Start-Up Ecosystems And Technology Funding in Türkiye From The Viewpoint Of DEİK

2021 was a year in which we achieved historic successes in the field of start-up ecosystems and technology funding in Türkiye. The total number of transactions, which was 155 in 2020, when the interest in the start-up ecosystem increased as a result of the effect of the pandemic that triggered the digital transformation, increased to 251 in 2021. On the other hand, the total funding value increased 10 times compared to the previous year, reaching a peak value of $1.55 billion. This made our country leave many European countries behind and become one of the top 10 countries in Europe and fetch 2nd place in the Middle East and North Africa region in technology-based start-up funding.

2021 was also a year in which our digital technology companies stepped into the world league. Exceeding a $1 billion valuation this year, Dream Games became the fourth unicorn in our country. Trendyol became our first decacorn company, carrying its value over $10 billion. Hepsiburada became the first Turkish company to go public on NASDAQ, where the world’s largest technology companies are traded, Udemy also went public on NASDAQ in the last quarter of 2021. We keep making breakthroughs in the field of technology through Getir, our first unicorn in the field of software, and Insider which rose to the 4th place in the ranking of unicorn companies in Europe, exceeding a valuation of $10 billion in 2022.

The average timespan of reaching a market value from zero to $1 billion in the world decreased to 7 years and we are in a fierce competition environment where start-ups that reach high valuations lose ground and shrink much faster. In this process, companies that can achieve the necessary pace of development survive in competition through significant gains in the following years, while those that did not achieve this transformation cannot escape from the destructive effects of their competitors. It requires certain strategies for our imagination to be blended with knowledge and technology and to reach billions of dollars and for our unicorn companies to keep their acceleration and to rise to the decacorn league.

Operating to maintain foreign economic relations, especially foreign trade and international funds, of the Turkish private sector, we, as DEİK, established the Digital Technologies Business Council in order for carrying out national and international activities that will contribute to the technology ecosystem of our country. In this way, we aim to render our country a technology centre by making significant contributions to our technology-based start-ups the critical strategy focus points we have determined.

5 important strategic pillars of our Digital Technologies Business Council from the viewpoint of DEİK

1- Supporting companies to expand abroad and scaling strategies

Looking at the unicorns around the world from a sectoral perspective as of the end of 2021, we see that the top 5 unicorn-producing sectors are e-commerce, software, financial technologies, healthcare, and transportation-logistics, respectively, and the countries with the highest number of unicorns in these fields are large markets such as the USA, China, and India. Therefore, market structure and scalability factors play a key role for technology start-ups to achieve a $1 billion valuation.

When the issue is considered countrywide, developing scaling strategies by focusing on global markets rather than staying local in these sectors is of utmost importance for the emergence of new unicorns and for our companies at the unicorn level to rise to the decacorn league. As a matter of fact, not limiting its activities to Türkiye but expanding to 3 countries has played a significant role in rendering Getir the first decacorn company in Europe’s fast grocery delivery sector by exceeding a valuation of $1 billion to $10 billion in less than a year. We believe that our technology start-ups that will operate under DEİK Digital Technologies Business Council will expand their spheres of influence around the world and make significant gains as they become a global player.

2- Establishment of platforms that will bring together foreign venture capital funds and start-ups, scaleups and domestic venture capital funds in Türkiye

The emergence of Türkiye’s growing number of billion-dollar technology companies is, of course, the result of the seeds planted years ago reaching a certain maturity. Looking at 2021 from this perspective, the fact that a total of 229 seed fundings have been made and that such fundings make up 85% of the total funding amount is very valuable as they foreshadow new success stories in the future. Well, do our entrepreneurs have adequate access to financing? In response to this question, when we compare it with other equivalent countries that have unicorns, we see that we have not fully utilized our potential. Research on Türkiye’s startup ecosystem shows that one of the most common problems our start-ups face is access to financing. Even though the volume of venture capital investment funds increased significantly in our country, financing problems may occur in seed and Series A funding, and in our start-ups that have matured and require a further level of funding. In addition to the development of mechanisms to attract foreign investors in increasing the fund supply, the interest of our business world and traditional investors should also be increased. Supporting entrepreneurs financially on their journey and establishing the necessary connections with the help of our networks will be a factor that accelerates the growth of our technology start-ups. This requires a process in which our start-ups are not only in need of financing but also constantly promote themselves and keep in touch with domestic and international investors.

3- Triggering of digital transformation

The integration of traditional manufacturing sectors with digital technologies provided productivity increase and cost advantage in production processes, which leads to an increase in the international competitiveness of the sectors and thus the level of exports. From this perspective, it is vital for our sectors to invest in innovative ideas, to be designers of products and services, and to put technology at the centre of the production and commercialization process for high value-added production and export-oriented growth model.

In the process of the establishment stage of our DEİK/Digital Technologies Business Council, more than 300 institutions and organizations from dozens of sectors willing to be included in Türkiye’s technology network in areas such as software, logistics, robotics, cyber security, construction, mining, etc. applied for membership. Comparing the sector where our companies operate and the subcommittees in which they are willing to be active in the Business Council, we see that the request for participation in the technology subcommittees connected with their sector is a concrete sign of digital transformation efforts, which is defined as “finding solutions to sectoral needs with the integration of digital technologies”. In these committees, for example, our companies from the machinery, electronics, or construction sectors and our companies operating in the field of the internet of things will come together to discuss the technologies needed by the real sector and the opportunity for bilateral business negotiations will arise. In addition, there are a large number of manufacturing industry, construction, energy, and tourism companies that apply to digital technology subcommittees outside their field of activity, which is very pleasing as the presence of these companies indicates that digital technology companies and potential domestic investors will come together.

4- Establishment of digital corridors with other countries

In line with the goal of making Türkiye a technology centre, strategic agreements with countries that have a leading position in the field of technology will contribute to many important areas such as technology transfer, attracting foreign venture capital investment funds to our country, expanding our startups to foreign markets, and global technology companies investing in our country. In this field, we conduct focus group studies on two significant technology blocks in the world, the European Union and the USA. The EU Digital Single Market strategy allows our start-ups to reach the market of more than 500 million people with a volume of 415 billion. We will publish the outputs of the Integration with the EU Digital Single Market project implemented by our DEİK European Business Councils this year. Our DEİK/Türkiye-U.S. Business Council (TAİK) has prepared a very comprehensive strategy study for the establishment US-Türkiye Digital Corridor. In line with this objective, we formed a working group under the leadership of Derya Matraş, Chairperson of TAİK California State Committee and Regional Director of Facebook in Türkiye, Middle East, and North Africa. This year, we will share the results of our joint work with Facebook with our counterparts in Türkiye and the US.

5- Identifying the problems companies face and preparing suggestions for improving the funding environment in Türkiye

As a complement to our first 4 strategies, we plan to create a policy set in line with the views and suggestions on thematic issues that will improve the funding environment of our country, through the innovative cooperation spirit of our technology start-ups and business world, in the working groups we will establish under DEİK/Digital Technologies Business Council. As DEİK, the door of the Turkish private sector that opens to the world, we will work to carry the voice of our technology start-ups to the world in 2022 through our 148 Business Councils and understanding of “business diplomacy”.

Caner Çolak / Secretary General of DEİK