Trends Deep Dive (Part 3) - Turkey Ecosystem at a Glance

In our Trends Deep Dive series, we have covered how COVID-19 accelerated the digitalization and latest trends in the venture capital investment world.

In this article, we will go into the details of Turkey's investment and startup ecosystem, which is one of our focus geographies, besides CEE and major hubs like London, NY, and the valley. As there is a growing investment appetite in Turkey, we decided to share the dynamics of the ecosystem with you.

Investments continue to break records in Turkey, thanks to the recent success stories of usual suspects. 

Turkey is having one of the best times; investments surpass $1B in H1 2021 with all time high results. Thanks to success stories of Getir and Dream contributing to the significant majority of the investments (~94% of total investments in 2021); x25 growth was achieved regarding investments in H1 2021 compared to the same period of previous year. Results without the outliers also point out an upward trend with a 49% growth for the same time period, according to startups.watch data. A simple estimation for FY 2021 indicates the volume will most likely reach to $1.4B with more than 400 rounds.

Another significant development is the amount raised by the funds in Turkey. Approximately $700M raised within the last two and a half years (from FY 2019 to H1 2021), which equals to the total amount raised between FY 2011 to FY 2019. The market will become more mature and full of opportunities with the increasing valuations as well as growing competition in upcoming years. 

With the increasing investments, valuation of tech players started to surpass large companies of the past. In fact, as of now, Turkey's most valuable companies are Getir and Trendyol. Trendyol and Getir needed less than a decade to achieve such high valuations and many other promising early-stage companies are yet to come. If other rapidly growing technology companies continue their goals of becoming global players, it is very likely that most of Turkey's most valuable companies will be technology startups in 2025. 

When we look at the development of success stories in Turkey from past to present, we see that exits have reached $6B in the last 10 years. Throughout these years, the Turkish ecosystem has witnessed both a company that made an IPO listed on NASDAQ, and one decacorn. More decacorns / unicorns and IPOs are expected to emerge going forward considering the past success stories. 

Going deep into the investments, the Turkish ecosystem stands out in several areas: e-commerce, gaming, grocery delivery apps. Since investments in these sectors are mega-round, they make up the bulk of all investments. 

After the acquisition of Opsgenie, which was founded and scaled by one of our founding partners Berkay, to Atlassian, many B2B SaaS companies in Turkey started to grow globally by taking this model as an example.

We expect to hear big news very soon from pioneering startups in the field working as B2B SaaS such as Insider, Akinon, and Picus Security.

At this point, we would like to touch on the most fundamental element that enables these success stories to emerge from Turkey: tech talent. 

Young and passionate talent pool will unlock the potential of Turkey, several bumps to tackle going forward. 

Showdown between conventional industries and tech companies is here to stay. Yet, more and more global success stories of tech companies are expected to grow in Turkey - thanks to the cost-competitive and ambitious talent pool with growing global experience. While the software pool in Turkey is ranked highly in the world in terms of talent, it is also very advantageous in terms of cost compared to global hubs.

Alongside the tech talent, COVID-19 has also helped boost the Turkish ecosystem. Although this sentence is controversial in itself, it is actually very true. 

In the fully digitalized world with COVID-19, Turkish startups started to go global faster and make global sales. 

With the increase in active investments and the increasing interest of global investors, entrepreneurs who have sufficient capital to grow globally started to create success stories quickly.

Besides these, thanks to the spillover effect, which emerged from entrepreneurs who have exited in the early 2010s and created great success stories locally, a new wave has emerged this time and entrepreneurs are preparing to create global success stories. In many ways, companies such as Maçkolik, OpsGenie, Foriba and İyzico acted as a university for entrepreneurs and raised dozens of talented entrepreneurs who know how to scale startups.

With the increasing investment appetite and minor bottlenecks to tackle, many opportunities lie ahead for the startup ecosystem in Turkey. Stay tuned for our next report focusing on going global through value focus.

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