Bank loan agreement with Ankara. It has supported “technological innovation activities in Turkey,” providing $300 million to 950, largely R&D, projects, carried out by 800 companies. TTGV also contributed to the establishment of investment firms, Is Girisim and TURKVEN, both of which launched in 2000 and have made combined investments over $3.5 billion. This has laid the ground floor for Turkish venture capital.

Venture capitalists

Izhar Shay, an Israeli-based general partner with Canaan Partners, told me recently, “venture capital lives and is based on entrepreneurship. There is no way to apply venture capital if there is no entrepreneurship.” By that measure, Turkey has something positive going on. There is a vibrant angel network. Galata Business Angels is a prominent platform of high net-worth individuals putting money into Turkish start-ups. There are also a handful of, mainly early-stage, investors in Istanbul.

The Istanbul Venture Capital Initiative (IVCI), launched in 2007, is the first of these early stage funds. It is a EUR 160 million fund of funds, again backed by TTGV and the European Investment Fund (EIF), as an vehicle to encourage others to take out risk in Turkish start-ups. IVCI director Jose Romano describes it as being a “catalyst to advance the development of the (Turkish VC) industry.” It has given a number of largely European and some Turkish investors the courage to gamble on Turkish start-ups such as Golden Horn Ventures. (NOTE: Some Turkish readers interpreted this to mean that IVCI or EIF has given Golden Horn money (rather than courage as I meant). Golden Horn is an independent fund. It has not received funding from IVCI or EIF: IVCI/EIF has not put money into Golden Horn.)

212 Capital Partners, is the latest risk taker to dive into the Turkish entrepreneurship market. Launched this year with a first round fund raised among Turks totaling $30 million, it is eyeing early stage investments in tech start-ups in e-commerce, gaming and software applications.

German-based Earlybird Ventures, Brussels-based Hummingbird Ventures and Intel Capital, which recently opened an office in Istanbul, are also scouring Istanbul’s many hills for the latest tech stars.

Still, as Burak Buyukdemir says Turkish entrepreneurship, while not at the beginning, is no where near the end of the road. Many challenges and obstacles remain. Infrastructure is one.  While the country’s roads, transport and communications have improved over the past decade, power and water outages are a regular occurrence (and often happen at the same time, as I found out late one night).

Logistics is another. Yes the traffic is stop-and-go. But getting around, let alone finding an address, Istanbul is nothing but a nightmare, as the ancient metropolis’s winding and single-lane roads that are, in name only, make navigating difficult and frustrating.

Government policy is a third. While there are efforts to encourage entrepreneurship, there is a very poor framework to hold it up. Turkish courts are notoriously weak and there are virtually no laws regulating investments.  According to the World Bank’s Doing Business Report it takes 24 procedures and 189 days to physically construct a business. Closing it down is worse. It takes an average of 3.3 years to dissolve a start-up in Turkey, where only 22 cents on a dollar is recovered. In the U.S. and U.K. that number is 88 and 81 cents on the dollar.

And while there are grants, subsidies and incubator space, the Turkish government has no coherent policy on promoting start-ups, beyond saying that they’re “vital.” Interestingly, it’s a sensitive topic at the Turkish Economics Ministry. In an attempt to get a comment, Economic Ministry officials: hung up on me, turned me away at their front door and have refused to answer email questions I submitted three weeks ago.

Trust is also an on-going dilemma. The Turks find it difficult to criticize, admit failure or say “no.” Most talk around delicate subjects for fear of insulting or hurting feelings. 212 Capital Partner’s general partner Ali Karabey recently noted, “the biggest obstacle to Turkish entrepreneurship are the Turks.” It is rare that you’ll find any Turkish entrepreneur tell you that he or she has a competitor, let alone what are the weaknesses with his or her start-up. A Turkish “yes” should be treated with skepticism, as many fail to deliver on promises and see commitments through.

Despite all, Turkey’s entrepreneurship ecosystem is on a growth track. Start-ups are now an integral part of Anatolian life. Whether they evolve and scale into innovative enterprises or remain easily flipped clones remains to be seen.

Oh and the entrepreneurs. I’ll tell you about them next time. (Elmira Bayrasli, Contributor - Forbes.com)
Last modified onSaturday, 06 May 2017 10:07