DEEP TECH ENTREPRENEURSHIP AND INCUBATORS IN TURKIYE

Many incubators and accelerators have been opened in Türkiye in the last 10 years and entrepreneurial activities have kept growing with the support of these institutions

Deep tech brings together start-ups from various sectors that share similarities, such as development time or financial needs, to offer solutions for a diverse array of needs. These enterprises with deep knowledge enjoy a competitive advantage. Deep technology start-ups are defined as companies that develop products based on scientific research or R&D. These technologies often have transformative potential. If successful, they could bring about paradigm shifts in the way businesses operate, impact national security measures, or revolutionize entire fields of exploration.

The Global Entrepreneurship Ecosystem Report predicts that the next Silicon Valley will not replicate the model of Silicon Valley but will emerge through entirely different innovations, with deep technologies playing a pivotal role in this transformation. According to the report, between 2010-2011 and 2017-2018, there was a remarkable increase in the number of newly established deep technology start-ups.

DEEP TECHNOLOGY IN TÜRKİYE

Türkiye is the 19th largest economy in the world, with a population of over 84 million and a significant proportion of young individuals, and an average age of 33.5. In 2001, the enactment of the “Law on Technology Development Zones” laid the groundwork for the establishment of technoparks throughout Türkiye. The state has initiated various incentive mechanisms for research and development (R&D) and technology-based entrepreneurship by providing tax deductions through technoparks, which gained legal status with the enactment of this law. Significant progress has been made in the 20 years since this pivotal moment, and currently Türkiye boasts 101 Technology Development Zones.

Of these, 89 technoparks have commenced operations, while the remainder are still in the establishment phase. As of February 2024, the number of companies conducting R&D studies in operational technoparks has reached 10,178. These companies collectively employ 107,079 personnel, and they have completed a total of 57,575 R&D projects.

45 percent of deep tech entrepreneurs in Türkiye are situated in Istanbul, 24 percent in Ankara, and 9 percent in Izmir. In recent years, there has been a notable surge in the number of start-ups in this field, with 63 percent of deep tech start-ups established in 2015 and later. When examined by sector, start-ups operating in the fields of Industry 4.0, IoT (Internet of Things), sensors, and electronics are particularly prominent.

Additionally, sectors such as biotechnology, artificial intelligence and data processing, and autonomous vehicles also garner significant attention. When examining the amounts of investments received by start-ups, it is observed that 20 percent received investments exceeding USD 1 million, while 10 percent received investments ranging between USD 500 thousand and 1 million. However, regrettably, only 14.3 percent of deep tech start-ups in Türkiye have secured investment.

17.6 percent of deep tech start-ups hold patents. The cities with the highest number of patent applications are Istanbul, Ankara, Izmir, Kocaeli, Eskişehir, and Kayseri. Patented start-ups are categorized based on the technology they produce, including biotechnology, new materials & nanotechnology, autonomous vehicles, and robotics & mechatronics. From a sectoral perspective, significant patent studies are being conducted in sectors such as healthcare, consumer products and services, energy, and food and agriculture. According to nationwide survey studies we conducted, 79 percent of entrepreneurs fund their startups with their own savings, while the second most significant source of financing is state incentives.

When examining investment sources, 50 percent of entrepreneurs prefer to receive investment from CVCs (Corporate Venture Capital), while 35 percent prefer to receive investment from VCs (Venture Capitalists). According to the survey results, financing, market access, access to qualified human resources, finding suitable partners, access to laboratories and testing areas, and visibility emerge as the most significant challenges faced by entrepreneurs. Additionally, according to the survey conducted with deep technology entrepreneurs, the most significant challenge faced by deep technology start-ups is the need for capital, with 64 percent citing it as their biggest challenge. The need for capital is followed by a conservative market structure at 47 percent, reaching the right connections at 42 percent, and the length of product development periods at 41 percent, according to the survey.

When examining the needs of enterprises, the need for financing is by far the most important, with 77 percent of respondents citing it as their primary need. Although financing stands out as the leading need area, it’s important to emphasize that the need for “Human Capital”, which encompasses various aspects, emerges as the primary area of need when considered collectively under different headings.

At this juncture, it’s evident that fostering early-stage entrepreneurship, engaging potential entrepreneur profiles through diverse training programs at the outset, and prioritizing initiatives to enhance awareness in the field of entrepreneurship, particularly during the undergraduate education phase, will enhance the national potential for deep technology entrepreneurship. Therefore, strengthening start-up and acceleration centres with functions akin to educational institutions and employment centres, and redefining universities and technical vocational high schools as pre-incubation development areas will bolster our national development goals.

SUPPORT PROVIDED TO DEEP TECHNOLOGY START-UPS IN TÜRKİYE

In addition to the incentive mechanisms provided in Technology Development Zones, various bodies such as the Ministry of Treasury and Finance, the Ministry of Industry and Technology, KOSGEB, TÜBİTAK, Development Agencies, and the Turkish Technology Development Foundation also implement support programs for innovative entrepreneurship. In this context, although Development Agencies were established recently, they have injected significant dynamism into their regions and have emerged as supporters of entrepreneurs, SMEs, and local stakeholders through financial support programs. Since deep technologies are expensive and time-consuming to develop, it is crucial to devise the appropriate commercialization path for deep technology start-ups. Incubators and accelerators are becoming increasingly effective in successfully commercializing deep tech start-ups.

These structures contribute to the development of new entrepreneurs by providing them with crucial inputs such as access to finance, business connections, qualified labour, specialized equipment, and facilities. Many incubators and accelerators have been opened in Türkiye in the last 10 years under the leadership of universities, technoparks, chambers and exchanges and entrepreneur-friendly corporate companies, and entrepreneurial activities have kept growing with the support of these institutions. Among these institutions, Cube Incubation, operating within Teknopark Istanbul, stands out as the sole incubator and accelerator in Türkiye exclusively catering to “Deep Technology” start-ups.

INVESTMENT RATES RECEIVED BY DEEP TECHNOLOGY START-UPS IN TÜRKİYE

According to the Deep Technology In-Depth Overview Report, the first study on deep technology entrepreneurship in Türkiye, out of 1,307 deep technology start-ups examined in terms of investments received, 172 of them secured investments. This figure corresponds to 14.3 percent of the total start-ups, which is relatively low, especially for deep technology start-ups with significant capital requirements. 86.7 percent of deep technology start-ups in Türkiye have not secured any investment. When examining the investment amounts received, it is observed that 19 percent of the enterprises receiving investments received amounts below USD 50 thousand, 20 percent received investments ranging between USD 50 thousand and 100 thousand, and another 20 percent received investments between USD 100 thousand and 250 thousand. An important point to note is that while the total investment received by 1,200 active deep technology start-ups in Türkiye amounts to USD 126 million, the total investment received by 60 deep technology start-ups established abroad by Turkish entrepreneurs is around USD 1.7 billion.