Venture capital investors eye further growth in Turkey despite turbulence

ANKARA – Anadolu Agency

REUTERS photo

Despite political turbulence and security worries, Turkey remains an attractive market for venture capital investors thanks to its prime location, its young, educated workforce, and the depth of Turkish entrepreneurship, according to seasoned market-watchers.

“Venture capital investments in Turkey are still immature but have still been attractive, with the increased interest of international angel investor networks and the activity of domestic investors,” Demet Özdemir, the Ernst & Young Turkey corporate finance company partner and growth markets leader in the area of EMEIA, told state-run Anadolu Agency on Jan. 10.

Although venture capital investments in the country are lagging compared to developed economies, Turkey is a “very promising market” for investments with a medium- to long-term perspective, said Özdemir, particularly pointing to the technology and healthcare sectors as being more attractive for venture capital funds in Turkey.        

In recent years, with a rising number of tech centers and incubation centers established especially at universities, Turkey has developed an entrepreneurship ecosystem for enabling the country’s competitive position, she noted.        

The country has many startup companies with innovative ideas but often no financial institution they can turn to for the funds needed to get their businesses up and running.      
  
Private investors can also take part in financing new startup companies to help them prove themselves and the profitability of their business ideas.        

According to Startups.Watch, Turkey’s first digital enterprise and investment analysis platform, the number of capital investments in Turkey made by CVCs (corporate venture capital, corporations making systematic investments into startup companies), VCs (venture capital, firms focused on financing startups and small businesses with long-term growth potential), and individuals in technology-based ventures, rose sharply from only 11 in 2010 to 85 last year.        

Last year CVCs in Turkey made investments adding up to $25.4 million, up from $2.2 million in 2012, soaring 12-fold from the total of only four years earlier.        

Some Turkish companies such as MV, Koç Holding, and Sabancı Holding are very active in corporate venturing, and their investment arms are focused on technology in particular.        

MV Holding, a founding partner of Turkcell and KVK, became a 24 percent shareholder in Cardtek, a company providing innovative end-to-end payment solutions for financial institutions, processors, and telecom operators, and is one of Turkey’s fastest-growing technology firms.        

Inventram, a technology-investment company of Koç Holding, invests in early-stage startup companies with growth potential. Mitsui & Co, one of Japan’s large-scale holding companies, partnered with Inventram last November, with a 30 percent share.        

Inovent, Turkey’s first technology commercialization/accelerator and core fund company, founded by Sabancı University in 2006, shares the same aims: To pursue innovation.

Ali Karabey, a founding partner of 212 Capital Partners, said Turkey needs to create 800,000 new business areas per year, which will be established by entrepreneurs.

“Last year’s political developments may have reduced the interest in venture capital investments in Turkey, especially from international investors, but this is believed to be a temporary issue,” said Ali Coşkun, the director of Boğazici University’s Center for Applied Research in Finance (CARF).      
 
“If we bear in mind that this relatively negative mood is not persistent and future consumption potential is very promising thanks to widespread use of technology and potential increases in domestic demand across many different sectors within the country, we can say that there are still a lot of long-term opportunities in Turkey,” he added.