and bridging programs will be beneficial for sectors on both sides of the Atlantic, in that they represent the chief currency of continued innovation. Nitin Dahad, a tech blogger, writes that “collaboration is a key theme in the success of any innovation ecosystem. Collaboration across industry, university and government all contribute to the development and prosperity of a city, region or nation. But cross border-collaboration between hubs is also important.” [34]
For investors and entrepreneurs looking to participate in the world of Turkish technology startups, the risks and rewards are well-documented. The Turkish government is serious about subsidizing and encouraging this sector, but bureaucracy and corruption remain problems. The ecosystem is growing but is still relatively undersized. The market potential is huge, but political troubles are a concern.
What seems clear, however, is that for all the risks, Turkish tech startups will continue to emerge apace. “As long as there are good startups, VCs [venture capitalists] will keep an eye on Turkey,” said one prominent Turkish tech blogger. [35] According to Rina Onur, founding partner of 500 Start-ups Istanbul, “the world just doesn’t stop because bad things happen. People continue to build and consume.” [36] Iyzico founder Barbaros Ozbugutu echoed this sense of inexorability when asked about the coup attempt: “Digitalization will still move forward, ecommerce will still move forward...it is what it is.” [37] Even where certain concerns force VCs to rethink strategy, such as concentrating investment in the more mature and risk-averse startups, the strength of the market will fill the void. Onur’s 500 Start-ups Istanbul, for instance, does exactly that; her VC fund targets startups seeking early-stage funding. [38] Investors from the U.S. and elsewhere should take notice – tech startups in Turkey aren’t going anywhere.
Case Study 1: Iyzico
Turkey’s latest high-profile startup success story is that of the payment company Iyzico. In many ways, the company’s journey and profile represent the strengths and weaknesses of the Turkish startup ecosystem. Founded in 2013 by two German-Turkish entrepreneurs, the company offers e-commerce functions (like PayPal) and a single point of payment contact for businesses. This latter product enables businesses to circumvent an inefficient and decades-old system brought about by Turkish banks’ insistence on operating closed payment systems. For years, every business had to possess a slew of different card readers to accommodate this foible, and acquiring these readers meant navigating a hellish maze of red tape.
Co-founders Barbaros Ozbugutu and Tahsin Isin pounced on the opportunity to address this issue. They also knew that in Turkey, “the e-commerce growth rate has been approximately 30% yearly since 2008.” [39] As startup expert Peri Kadaster writes, “Turkey’s mobile users are also reported to be the most active consumers in the world for mobile shopping, mobile banking and QR code scanning, and are third in the world for mobile wallet technology usage.” [40] Ozbugutu and Isin were also aware that competition was weak from non-Turkish companies, as the Turkish government had set up heavy barriers in the payment sector. Companies were required by law to host their IT infrastructure locally; as an entirely Turkey-based operation, the co-founders had an advantage over U.S.-based behemoths. [41]
Still, it wasn’t an easy process. In 2013, “Ozbugutu thought Iyzico’s paperwork would take three months,” but “it took a year and a half to complete the 45 agreements needed.” [42] In July 2016, the night after obtaining five term sheets from investors, their celebration was cut short by a traumatic coup attempt. Within a few days, three of the five investors had pulled out. [43]
Despite these localized setbacks, the company is thriving. After his company poured 12 million into Iyzico in April 2017, an executive spoke confidently of Iyzico’s niche: “Turkey offers a very rich opportunity set in the payments space.” [44] It is not surprising, therefore, that Ozbugutu believes “the coup attempt hasn’t affected their business much.” [45]
Case Study 2: Modanisa
Modanisa was founded in 2011 by Turkish entrepreneur Kerim Ture and retail executive Lale Tuzun. It achieved great success with a seemingly simple concept: the company is an online fashion retailer that caters to Muslim women. This is a huge market; the Islamic women’s fashion industry is expected to be worth approximately 488 billion USD by 2019. [46] Modanisa serves more than 100 million customers a year in over 70 countries, and their website receives six million visitors a month. [47]
While it sells brands from all over the Muslim world to customers all over the Muslim world, Modanisa’s success is in many ways a product of its Turkish roots. Ture claims the country is the “biggest conservative fashion market in the world today,” which is a boon in terms of customer and vendor base. [48] As to those vendors, Turkish textiles are world-famous. Four hundred medium-size textile manufacturers can be found within a 25-mile radius of the company’s Istanbul headquarters, according to Ture. [49]
The company wrapped up a Series D funding round (for an undisclosed amount) in March 2017, proving again that at least some investors are not put off by the recent political and economic turmoil in Turkey. [50] Modanisa’s funding path is a reflection of the country’s increasingly internationally-connected ecosystem. Their seed funding came by way of Startup Turkey, a conference organized by Turkish angel investor network Etohum. The conference is now sponsored by massive multinationals (like Amazon, MasterCard, Paypal, Samsung, and Microsoft), and venture capitalists from firms like Google Ventures, Qualcomm Ventures, and Microsoft Ventures attend the event. [51] Shortly after presenting their product at Startup Turkey, Modanisa’s founders received a funding offer from Aslanoba Capital, an early stage investor in tech startups. As the company grew, they were put in touch with a Saudi venture capital firm eager to help Modanisa expand their reach in the Gulf.
Modanisa now reaps the benefits of taking risks and innovating in an industry long ignored by Western entrepreneurs and investors. Their success should only grow as payment methods and delivery services improve in predominantly Muslim Middle Eastern and African countries. Modanisa is also looking to expand its customer base in Muslim-minority countries like the U.S. The company recently launched an ad campaign titled “#JustLikeYou” that features American Muslim women against the everyday backdrop of New York City; the video was directed by D.C.-based filmmaker Samah Safi Bayazid. [52]
With Modanisa, Ture has achieved success by following a simple ethos: “Provide the latest fashion in conservative style and help conservative women to look stylish while following the dress codes of Islam – all with excellent customer service.” [53]
Endnotes
[1] Abbott, A. (2017, February 16). Turkish science on the brink. Nature. Retrieved from https://www.nature.com/polopoly_fs/1.21475!/
menu/main/topColumns/topLeftColumn/pdf/542286a.pdf?origin=ppub
[2] Udemy: Interview with its founder, Eren Bali. (2014, December 16). Cleverism. Retrieved from https://www.cleverism.com/udemy-interview-co-founder-chairman-eren-bali/
[3] Abbott (2017).
[4] Technoparks in Turkey. (n.d.). ODTU Teknokent. Retrieved from http://odtuteknokent.com.tr/en/information/technoparks-in-turkey
[5] Colak, T., & Yildirim, R. (2016, October 1). Are Turkish start-ups the next big thing? Holland Innovation Network & Netherlands Foreign Investment Agency. Retrieved from https://www.rvo.nl/sites/default/files/2017/01/Startup_Turkey.pdf
[6] The World Factbook: Turkey. (n.d). Central Intelligence Agency. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/tu.html
[7] Erozden, C. (2017, August 18). Turkey: Eight out of ten households have internet access. Anadolu Agency. Retrieved from http://aa.com.tr/en/science-technology/turkey-8-out-of-10-households-have-internet-access/887322
[8] Poushter, J. (2016, February 22). Smartphone ownership rates skyrocket in many emerging economies, but digital divide remains. Pew Research Center. Retrieved from http://www.pewglobal.org/2016/02/22/smartphone-ownership-rates-skyrocket-in-many-emerging-economies-but-digital-divide-remains/
[9] Bayrasli, E. (2015). From the other side of the world: Extraordinary entrepreneurs, unlikely places. New York: PublicAffairs, p. 28.
[10] Butcher, M. (2017, April 17). Erdogan’s victory means uncertain times for Turkey’s startups. TechCrunch. Retrieved from https://techcrunch.com/2017/04/17/erdogans-victory-means-uncertain-times-for-turkeys-startups/
[11] Unsal, S. (2017, July 17). 2017 H1 funding activities in Turkey & Europe. Startups.watch. Retrieved from https://blog.startups.watch/2017-h1-funding-activities-in-turkey-europe-5318460dc1dc
[12] The Turkish government believes the coup attempt was organized by Fethullah Gulen, who resides in the U.S., and was carried out by his followers in the Turkish Armed Forces. See: Fraser, S. (2017, May 26). Turkish committee: US-based cleric was behind failed coup. U.S. News & World Report. Retrieved from https://www.usnews.com/news/world/articles/2017-05-26/turkish-committee-us-based-cleric-was-behind-failed-coup
[13] Abbott (2017).
[14] Durgun, C. (2015, October 10). A look inside Turkey’s startup scene. Venturebeat. Retrieved from https://venturebeat.com/2015/10/
10/a-look-inside-turkeys-startup-scene/
[15] Demir, F. (2017). Innovation strategies and challenges in emerging economies: The case of research and technology organizations in Turkey. International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering, 11(6), 1351-1357. https://waset.org/Publication/innovation-strategies-and-challenges-in-emerging-economies-the-case-of-research-and-technology-organizations-in-turkey/10007195
[16] Gonultas, B., & Dogan, F. E. (2017, January 11). Venture capital investors eye further growth in Turkey. Anadolu Agency. Retrieved from http://aa.com.tr/en/economy/venture-capital-investors-eye-further-growth-in-turkey/724812
[17] G20 innovation report 2016. (2016, November 4). Paris: OECD. Retrieved from https://www.oecd.org/china/G20-innovation-report-2016.pdf
[18] Colak & Yildirim (2016).
[19] Bayrasli (2015), p. 32.
[20] Abbott (2017).
[21] Abbott (2017).
[22] Colak & Yildirim (2016).
[23] Introducing Endeavor Catalyst. (n.d.). Endeavor. Retrieved from http://endeavor.org/approach/catalyst/
[24] See: Investors: Trendyol. (n.d.). Crunchbase. Retrieved from https://www.crunchbase.com/organization/trendyol#/entity; and, Yemeksepeti.com partners with global growth investor General Atlantic (2012, September 17). General Atlantic. Retrieved from http://www.generalatlantic.com/media/archive/yemeksepeticom-partners-with-global-growth-investor-general-atlantic/
[25] Global entrepreneurship program signed with U.S.A. (2011, June 23). The Economic Policy Research Foundation of Turkey (TEPAV). Retrieved from http://www.tepav.org.tr/en/haberler/s/2189
[26] See: Kaan Akin. (n.d). SXSW Schedule. Retrieved from http://schedule.sxsw.com/2017/speakers/2016; Mitchell, D., & Quinn, M. (2017, July 14). Turkish tech startups head to Silicon Valley. VOA News. Retrieved from https://www.voanews.com/a/turkish-tech-start-ups-head-to-silicon-valley/3944869.html; and, Cho, H. (2012, October). Startups from around the globe visit Dallas. Dallas News. Retrieved from https://www.dallasnews.com/business/business/2012/10/30/startups-from-around-the-globe-visit-dallas
[27] Speakers. (n.d.). Startup Turkey. Retrieved from http://startupturkey.com/speakers
[28] Mitchell & Quinn (2017).
[29] Mitchell & Quinn (2017).
[30] San Francisco ’17: Connecting Turkish internet ecosystem to Silicon Valley's network. (n.d.). Etohum. Retrieved from https://etohumsf.com/
[31] Bayrasli (2015), pp. 23-46.
[32] Turkish second-hand clothing site raises $2M in Series B, led by MEVP. (2017, June 19). Wamda. Retrieved from https://www.wamda.com/2017/06/turkey-modacruz-site-raises-2m-series-b-mevp
[33] See Turkish startups now operational in the U.S., such as Udemy, UrbanStat, Botanalytics, Logiwa, and more.
[34] Dahad, N. (2017, July 13). Why global collaboration between technology hubs is vital for economic growth. The Next Silicon Valley. Retrieved from http://www.thenextsiliconvalley.com/2017/07/13/9015-why-global-collaboration-between-tech-hubs-is-vital-for-economic-growth/
[35] Butcher (2017).
[36] Onur, R. (2017, Feb. 8). How startups thrive in emerging markets. TechCrunch. Retrieved from https://techcrunch.com/2017/02/08/
how-startups-thrive-in-emerging-markets/; and, Butcher (2017).
[37] Locke, A. (2017, January 20). Turkish payments startup Iyzico closes $13M Series C. Wamda. Retrieved from https://www.wamda.com/2017/01/Turkish-payments-solution-Iyzico-13M-Series-C
[38] Onur (2017).
[39] O’Hear, S. (2017, August 26). Turkish payment platform Iyzico raises further $1.4M. TechCrunch. Retrieved from https://techcrunch.com/2014/08/26/iyzico/
[40] Kadaster, P. (2014, July 9). Turkey is becoming a new kind of Silicon Valley. Forbes. Retrieved from https://www.forbes.com/sites/
groupthink/2014/07/09/turkey-is-becoming-a-new-kind-of-silicon-valley/#43a96fd33591
[41] Locke (2017).
[42] Locke (2017).
[43] Locke (2017).
[44] Gunen, E. (2017, April 11). Turkish online payment and fintech firm Iyzico raises 13M in Series C round. FinTechtime. Retrieved from http://bitcoinagile.com/CA4B43/turkish-online-payment-and-fintech-firm-iyzico-raises-13m-in-series-c-round_stream
[45] Locke (2017).
[46] Shirazi, F. (2017, May 7). How the Hijab has grown into a fashion industry. The Conversation. Retrieved from https://theconversation.com/how-the-hijab-has-grown-into-a-fashion-industry-74740
[47] About us: Modanisa. (n.d.). Modanisa. Retrieved from https://www.modanisa.com/en/about-us.page?ck=38-en-USD-s6; https://www.wamda.com/2017/03/modest-fashion-site-modanisa-closes-new-round
[48] Startup of the week. (2015, January 26). Wired. Retrieved from http://www.wired.co.uk/article/startup-of-the-week-modanisa
[49] Startup of the week (2015).
[50] Knight, L. (2017, March 6). Modest fashion site Modanisa closes new round. Wamda. Retrieved from https://www.wamda.com/2017/
03/modest-fashion-site-modanisa-closes-new-round
[51] Startup Turkey: Demo Days of Eurasia. (n.d). Startup Turkey. Retrieved from http://www.startupturkey.com/Content/files/startup
turkey2016.pdf
[52] Modanisa. (2017, April 19). Just like you [Video file]. Retrieved from https://www.youtube.com/watch?time_continue=83&v=
lwLXQ18qEnE
[53] Startup of the week (2015).