Home Venture Capital Turkish startups secure $722M in investments despite global downturn

Turkish startups secure $722M in investments despite global downturn

27
0

Türkiye’s entrepreneurial landscape saw a total investment of $722 million in 2023 across 325 investment rounds, as revealed by statistics from the industry monitor, startups.watch.

When factoring in cryptocurrency investments and convertible debts, the total figure climbs to $889 million, a noteworthy achievement considering the global downturn in venture capital.

The deal count marked a 7% decline from a year ago, according to the startups.watch data, while the total amount fell 47% year-over-year. Still, the fact that the decline remained limited has been viewed positively within the entrepreneurial community.

The data was unveiled during the Türkiye Startup Ecosystem 2024 event in Istanbul, which also brought together stakeholders to discuss the ecosystem’s current state and future prospects.

Global trends

Globally, venture capital investments have hit a five-year low, with mergers and acquisitions at their lowest point in the past decade.

However, in the Middle East and North Africa (MENA) region, Saudi Arabia bucked the trend with a 90% increase in investment compared to the previous year, a trend attributed to the kingdom’s recent favorable decisions related to entrepreneurs.

The surge in technology-focused investments and the emergence of technology cities have been particularly impactful, though overall global investment numbers continue to decline. High interest rates and inflationary pressures worldwide have influenced investor confidence, affecting decision-making within entrepreneurial ecosystems.

In Türkiye, 70 of the 325 investment rounds in 2023 were directed toward initiatives led by female entrepreneurs, reflecting a commitment to gender diversity in the startup landscape.

Diversification and new funding avenues

The creation of new venture capital investment funds (VCIF), the proliferation of crowdfunding platforms, Borsa Istanbul Stock Exchange’s (BIST) introduction of new funding opportunities and the increasing number of financial technology companies expanding internationally have diversified the investment climate in Türkiye.

Over the past three years, 276 venture capital (VC) and VCIF funds, boasting a combined size of $1.3 billion, have been established. The VCIFs have become an integral part of the ecosystem as they were involved in nearly half of the investments in 2023, facilitating increased opportunities for early-stage startups.

Crowdfunding platforms remained a significant alternative financing source for early-stage ventures with new platforms in 2023. Startups raised a total of $20.6 million in 59 campaigns. However, transparency and trust issues persist in the sector, potentially hindering faster growth.

Unicorn decline

The year 2023 witnessed a decline in the number of unicorns globally, as the number of startups with a valuation of at least a billion dollars dropped to 100 from 348 in 2022 and 622 in 2021.

Despite the overall decrease in investment numbers, Türkiye retained its position as a leader in seed investments in the MENA region, while it ranked fourth in Europe.

The total investments reached $222 million when the rapid grocery delivery pioneer, Getir, was excluded, which still exceeds the pre-pandemic amounts by almost twofold.

In 2023, investments in startups worldwide were at the lowest level in the last five years. Investment in ventures in Europe decreased by 39% compared to the previous year.

Mergers and acquisitions globally came in at the lowest level in the last 10 years, the data showed.

Initial public offerings and special purpose acquisition company (SPAC) transactions, which peaked during the pandemic, particularly in the United States, fell to less than one-tenth in 2023.

Ahmet Burak Dağlıoğlu, the head of the state Investment Office, emphasized Türkiye’s growing prominence, particularly in the gaming sector and artificial intelligence investments.

He anticipates further advancements in 2024, with increased support for early-stage entrepreneurs through initiatives like the Scientific and Technological Research Council of Türkiye’s (TÜBITAK) pre-seed fund.

“From the seed stage to the advanced stages, the government has stepped in to support. The increase in gaming initiatives and artificial intelligence investments could be seen as signs that 2024 will be even better,” said Dağlıoğlu.

“In addition, we believe that with TÜBITAK’s pre-seed fund, introduced in collaboration with the Türkiye Development Fund, nearly 300 entrepreneurs in the idea stage will be supported each year, which we believe will elevate us to higher ranks. This means more seeds will be sown, and we will have more initiatives,” he noted.

Dağlıoğlu emphasized that they see that capital market instruments are effective, and ventures are starting to find new sources of funding.

“The (Türkiye) Wealth Fund was also in talks with funds. I believe there will be significant investments in the advanced stages. We expect increased interest from international investors in Türkiye. I think we will see unicorns, especially in the financial technology sector, emerging from Türkiye. Due to changes in the global investment climate, valuations remained below expectations,” he said.

Getir’s resilience

The Turkish fast delivery startup Getir, a once-global success story, is actively seeking a resurgence following a valuation dip.

A significant portion of the total investment in 2023, including a $500 million deal, contributed to Getir’s growth ambitions, particularly in the United States.

Despite the global economic downturn, the remaining $222 million of investment in Türkiye, excluding the Getir deal, still surpassed pre-pandemic levels, indicating a shift to a more advanced league.

Türkiye’s position in Europe

Türkiye ranked 11th in Europe in terms of investments in idea-stage startups. However, the TÜBITAK BiGG fund, operated by the Türkiye Development Fund, has already secured the top position in pre-seed investments in Europe for the first quarter of 2024.

The fund has agreed to a record 143 pre-seed deals since the beginning of the year.

Although investment amounts decreased in many sectors, the number of investments in the artificial intelligence and gaming verticals showed a significant increase compared to the previous year.

In 2023, institutional interest remained strong, with 38% of investments involving corporate entities or institutional venture capital funds.

Although the percentage of foreign investors in Turkish investments reached a five-year low, the absolute number remained higher than pre-pandemic levels.

In the gaming vertical, there were 41 funding rounds in 2023, with a total investment of $31.1 million. Türkiye ranked first in Europe in terms of the deal count, while it came in fifth looking at the investment amount, according to the data.

Cloud, credit card

Seeking to address a major need of entrepreneurs, Türkiye’s largest private lender has enriched its suite of products and services tailored for startups.

Işbank has introduced the Maximiles Business Startup Credit Card and Cloud services, aiming to alleviate the financial burden on startups and enhance their banking experience.

Emre Ölçer, the digital banking director at Işbank, elaborated on the details of the new product and the specialized services for entrepreneurs.

“According to our research, technology expenses constitute the highest cost for startups. We wanted to provide a specific advantage, and therefore, we secured a special agreement with the world’s most preferred cloud operating system, Amazon Web Services (AWS). This makes us the first to bring a credit card offering free cloud credits for AWS access to our entrepreneurs,” Ölçer stated.

Pay as you go

Tunç Özgül, head of startup and VC ecosystem at Amazon Web Services Türkiye, emphasized the significant advantage of the “pay as you go” model in cloud services, not only for corporations but particularly for startups.

As AWS, we are the world’s most comprehensive and widely used cloud platform, offering over 200 fully featured services from data centers worldwide. The fastest-growing startups use AWS products and solutions to reduce costs, become more agile and innovate faster,” said Özgül.

“In Türkiye, gaming startups doing business globally are utilizing AWS, and we aim to continue supporting startups in their growth journey,” he noted.

“We believe that our collaboration with Işbank will facilitate the lives of startups and help them reach their growth potential faster.”

Through branches tailored for ventures, Işbank has reached 15% of Türkiye’s entrepreneurship ecosystem, providing over TL 200 million ($6.62 million) in financing.

In addition to the partnership with AWS, Işbank plans to offer privileges in various spending categories crucial to entrepreneurs, collaborating with different business partners. The bank also aims to facilitate international expenses for startups through periodic campaigns in the near future.

Türk Telekom: Yearslong supporter of startup ecosystem

Türk Telekom, one of Türkiye’s leading telecommunications and technology companies, has been one of the key backers of the entrepreneurship ecosystem, be it through its venture capital arm, TT Ventures, or its startup acceleration program, Pilot.

Highlighting Türkiye’s entrepreneurial spirit, TT Ventures General Manager Muhammed Özhan emphasized the nation’s ascent in technology and innovation.

“We recognized this trend in its infancy as we took the initial steps. A decade ago, we became one of the pioneering institutions to embrace next-generation technologies and the ventures fueling them,” said Özhan.

TT Ventures General Manager Muhammed Özhan. (IHA Photo)

“With our leading role in the Turkish entrepreneurial ecosystem, we continue to act as a bridge connecting ventures to the world through our TT Ventures office in San Francisco.”

Established in 2018 to foster and add value to early and midstage ventures with the support and investment of Türk Telekom, TT Ventures, has invested in 16 different ventures to date, he explained.

Through the TT Ventures Venture Capital Investment Fund that was established in 2022, Özhan said they invested in numerous ventures throughout 2023.

“Our Venture Capital Investment Fund offers us the opportunity to create long-term value for both ventures and investors,” he noted.

With Pilot, Özhan said they had extended approximately TL 32 million in cash support to 111 ventures to date. Of these, 52 attracted investments exceeding a total of $30 million from both domestic and international investors and institutions, enabling them to enhance their projects and ideas.

Beyond financial support, Özhan emphasized their dedication to nurturing ventures. “In addition to our Santral building in Eminönü, we are opening new doors for ventures at the TT Ventures Entrepreneurship Center at the Atatürk Cultural Center, of which we are the main supporters. This center empowers ventures to bring numerous future-shaping ideas to life,” he noted.

“As we steadily progress toward our goal of becoming a technology bridge between Türkiye and global markets, we aim to foster and propel even more ventures to achieve global success.”

Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here