Mapping the Istanbul Tech Ecosystem

MAPPING THE ISTANBUL TECH ECOSYSTEM

HOW A SMALL GROUP OF FOUNDERS SCALED AND CREATED THOUSANDS OF JOBS IN ISTANBUL BY SUPPORTING OTHER FOUNDERS.

AUTHORS: Lili Török, Project Leader at Endeavor Insight ([email protected] I @lilitorok)

ADDITIONAL CONTRIBUTORS: Rhett Morris, Director of Endeavor Insight ([email protected] I @rhettmorris)

ABOUT ENDEAVOR INSIGHT: Endeavor Insight is the research division of Endeavor, a non-profit organization that supports high- impact entrepreneurs across the world.

Its work seeks to answer three questions:

1 How do entrepreneurs reach scale at their companies?

2 How do entrepreneurs reach scale in local networks or ecosystems?

3 What can policymakers, philanthropic leaders, investors, support organizations, and other stakeholders do to empower more entrepreneurs to reach scale in their communities?

The methodology utilized in this study builds on previous Endeavor Insight research supported by the Argidius Foundation, the Bill and Melinda Gates Foundation, the Omidyar Network, the Inter-American Development Bank, as well as partners in the Global Entrepreneurship Research Network.

SPECIAL THANKS: The authors of this report would like to thank their colleagues at Endeavor including Adrián Garcia- Aranyos, Maha AbdelAzim, Leah D. Barto, Penmai Chongtoua, Luisa Fajardo, Patrick Linton, and Linda Rottenberg, as well as the Endeavor Turkey team, especially Aslıhan Kurul Türkmen, Utku Tuncay, Oktay Azbazdar, Orhan Gazi Yalçın, Leyla Unat, Berkan Orta, Alev Ertem, İdil Mayzel, Mehmet Ege Kurt, and Melisa Fakabasmaz Özerdim. A number of research assistants and analysts were also critical to the project’s success, including Tanya Kapoor and Camila Navarrete. In addition, the following individuals provided valuable input as Endeavor Insight developed the analyses and content in this report: Hande Cilingir, Fırat İşbecer, Ahmet Kayhan, Emek Kirbiyik, and Cenk Soyak.

Published in October 2019. EXECUTIVE SUMMARY

In early 2019, Endeavor Insight partnered with Endeavor Turkey and the Istanbul Development Agency to assess the entrepreneurship ecosystem for technology companies in Istanbul. Powered by Eczacıbaşı, The purpose of the study is to provide a snapshot of the sector’s current state, evaluate its strengths and weaknesses, and enable decision makers to better understand and support local tech entrepreneurship. The following findings are based on over 200 interviews with tech entrepreneurs in Istanbul, as well as interviews with over 20 investors and entrepreneurship support organization leaders.

1 The Istanbul tech sector has been growing 3 Decison makers should work to address Pozitron reinvested their resources in other steadily for decades, but dynamism has the challenges that scaling tech founders tech entrepreneurs. Over one third of the slowed down in recent years. have identified. Based on interviews with tech companies in Istanbul today can be The Istanbul tech entrepreneurship the founders of high growth companies traced back to one of these four companies community emerged from email and internet (the fastest 20 percent of companies through either investment, mentorship, former provider companies in the 1980s, and has with over 10 employees), access to tech employment, or serial entrepreneurship. gained worldwide recognition in the past talent and late-stage capital are two main These high quality connections have decade as an e-commerce tech hub with a barriers holding entrepreneurs back. helped scaling founders perform better. series of successful exits. Companies like  Access to capital: International investors  A number of entrepreneur-led support Yemeksepeti, Trendyol, and Gittigidiyor have been approaching entrepreneurs with organizations and investors have been have been sold to companies like Delivery more caution than before. The currency crash instrumental in engaging accomplished Hero, Alibaba, and eBay for over USD 100 caused revenue numbers and valuations founders to give back. There are over 80 active million dollars each. Today, there are over to collapse, which left founders struggling investment firms and support organizations 800 tech companies operating in Istanbul. to demonstrate the growth rates that working to support tech entrepreneurs in The tech community’s resilience was tested in foreign investors expect while navigating Istanbul today, and collectively, they supported recent years when Turkey entered a period of complicated relationships with investors at nearly thirty percent of the companies in the geopolitical instability, followed by a currency home. There was a sizeable decline in larger sample. Some of the most influential support and debt crisis. Valuations dropped, as did the investment rounds: the number of investment organizations in Istanbul like Endeavor, influx of foreign capital into tech companies rounds above USD 1 million has gone from Galata Business Angels, and ITU are led by in Istanbul. Companies with foreign revenue 26 in 2017 to just 6 in the fall of 2019. scaleup entrepreneurs, and some of the most sources weathered the crisis more easily, accomplished tech entrepreneurs are involved  Access to technical talent: Qualified tech but new entrepreneurs have not been able to as senior executives or board members of employees are hard to find, and even harder scale at the same rate as their predecessors. support organizations and investment funds. to keep in Istanbul today. Several decades of Looking ahead, strategies that previously sustained growth in the tech sector fostered  Network effects may slow down because enabled entrepreneurs to thrive in Istanbul may a high quality talent pool, but it is fast fewer resources are recycled back in the not ensure future growth at the same rate. disappearing today. Istanbul founders have to community. With every new generation of 2 Decision makers need to focus on helping compete for tech talent with European tech tech founders that has scaled and engaged a new generation of tech entrepreneurs reach hubs like Amsterdam and Berlin, where there is with the network, the sector has further scale in Istanbul. an established and growing Turkish diaspora. specialized, moving from IT, to enterprise Companies with 50 or more employees have software, to e-commerce, to payments and  Regulation: Regulation around research been driving most of the economic growth in analytics. Each new sector has drawn on and development and startup support, Istanbul’s tech sector, but only 13 percent of value from its precursors. In the past five as well as a lack of regulation around these firms were founded in the past five years. years, companies have been exiting at earlier employee stock options, have made it more This is an indication of slowing dynamism stages and for lower dollar amounts than difficult for companies to retain talent. that could have long-lasting implications previously. To keep the tech sector moving for the sector’s growth if the city does not 4 Decision makers in the public and the forward, founders need to keep scaling increase the number of new companies . private sector who want to help more and injecting new values, information, and resources back into their industry. Istanbul has demonstrated strengths in certain tech entrepreneurs scale need to focus on subsectors — most of the companies at scale connecting established company founders that were founded more recently operate with the new generation of entrepreneurs. in the enterprise software, e-commerce,  The Istanbul tech community has been and analytics sectors. Decision makers able to thrive because earlier generations of should look to the entrepreneurs scaling founders generously reinvested their resources fast in these areas, as well as new domains in the ecosystem. Like the founders of Fairchild with demonstrated scale, to identify the Semiconductor in Silicon Valley, the founders next pathways for Istanbul to excel. of the first great Istanbul tech companies like Mynet, Markafoni, Yemeksepeti, and

1 RESEARCH QUESTIONS

The purpose of this study is to understand Three principal research questions how technology companies in Istanbul are guided the research process: reaching scale, and to identify the greatest 1. What is the current state of the tech As soon as internet opportunities and challenges faced by these entrepreneur community in Istanbul? technology became scaling companies that decision makers can widely available in help address. Over the course of this project, 2. What is the role of support the research team identified over 865 tech the 1990s, Istanbul organizations and other institutions companies in Istanbul; interviewed the in fostering entrepreneurship and entrepreneurs founders of over 230 of these tech companies; economic growth in the sector? recognized and analyzed additional secondary data on former employment, investment rounds, and 3. Where do opportunities exist the potential exits from publically available data sources to accelerate the growth of this of building the (i.e., Linkedin and Crunchbase) on over 1,000 community so that it can generate country’s internet tech founders from over 865 tech companies. more jobs and wealth for the region? infrastructure. Throughout this report, Istanbul refers to the greater Istanbul Metropolitan Area, also known as the administrative province of Istanbul. Technology companies were defined as for-profit companies whose primary activity can be described as either software development, internet-based or mobile-based retail services such as e-commerce, delivery platforms, content platforms, or online lenders, or as electronic hardware or manufacturing. Companies were only included in the research if they were entrepreneurial: founded by people, not corporations or government agencies.

2 CONTEXT

On May 5, 2015, the Istanbul tech sector investing in the industry, inaugurating what of geopolitical instability, followed by a debt made headlines around the world when became a culture of generousity in the sector. crisis and a currency crash. In the first half Yemeksepeti, a Turkish on-demand food Over 540 entrepreneurial tech companies of 2018, the Turkish lira dropped 40 percent delivery company, was sold for USD 589 were founded just between 2000 and 2015, against the U.S. dollar, and so did the valuations million to Delivery Hero, its German based on Endeavor Insight research. of tech companies in Istanbul. 6 Investment competitor. This was the largest acquisition in activity slowed down. Companies were not By the mid-2000s, Istanbul gained recognition Turkish history at the time, and the story was only worth less nominally; their revenues in as an e-commerce hub among emerging covered by all major online media platforms Turkey were discounted by 40 percent in a markets, marked by a series of high-value exits. from CNN to the Wall Street Journal. 1 2 near instant. In a capital raising process, a Yemeksepeti was one of seven companies Founders Nevzat Aydın and Melih Ödemiş, who drop of this magnitude was unprecedented, acquired for over USD 100 million, accompanied started the company with USD 50,000, publicly and posed a major challenge. Growth rates by Markafoni, Gittigidiyor, Pozitron, Gram thanked employees for the company’s success. vanished when they were measured in dollars.7 Games, Trendyol, and Iyzico. General Atlantic, In July 2015, the Independent published an Kleiner Perkins, and Tiger Global were The current generation of growing companies article calling him the world’s best boss 3 among the major investors. The list of buyers was hit hardest by the new macroeconomic By the time the story broke about Yemeksepeti, includes companies like Alibaba and eBay.4 circumstances; large tech companies there was a vibrant tech ecosystem in Istanbul. weathered the crisis more easily. Those that Global tech companies were keen to tap into When internet technology became widely generated most of their sales abroad, but the Turkish market, a young population of available in the 1990s, Istanbul entrepreneurs kept their operational costs in Turkey proved 80 million native Turkish speakers who were recognized the potential in building the to be especially resilient. To some, the new difficult, if not impossible, to access without country’s internet infrastructure, including reality had some advantages as operational the involvement of Turkish companies. Three its email, IT, and web security services. Local costs fell together with valuations.8 But new of the largest merger and acquisition deals entrepreneurs launched companies like Mynet entrepreneurs have not been able to scale at in Europe in 2018 came out of Istanbul. 5 (an email and internet portal), Logo Yazilim the same rate as their predecessors. Of the 107 (an enterprise software company), and Pronet The Istanbul tech entrepreneurship tech companies with 50 or more employees (a security firm). When this first generation community’s resilience was put to the test in in Istanbul, only 14 companies, or 13 percent, of founders sold their companies, they began recent years when the city endured a period were founded in the past five years. 9

3 4 A SMALL MINORITY OF TECH FOUNDERS CREATED MOST OF THE JOBS IN THE ISTANBUL TECH ENTREPRENEURSHIP COMMUNITY.

By 2019, there were an estimated 865 This trend is comparable to other tech entrepreneurial tech companies founded ecosystems that Endeavor Insight has studied. or headquartered in Istanbul. Between For example, in Mexico City, 15 percent of 600 them, they employed over 25,000 people companies reached scale and generated over By 2019, there were on a full-time, permanent basis. The sector 80 percent of the jobs among entrepreneurial an estimated 865 has made a significant contribution to tech companies in the city. In Sao Paulo, 21 entrepreneurial tech employment growth in the city. Most of this percent of 585 companies reached scale contribution, however, came from companies and generated over 87 percent of the jobs companies founded that scaled. As the chart below indicates, among local tech companies. Companies or headquartered in over 68 percent of these jobs were created at scale tend to drive productivity in tech, Istanbul. Between by the 107 tech companies that employed and they are likely to pay higher average 50 people or more — which comprise only wages than smaller companies. They are them, they employed thirteen percent of local tech companies. also more resilient in times of crisis. over 25,000 people.

EMPLOYMENT CONTRIBUTION BY COMPANY SIZE Sample size: 865 entrepreneurial tech companies founded or headquarted in Istanbul.

COMPANIES WITH 50 EMPLOYEES OR MORE COMPANIES WITH 1-49 EMPLOYEES 13 percent of local tech firms with 50 100% 13 % 68 % employees or more contributed 68 percent of the jobs in the sector. 75%

50%

25%

0% SHARE OF COMPANIES SHARE OF EMPLOYMENT

Source: Endeavor Insight analysis.

5 A number of sub-sectors emerged as The founders of high-growth companies competitive strengths and produced more also had distinct careers prior to starting Enterprise software, companies at scale than others. 13 percent their company. These founders were twice e-commerce, of entrepreneurial tech companies reached as likely to have over 10 years of total work scale in Istanbul, but some sub-sectors experience among their co-founding team, payments and emerged as important competitive strengths. and 60 percent more likely to have worked at analytics grew more As entrepreneurs gained expertise in one a local entrepreneurial company that scaled. dynamically. These domain, adjacent domains began to develop. domains produced To emerge from a challenging macroeconomic Enterprise software, e-commerce, payments environment, new tech firms need to scale. more companies and analytics grew most dynamically and In a new economic environment, the tech at scale than other produced more firms that scaled than community needs to be more self-reliant and industries. other sub-sectors. As the table across more founders need to be able to leverage the page demonstrates, these domains local resources to generate revenues abroad. produced more companies at scale than Istanbul has a number of resources available other industries; between 15 to 18 percent of to entrepreneurs, such as comparatively low these companies reached scale. Some other operational costs, great quality of life, and a sectors underperformed — of an estimated cosmolitan city closely connected to the rest 50 gaming and mobile app companies, of the world. Compared to European cities, only 8 percent were able to reach scale. tech talent in Istanbul is inexpensive while still highly qualified. The city is famous for its Newer companies have been struggling high standards of living and it headquarters to reach scale at the same rate as their Turkish Airlines the world’s most connected predecessors, and only one percent of airline in 2019 by number of destinations. companies have been able to reach scale One of the greatest strengths of the city in the past five years. Scaling a company are the entrepreneurs commitment to their today looks different than it did before community. Over 70 percent of interviewed the crisis, and it takes new types of founders were planning to stay in the city resources. Scaling an analytics company either long term or indefinitely. High net today also looks different from scaling an worth individuals, who control 51 percent e-commerce company 20 years ago. of private wealth in Turkey, could also be a great asset to the ecosystem as investors, The next generation of founders at scale but are not as connected as they could be.11 will come from founders rapidly growing their companies today. For the tech sector The next section offers guidance to to thrive in Istanbul, new founders need decision makers who wish to support tech to achieve scale in greater numbers than entrepreneurship in Istanbul. They need to they are today. The next generation of identify the entrepreneurs with the highest founders are most likely to come from the potential to scale and help them address the companies that are scaling the fastest today. challenges that they are facing. Entrepreneurs who are successful in building companies In order to identify these founders, Endeavor that scale in the current environment Insight analyzed a subset of high-growth are going to be leaders of Istanbul’s next tech companies in Istanbul, defined by era of tech growth and excellence. their placement in the top 20 percent of all tech companies in the study based on their annualized employee growth rate.

High-growth companies differ from lower- performing companies in their industry representation and founder work history. Often, they operate in industries where Istanbul has demonstrated historical strengths, like payments and analytics as well as e-commerce. These companies were 60 percent more likely to be analytics, and 25 percent more likely to be e-commerce, than lower-performing companies.

6 MAJOR SUB-SECTORS IN THE TECHNOLOGY SECTOR Estimated start of sub-sector, number of total firms, total jobs, percentage of 50+ firms, and notable exits.

ENTERPRISE E-COMMERCE AND PAYMENTS AND MOBILE DEVELOPMENT AND SOFTWARE DELIVERY ANALYTICS GAMING

Estimated Start 1980s 1990s Early 2000s 2010s

# of Companies ~140 ~200 ~80 ~50

# of Jobs ~5,400 ~9,000 ~2,000 ~1000

Percentage with 50+ 18% 16% 15% 8% Employees

Pozitron, Trendyol iyzico PeakGames (Monitise, 100M) (Alibaba, 728M) (PayU, 165M) (Zynga, 100M for a single game)

Logo Yazilim Yemeksepeti Foriba GramGames (Mediterra, 27M) (Delivery Hero, 589M) (Sovos, 50M) (Zynga, 250M) Notable Exits Gittigidiyor Masomo (Ebay, 183M) (Miniclip, 100M)

Markafoni (Naspers, 146M)

INDUSTRY REPRESENTATION OF HIGH GROWTH COMPANIES Percentage of high-growth and regular companies by industry.

AVERAGE GROWTH HIGH-GROWTH

40% High-growth companies are more likely to be E-commerce, SaaS, and Payments and Analytics 30% companies.

20%

10%

0% E-commerce / On Software Development Payments and Adtech / Media / Agtech / Biotech / Demand Delivery for Enterprises / SaaS Analytics Content Delivery / Cleantech Platform Social Media

Note: Industry representation of high-growth companies compared to others. Sample size: 865 total companies, 90 of them high-growth companies. Source: Endeavor Insight Analysis.

7 8 ACCESS TO CAPITAL, ACCESS TO TECH TALENT, AND GOVERNMENT REGULATION ARE THE GREATEST CHALLENGES FOR SCALING FOUNDERS IN ISTANBUL.

Endeavor Insight conducted interviews with over 230 founders, including 39 founders of high-growth companies in Istanbul and leaders of the support organizations. Istanbul tech entrepreneurs identified three major challenges that are preventing them from scaling their companies: access to capital, access to tech talent, and issues related to regulation.

CHALLENGE 1 ACCESS TO CAPITAL

The past several years of economic volatility number of investments in the industry investment rounds in Istanbul, this dropped and political risk have had a significant impact dropped by an astounding 65 percent. to a mere 18 by 2018, and to 6 by August on investment activity. Following several 2019 when data collection closed for this Larger investment rounds, which usually draw years of uneven growth, the greatest drop report. Interviewees confirmed that after foreign investments, suffered the greatest in investment activity over the past decade the valuation and sales of local companies loss. Sixty-three percent of investment rounds occured in recent years. In a dataset of over collapsed, international investors have had above USD 1 million involved the participation 900 investment rounds in the industry a reduced appetite for making investments of a foreign fund, and nearly all — 95 percent between 2008 and 2019, 134 investment in Turkey. Valuations of Turkish companies — of investment rounds above USD 5 million rounds occurred in 2017; 87 in 2018; and collapsed — alongside the Turkish lira — and involved the participation of a foreign fund. only 29 by August 2019 when this report so did domestic sales at Turkish companies. While the year 2017 saw the closure of 26 was written. Between 2017 and 2018, the

150 INVESTMENT ROUND SIZES IN ISTANBUL TECH COMPANIES IN US DOLLARS

Sample size: 250 investment rounds that took place between 2017 and 100 August 2019, when data collection was closed for this study. UP TO 100,000 1,000,000 ABOVE 1,000,000

0 2017 2018 2019 AUGUST

Source: Endeavor Insight Analysis.

9 CHALLENGE 2 CHALLENGE 3

ACCESS TO TECH TALENT REGULATION

As tech entrepreneurs call it, Istanbul is Government regulation, or the lack thereof, a developers’ market: tech employees has also impacted the potential to create are hard to find and even harder to keep. compelling work environments and retain Over decades of growth, the Istanbul tech employees. Employee stock options, a community has fostered a quality talent powerful retention tool for tech companies pool, but entrepreneurs are now faced with that scale, are generally unknown and a great challenge as coders leave en masse unregulated by law. Employment stock options to pursue opportunities abroad. Over 40 are a type of equity compensation granted by percent of founders classified access to companies to their employees, widely used qualified coders and engineers as a challenge, in the U.S. and many other vibrant startup and founders of high-growth companies hubs. This is a significant challenge in an were the most likely to bring up this issue. environment where companies are racing against brain drain, or even seeking to lure Tech employees with a few years of experience members of the diaspora to work for them. are frequently approached by tech companies in Amsterdam and Berlin, where many of National regulation ties startup support the regional headquarters of the largest to policies that encourage R&D activity in tech companies are located. For instance, the country. This has resulted in startup the headquarters of Tesla, Netflix, Uber, and support initiatives that are overly prescriptive Booking are all based in Amsterdam, as well as for entrepreneurial companies, including the European branches of Y-Combinator and policies that require companies to move Techstars. There is also an existing diaspora their headquarters to technoparks in the of nearly 6 million Turkish citizens in Western outskirts of Istanbul to qualify for tax European countries, making Turkish migration benefits. As most top-performing founders to these countries significantly easier. 12 noted, technoparks are much less attractive environments for coders than the alternative Scaling companies in Istanbul go to of an office in downtown Istanbul. great lengths to create appealing work environments to retain employees. Offices are often based in Istanbul neighborhoods like Beyoğlu or Galata, equipped with an espresso bar and a barista. In one case, a company hired a dietitian and a dentist to attract the best coders. Another tech founder was piloting a program to establish an Amsterdam campus for his company, arguing that it would be less expensive than losing his best talent and institutional knowledge.

10 11 NETWORK EFFECTS HAVE PLAYED AN IMPORTANT ROLE IN SHAPING THE ISTANBUL ENTREPRENEURSHIP COMMUNITY.

Networks are important vehicles to LESSON 1 1. Mynet, an email provider and social transmit resources and information in a media company with over 250 employees. community, and they can be powerfully THE ISTANBUL TECH COMMUNITY Founded in 1999, and still owned by the leveraged to address the challenges of HAS THRIVED BECAUSE EARLIER founder, Emre Kurttepeli, Mynet is one scaling tech companies in Istanbul. GENERATIONS OF FOUNDERS of Istanbul’s earliest success stories. REINVESTED THEIR RESOURCES IN THE Network analysis helps trace the flow of ENTREPRENEURSHIP COMMUNITY. 2. Yemeksepeti, a marketplace company people, capital, and information between with almost 400 employees, which The Istanbul tech community is highly entrepreneurs, their co-founders, employees, was acquired for more than USD interconnected. Of an estimated 865 mentors, investors, and other stakeholders. 589 million by Delivery Hero; entrepreneurial tech companies in the sector, To get a snapshot of Instabul’s tech 186 were connected to at least one other , an e-commerce company entrepreneurship network, Endeavor Insight 3. Markafoni company through serial entrepreneurship, with over 500 employees, acquired interviewed 230 founders and analyzed the former employment, mentorship, and/ for USD 146 million by Naspers. connections among them using a methodology or angel investment. There is also strong that was developed by members of the Global , an enterprise software company peer-to-peer connectivity: 74 percent 4. Pozitron Entrepreneurship Research Network. founded by Firat İşbecer and Fatih İşbecer of founders believe they could get the with more than 100 employees, acquired The methodology looks at four types of phone number of any founder in the city for USD 100 million by Monitise. relationships among founders and companies they wanted to meet the same day. that illustrate the ways in which local Over half of the 186 entrepreneurial tech Tech entrepreneurs in Istanbul seem to founders take knowledge and other resources companies in the network were directly appreciate the importance of building the acquired from founding one firm and use it related to one of these four companies. right connections. In a sample of 163 tech to help launch or grow another. These are: entrepreneurs who answered this question, The network map on the top of the opposite over 90 percent believed that knowing the right page represent the connections between people was either very important, or essential tech founders in Istanbul. The map on the 1. Serial entrepreneurship; to getting ahead as an entrepreneur in Istanbul. bottom of the page highlights the companies 2. Former employment; at significant scale. Significant scale is More importantly, the network is dominated defined by having 100 or more full-time, by high-quality connections. Over half 3. Mentorship; and permanent employees, or an exit over USD of the local tech companies that were 5 million. These are highlighted in yellow. 4. Investment. able to reach scale were connected to at Three important lessons emerged. least one other company through serial entrepreneurship, former employment, mentorship, or angel investment, as the map on the opposite page illustrates. Previous research by Endeavor Insight has shown that when entrepreneurs at scale are more connected to other founders, entrepreneurship communities are more productive. (Endeavor Insight, 2018) In Istanbul, the four most influential companies in the network are:

12 3DURAK MUTLUBIEV ANALYTICAHOUSE BUY SIHIRLI BUDDY USERGUIDING FULLE YOLCULUK CEPFIX GITSIN SOSYOPIX OCTOVAN PUSULA OPTIYOL CARLA APLIKA ALLDAYWIFI 360 LAB ESNEK KOLAYIK DOPIGO BENZIN ÖDEME LITRE PABBLER FURTHER SWINGO SCORP SCOTTY MODACRUZ INOOSTER CARBON PISANO ZINGAT ALTER- SWEATERS QUMPARA CX (NOBIUM) VOLE ENGLISH ZEBRAPOS ETKINLIKCIM PAPARA NINJAS ADTECH BITLO MAPPLICO OTTOO IUGO TWENTIFY ACTA KAPGEL RESTROID (BOUNTY) GRAM 1V1Y WORDEGO ACROME CORETOEDGE STARDUST GAMES JETLINK WALKOVR INC. PROJECT REPG MANIBUX EXASTAX YOUR ENERGY LENA PORTER GARDROPS SALESMOT TÜRKKEP BAMBULABS VERI PARCADEPOSU COSA TRENDYOL SEKIZGEN APP (NEO) KAYITLI (FORMERLY PAKET YOL ADACHYPAY E-CEREZ BULBUNU NUVIA) TAXI RUUP IYISAHNE.COM GARAJYERI FITANDCOLOR BUNSAR PAYPORT VERISUN EGITIMONLINEASKIDA INSIDER SMART ALPPEDO HEMENKIRALIKINCIR.COM LIDYANA AGENCY (IYIBILIR) NE MIDPOLY MIMIC (FLAT4DAY) ARCANA BEETOUCH VAR ANLATSIN.COM GAMES -RCADE CRAFTBASE ANNEYSEN BTCTURK STAJIM.NET OTSIMO BONVAGON HEDIYEMO PERA IZLESENE BONI REMINIS VIVENSE GAMES FUNDUNGO GLOBAL TUTUMLUANNE TAZEDIREKT 23 CAYCI V-COUNT STUDIOS ANT ADPHORUS INPLOID SHOPI TINYMINY.COM ALTER- YAZILIM CREACONIC MOBILIKE HEPFLY LALA TEAM GIMORA TARA CIMRI VIDYOU SISTEM (UCAKBILETI BILISIM DINLIO COM) KAHVEGIBIKAHVE ALOTECH PEAK TEMIZLIKYOLDA ALWAYSFASHION VOLOSOFT IYZICO PAKOLINO AVANSAS DOTTO OMMA ANNELUTFEN TUTTUR UDENTIFY MOBILUS TMOBTECH SIGN PIRI GUIDE SPARKUS FINEDINE SISTEM9 VIPME CORETEK ALIVEX FIRSAT YOUTHALL UZMAN COINY GORDION TV MARKAFONI TURUNCU TEKNOLOJI MISSPERA PLUSONEMINUSONE 8DIGITS CERASUS MIKRO-ÖDEME POZITRON MEKANIST DORUKNET TEKNOLOJI -SILKOLAY YUVAKO PEMBEPANJUR.COM COMMENCIS YENIBIRIS SEGMENTIFYTEKNOLOJI TINYMINY SYMBIE DUGUN.COM SESTEK TEMIZ JOYFOODZ D-CAT WORDEGO ZEROBUFFER YENICARSIM RIMUUT TECHNOLOGIES PRONET AKINON PROTRANSLATE MACKOLIK ENQURA JETRACT DONE BALERIN KOKTEYL INFINITY GASTROCLUB AIRTIES HEPSIBURADA VAGUSTIM YONJA TEKNOLOJI BLESH TASIT B-FIT BAKKALDAN ELEMAN EVDEKIBAKICIM DATABUL BINOVIST YÖNLENDIR MODANISA VOLT FIRSAT35 EKIP COLENDI PROJE OTELZ.COM ENUYGUN MYNET TIKLE REZTORAN DIGITOUCH PAYM.ES LOGO MAVIKEP FLYMEDI SPORCUM DOKTORTAKVIMI ÇIÇEK SEPETI DOGALZEKA ISTEOYUN PLAYZ (ENIYIHEKIM) ÖDE.AL VOLT CARLA Before 2004- 2010- 2014- Year LINES CAR 2004 2009 2013 2019 Founded GAUSS INPLOID BIR RENTAL SOCIAPLUS CÜZDAN TASIT.COM FIXTABLE (SETSEC) ARTIWISE SAMBA AHTAPOT PAYPAD VISTEK POS APP GIDEROS BIOGUY INOMERA AGITO YEMEKSEPETI ISRA KREDICO VISION ININAL PAVO SIMULARGE MEKAN DOKTOR BULDUYSAN.COM COM SITESI YAZILIMNET ENOCTA EVTIKO MOBILECRAFT ADINTERACTIVE FIZY MAPPS GITTIGIDIYOR PUBINNO FORNET ZET/SOPSY GLAMY MARTI EVIDEA BIZITEK SCOUTIUM DATAMARKET N11 GARAJ SIZ.NET YOUTHOLDING KAFT SEPETI HESAPKURDU SAHIBINDEN FITWELL PAYFULL ACCOUCHÉE CLICKMEDYA FORIBA DAKICK SOBEE YAZ VISPERA OBSS TART SMART KAMPÜS GAMES IDEMAMA GRUPANYA MODERATION MADENCILIK HIZLI BULDUYSAN ZEK.AI DUDESDIVISION FI-RTZ CEVIRI ODC KAHVEGIBIKAHVE HOCAM.COM DRIVEYOYO OKUL STARTUPS.WATCH HESAPKURDU.COM MAGNET ENHENCER ZIZIGO FESMEKAN.NET ODC BLINDID DIGITAL BUSINESS PAYBYME SOLUTIONS Tech founders that scaled 41 VALENSAS CARDTEK BILGETECH APIHEAL 29 BIZIMHESAP TAGLETTE TEMIZ.CO ZOLAKS (SBS BUTIGO LILAKUTU ZEITIN 3 TARENTUM 2K BILISIM BILIMSEL 90 LIFT FAKTÖRIYEL 3B MEDYA BILGI STILSOS YAZ. BIO) DIJITAL are strongly embedded in the DAN. FIRSATBUFIRSAT LISA TAG2SENSE HADI SDC TABLETSEMINERLERBIN-Z AKARGE LIVE BASHLA LOJIKA HIZMETLERI BIOPIPE RENTNCONNECT CBOT BIDOLUBASKI AKAUNTING entrepreneurship community DOKTORBURADA VISPERA SBS UPLIFERS MEDYAGURU SCIENTIFIC PICUS BIOPIPE BIO SECURITY DEKAMEDYA -NOMIK (GREE-GETECH) CODEVIST SOLUTIONS ARCADEMONK ARKENUS DOLAP TEKNOLOJI SPARK MASOMO ZIMOBI INC. TECHBASE in Istanbul. DIJITAL TIKBU GOANO BURO ARDELA DENEBUNU.COM BITAKSI CODFABRIK ISTANBUL METAMORFOZ PRISYNC TECHNOLOGIES ELEMANYONLENDIR.COM / DALISTO STARTUPMARKET DBI TARFIN ARASTTA GMPLY INSPREA COSA BOTGATE

GETIR PRATIXRM MOVENDE NEXT DENEBUNU TRUSTURK HORIZONS ANIBERA DEKOPASAJ TEKKREDI IVEN ORTHERO ONCE CEPSTOP WHISPTO INOVEN COUPON SORUN GEEN FIELDPIE A APIPLUG S-PBUY TIME OTOTRINK ZAXE (ZONE TAPU.COM PARTYMAG BANTTAN 3DPRINTER) BANTTAN TANBULA CANLÄ± CANLI

3DURAK MUTLUBIEV ANALYTICAHOUSE BUY SIHIRLI BUDDY USERGUIDING FULLE YOLCULUK CEPFIX GITSIN SOSYOPIX OCTOVAN PUSULA OPTIYOL CARLA APLIKA ALLDAYWIFI 360 LAB ESNEK KOLAYIK DOPIGO BENZIN ÖDEME LITRE PABBLER FURTHER SWINGO SCORP SCOTTY MODACRUZ INOOSTER CARBON PISANO ZINGAT ALTER- SWEATERS QUMPARA CX (NOBIUM) VOLE ENGLISH ZEBRAPOS ETKINLIKCIM PAPARA NINJAS ADTECH BITLO MAPPLICO OTTOO GRAMGAMES IUGO TWENTIFY ACTA KAPGEL (BOUNTY) RESTROID YEAR FOUNDED: 1V1Y WORDEGO ACROME CORETOEDGE JETLINK STARDUST WALKOVR INC. PROJECT REPG MANIBUX EXASTAX YOUR ENERGY LENA PORTER GARDROPS SALESMOT TÜRKKEP BAMBULABS VERI PARCADEPOSU COSA TRENDYOL SEKIZGEN APP (NEO) BEFORE 2004 KAYITLI (FORMERLY PAKET YOL ADACHYPAY E-CEREZ BULBUNU NUVIA) TAXI RUUP IYISAHNE.COM GARAJYERI 2004–2009 FITANDCOLOR BUNSAR PAYPORT VERISUN EGITIMONLINEASKIDA INSIDER SMART ALPPEDO HEMENKIRALIKINCIR.COM LIDYANA AGENCY (IYIBILIR) NE MIDPOLY MIMIC (FLAT4DAY) ARCANA BEETOUCH VAR ANLATSIN.COM GAMES 2010–2013 -RCADE CRAFTBASE ANNEYSEN BTCTURK STAJIM.NET OTSIMO BONVAGON HEDIYEMO PERA IZLESENE BONI REMINIS 2014–2019 VIVENSE GAMES FUNDUNGO GLOBAL TUTUMLUANNE TAZEDIREKT 23 CAYCI V-COUNT STUDIOS ANT ADPHORUS INPLOID SHOPI TINYMINY.COM ALTER- YAZILIM CREACONIC MOBILIKE HEPFLY LALA TEAM GIMORA TARA CIMRI VIDYOU SISTEM (UCAKBILETI BILISIM DINLIO COM) KAHVEGIBIKAHVE ALOTECH PEAK TEMIZLIKYOLDA ALWAYSFASHION PAKOLINO ACTORS: VOLOSOFT AVANSAS IYZICO OMMA DOTTO ANNELUTFEN TUTTUR UDENTIFY MOBILUS TMOBTECH SIGN PIRI GUIDE SPARKUS FINEDINE SISTEM9 VIPME CORETEK ALIVEX FIRSAT YOUTHALL UZMAN COINY ENTREPRENEURIAL COMPANIES GORDION TV MARKAFONI TURUNCU TEKNOLOJI PLUSONEMINUSONE MISSPERA 8DIGITS CERASUS MIKRO-ÖDEME POZITRON MEKANIST DORUKNET TEKNOLOJI -SILKOLAY YUVAKO PEMBEPANJUR.COM COMMENCIS YENIBIRIS SEGMENTIFYTEKNOLOJI TINYMINY SYMBIE DUGUN.COM SESTEK TEMIZ JOYFOODZ D-CAT WORDEGO ZEROBUFFER YENICARSIM RIMUUT TECHNOLOGIES PRONET AKINON PROTRANSLATE MACKOLIK ENQURA JETRACT DONE BALERIN KOKTEYL INFINITY The size of the circle reflects the number of GASTROCLUB AIRTIES HEPSIBURADA VAGUSTIM YONJA TEKNOLOJI BLESH TASIT B-FIT BAKKALDAN ELEMAN EVDEKIBAKICIM DATABUL BINOVIST connections originating from the founders YÖNLENDIR MODANISA VOLT FIRSAT35 EKIP COLENDI PROJE OTELZ.COM ENUYGUN MYNET TIKLE REZTORAN DIGITOUCH of each company or the leaders of each PAYM.ES LOGO MAVIKEP FLYMEDI SPORCUM DOKTORTAKVIMI ÇIÇEK DOGALZEKA ISTEOYUN PLAYZ (ENIYIHEKIM) SEPETI ÖDE.AL VOLT organization. Founders are represented CARLA Before 2004- 2010- 2014- Year LINES CAR 2004 2009 2013 2019 Founded GAUSS INPLOID BIR RENTAL SOCIAPLUS CÜZDAN by their most prominent company or TASIT.COM FIXTABLE (SETSEC) ARTIWISE SAMBA AHTAPOT PAYPAD VISTEK POS APP GIDEROS BIOGUY INOMERA AGITO YEMEKSEPETI ISRA KREDICO organization. VISION ININAL PAVO SIMULARGE MEKAN DOKTOR BULDUYSAN.COM COM SITESI YAZILIMNET ENOCTA EVTIKO MOBILECRAFT ADINTERACTIVE FIZY MAPPS GITTIGIDIYOR PUBINNO FORNET ZET/SOPSY GLAMY MARTI EVIDEA BIZITEK SCOUTIUM DATAMARKET N11 GARAJ SIZ.NET YOUTHOLDING KAFT SEPETI HESAPKURDU SAHIBINDEN FITWELL PAYFULL ACCOUCHÉE CLICKMEDYA FORIBA DAKICK CONNECTIONS: SOBEE YAZ VISPERA OBSS TART SMART KAMPÜS GAMES IDEMAMA GRUPANYA MODERATION MADENCILIK HIZLI BULDUYSAN ZEK.AI DUDESDIVISION FI-RTZ CEVIRI Serial entrepreneurship ODC KAHVEGIBIKAHVE HOCAM.COM DRIVEYOYO OKUL STARTUPS.WATCH HESAPKURDU.COMZIZIGO MAGNET ENHENCER BLINDID FESMEKAN.NET DIGITAL PAYBYME 4129 Former employment VALENSAS CARDTEK BILGETECH APIHEAL BIZIMHESAP TAGLETTE TEMIZ.CO ZOLAKS (SBS BUTIGO LILAKUTU ZEITIN 3 TARENTUM 2K BILISIM BILIMSEL 90 LIFT FAKTÖRIYEL 3B MEDYA BILGI STILSOS YAZ. BIO) DIJITAL DAN. FIRSATBUFIRSAT LISA TAG2SENSE HADI Mentorship SDC TABLETSEMINERLERBIN-Z AKARGE LIVE BASHLA LOJIKA HIZMETLERI BIOPIPE RENTNCONNECT CBOT AKAUNTING BIDOLUBASKI DOKTORBURADA VISPERA SBS UPLIFERS MEDYAGURU Angel investment SCIENTIFIC PICUS BIOPIPE BIO SECURITY DEKAMEDYA -NOMIK (GREE-GETECH) CODEVIST SOLUTIONS ARCADEMONK ARKENUS DOLAP ZIMOBI TEKNOLOJI INC. SPARK MASOMO DIJITAL TECHBASE TIKBU GOANO BURO ARDELA DENEBUNU.COM BITAKSI CODFABRIK ISTANBUL METAMORFOZ PRISYNC TECHNOLOGIES ELEMANYONLENDIR.COM / DALISTO STARTUPMARKET DBI TARFIN ARASTTA GMPLY INSPREA HIGHLIGHTS: COSA BOTGATE GETIR PRATIXRM MOVENDE NEXT DENEBUNU TRUSTURK HORIZONS ANIBERA Companies with 100 or more employees and DEKOPASAJ TEKKREDI IVEN ORTHERO ONCE CEPSTOP WHISPTO INOVEN COUPON SORUN GEEN companies that were acquired for over USD 5 million. FIELDPIE A APIPLUG S-PBUY TIME OTOTRINK ZAXE (ZONE TAPU.COM PARTYMAG BANTTAN 3DPRINTER) BANTTAN TANBULA CANLÄ± CANLI

13 The tech community was able to thrive Previous research suggests that connections because tech entrepreneurs remained to entrepreneurs who have experience strongly connected to the community. They in building a company that employ a 100 Support from reinvested their resources and knowledge people or more can demonstrably improve a experienced through mentorship and angel investment. company’s chances to be one of the fastest growing companies by number of employees. entrepreneurs Support from experienced entrepreneurs The network map of Istanbul’s tech community measurably helped tech entrepreneurs scale measurably helped reflects this same story. tech entrepreneurs in Istanbul. The fact that accomplished entrepreneurs are the most influential in the The chart below demonstrates this relationship scale in Istanbul. tech community in Istanbul explains why the between connections to experienced community was able to produce over a 100 entrepreneurs and the likelihood of building companies at scale and a number of exits over one of the fastest growing companies among USD 100 million. companies of the same age.

CONNECTIONS TO SCALED ENTREPRENEURS VS. COMPANY PERFORMANCE NON-TOP PERFORMER Sample size: 865 entrepreneurial tech companies in Istanbul. TOP PERFORMER*

60%

50%

40%

30%

20%

10%

0% Former Employee of Mentored by Scaled Received Angel Received Received Support Any Connection to a Scaled Entrepreneur Entrepreneur Investment from Institutional from Organization Scaled Entrepreneur Scaled Entrepreneur Investment Led by Led by Scaled Scaled Entrepreneur Entrepreneur

Source: Endeavor Insight Analysis.

* Top performing companies were defined by their placement in the top 20 percent of the sample by their employee CAGR.

14 In Istanbul, companies that received support Endeavor Insight adapted a question from from entrepreneurs with a 100 or more the World Values Survey to ask how much employees were almost twice as likely to respondents trusted each of the following become high-growth companies. Companies groups: people in general, neighbors, The network founded by former employees of companies corporate executives, investors, other tech between tech at significant scale were nearly twice as likely entrepreneurs, other members of the tech entrepreneurs is to reach high growth; companies that received entrepreneurship community, and politicians. mentorship from a founder at significant based on a strong Other tech entrepreneurs were by far the scale were over three times as likely to be top foundation of highest trusted group; more than two-thirds performers. of respondents said that they trusted them trust between The network between tech entrepreneurs somewhat or completely. In comparison, only entrepreneurs. is also founded on a strong foundation 36 percent of entrepreneurs trusted other of trust between entrepreneurs. entrepreneurs at the same levels in Mexico City, a tech ecosystem of similar age and size.

NON-TOP PERFORMER THE TRUST LEVELS OF INTERVIEWED TECH FOUNDERS IN ISTANBUL TOP PERFORMER* Sample size: 173 unique responses.

Over 60 percent of founders reported that they trusted other tech entrepreneurs either somewhat, or very

80% much.

60%

40%

20%

0% Politicians Corporate Investors Entrepreneurship People in Neighbors Tech Executives Community General Entrepreneurs

15 Renewal in the network has been driving An analysis of recent acquisitions over USD innovation in the Istanbul tech sector. With 1 million over two- to three-year periods every new generation of tech founders in demonstrates the shift from e-commerce to Founders who Istanbul, the sector further specialized, moving payments and analytics in the past five years. scaled reinvested from IT, to enterprise software, to e-commerce, In the three years between 2015 and 2017, the the resources they to payments and analytics. Each sector has majority of companies acquired for more than added value to the previous one. Founders USD 1 million were e-commerce companies, acquired founding who built successful companies reinvested like Gittigidiyor, Markafoni, and Yemeksepeti. one company to their resources towards supporting the new A smaller number came from the subsector of support the new generation. Whenever a new generation payments and analytics. reached scale, the community received fresh In the past two years, seven out of the nine generation. inputs of information on what makes growth acquisitions over USD 1 million were in possible in Istanbul. payments and analytics companies like Nevzat Aydın, Fırat İşbecer, and Emre Iyzico, Foriba, and Paraşüt. Only one was in Kurttepeli made over 85 direct investments in e-commerce. Istanbul tech companies, directly influencing over 10 percent of the entrepreneurial companies in the industry between the three of them.

RECENT EXITS OVER USD 1 MILLION IN ISTANBUL TECH Sample size: 19 exits over USD 1 million between 2015 and 2019.

100% OTHER PAYMENTS AND ANALYTICS E-COMMERCE

75%

50%

25%

0% 2015 - 2017 2018 - 2019

16 LESSON 2 LESSON 3 ENTREPRENEUR-LED SUPPORT NETWORK DYNAMISM IS ORGANIZATIONS AND INVESTORS SLOWING DOWN BECAUSE FEWER HAVE BEEN INSTRUMENTAL IN RESOURCES ARE INVESTED FOSTERING NETWORK EFFECTS. BACK IN THE COMMUNITY. When tech entrepreneurs are more involved There are a number of reasons to think that in leading investment firms and support the network effects that helped the Istanbul organizations, entrepreneurship communities tech community succeed have slowed down are more productive, and they create more in recent years. In the past five years, founders jobs and wealth.13 Istanbul is a textbook have been selling companies earlier and for example of this relationship: entrepreneur-led lower dollar amounts than they did in the five investment firms and support organizations years prior. They are less experienced when have been influential in making Istanbul’s tech they sell, and they receive less capital to inject community thrive. The next section covers the back into the community. Based on a dataset role of these organizations in more detail. of 63 exits, between the five year periods of 2008-2013 and 2014-2018, the median price In Istanbul, the top investment firms of acquired companies and the median number and support organizations are all led by of their employees dropped by about half. entrepreneurs or former senior executives of entrepreneurial companies. Most of these Tech companies are selling earlier because organizations have at least one executive or they are being bought by foreign competitors. board member with experience at a company While investors were deterred by the valuation that reached a 100 employees or more. drops, foreign tech companies saw this as an opportunity. Buying access to the Turkish Conversely, the majority of the most market remains an appealing opportunity for accomplished tech entrepreneurs are any global tech company. At the same time, as involved in the leadership of the most active circumstances became more difficult, founders investment firms and support organizations. were more willing to cash out, rather than The founders of Airties, Mynet, Pozitron, struggle to scale their companies in a difficult Pronet, and Yemeksepeti are all involved as investment climate. board members and leaders in at least one entrepreneurship support organization, and The talent pool is also thinning. Former many of the founders of the more recently employees of scaled companies are exited companies are active angel investors particularly well-positioned to become through Galata Business Angels or other angel top-performing founders, but they are more groups. likely than ever to leave the country instead of starting their own company. They are currently undervalued compared to European salary levels, and so many of them decide to pursue opportunities abroad.

17 PUBLICALLY SPONSORED INTIATIVES LAID THE GROUNDWORK FOR A DIVERSE, LOCALLY DRIVEN, AND DYNAMICALLY EXPANDING ENTREPRENEURSHIP ECOSYSTEM IN ISTANBUL TODAY.

THE SUPPORT SYSTEM FOR Among the 30 accelerator programs, about ENTREPRENEURSHIP SUPPORT IS ENTREPRENEURSHIP IN ISTANBUL 30 percent are privately held programs, 33 OVERWHELMINGLY LOCALLY DRIVEN RAPIDLY EVOLVING. percent are corporate programs, 33 percent IN ISTANBUL. are university and NGO programs, and 3 Investment firms and entrepreneurship Support organizations are not only numerous percent are government programs; revealing support organizations like accelerators in Istanbul today but also very active: over 165 a balanced distribution of responsibilities and incubators play an important role in of the estimated 800 local tech firms in the among actors. On the other hand, there is the Istanbul entrepreneurship community. sample have passed through an incubator or an uneven ownership among incubation Endeavor Insight identified over 80 accelerator program at some point -- or over programs where university and NGO-run active investors, accelerators and other one in five local tech firms. programs take the lead with 68 percent, support organizations in Istanbul. followed by privately held institutions at 14 Most of the support activity appears to The support system for tech entrepreneurs percent, the government at 11 percent and be locally driven. 126 of the 165 firms that in Istanbul has evolved rapidly over the finally by corporate companies at 7 percent. participated in incubation or acceleration past decade. In 2010, less than 5 support programs went through programs that were Corporations have increased their organizations were active in the city, but locally founded. The most active support entrepreneurship support dramatically by 2019, there were over 80 incubators, organizations were all local organizations: in the last few years, making them one accelerators, and institutional investors Endeavor, Istanbul Technical University. The of the active players in entrepreneurship working to support local tech founders. most active investors were also local: 212, Revo support. Banks have become the prominent Capital, Galata Business Angels, and Aslanoba This abundant support activity is a relatively actors running the majority (80 percent) Capital. recent trend in Istanbul, especially compared of corporate accelerator programs. to the maturity of the tech entrepreneurship HIGH-GROWTH COMPANIES ARE GOVERNMENT AND UNIVERSITY ecosystem, which has seen entrepreneurs PASSING THROUGH AT LOCAL PROGRAMS WERE THE FIRST TO scale and reach success in the city since SUPPORT PROGRAMS AT SIMILAR SUPPORT TECH ENTREPRENEURSHIP IN the 1980s. Over 90 percent of the support RATES TO OTHER COMPANIES. ISTANBUL. organizations were founded in the past decade. About 16 percent of the local tech firms in Today, there is an incubator or accelerator for The first movers in entrepreneurship support the study participated in a local incubation or every 12 local Istanbul tech firms. were government institutions like TÜBİTAK acceleration program. To gauge the economic and Kosgeb, followed by university programs performance of these programs, Endeavor TODAY, UNIVERSITIES AND NGOS like the programs of Yıldız Technical University, Insight assessed the percentage of top DRIVE BUSINESS INCUBATION Sabancı University, Istanbul Technical performing companies who passed through EFFORTS, WHILE ACCELERATOR University and Koç University. The past decade them, and compared it to the percentage PROGRAMS ARE MORE EVENLY SPLIT has seen an expansion of corporate support of other companies that passed through. BETWEEN PRIVATE INITIATIVES, NGOS, programs (such as Fincube, Garanti Partners, 19 percent of top performing firms passed CORPORATES, AND THE GOVERNMENT. and Albaraka Garaj), and independent through local organizations at some point, Today, according to data gathered from programs (such as Etohum, 500 Startups, compared to a little less than 16 percent of all Startups.watch the entirety of the support SDG Impact Accelerator, taking over a lot other firms — an insignificant difference. ecosystem for startups in Istanbul comprises of of the support tasks that government and 58 local Incubation and accelerator programs. university programs kickstarted in the early The general allotment amongst these support 2010s. Investment firms have differed in their program owners are universities and NGOs source from accelerators and incubators: it is at 50 percent, privately held institutions at 22 not typical for university programs to invest percent, corporate companies at 21 percent in local entrepreneurs; instead, independent and finally the government at 7 percent.13 investment firms tend to dominate that field. Corporate programs tend to be more active in entrepreneurship support than in investment.

18 SUPPORT ACTIVITY IN THE ISTANBUL TECH SECTOR, 2010 - 2019 Government and university programs were the first movers of entrepreneurship support.

40 GOVERNMENT UNIVERSITY 35 CORPORATE INDEPENDENT

0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

INVESTMENT ACTIVITY IN THE ISTANBUL TECH SECTOR, 2010 - 2019 Corporate programs are more active in entrepreneurship support than in investment.

40 GOVERNMENT CORPORATE 35 INDEPENDENT

0 2010 2011 2012 2013 2014 2015 2016 2017 2018

19 SUPPORT ORGANIZATIONS CAN As the section on page 14 illustrates, support INCREASE THEIR ECONOMIC IMPACT and investment connections to experienced BY INVOLVING ACCOMPLISHED scaleup entrepreneurs can significantly Today, there is ENTREPRENEURS IN THEIR LEADERSHIP increase a company’s chances to be a fast- an incubator or AND THEIR BOARD. growing company. Support organizations can accelerator for every further improve their performance by involving There is a strong and dynamically evolving accomplished tech entrepreneurs in their There are also 12 local Istanbul tech support system in Istanbul. leadership or their board. firms. opportunities to enhance the performance of local organizations, and increase the percentage of alumni who go on to become top performing employers in the sector. Istanbul’s support system for tech entrepreneurs is relatively young, and it has shown great potential based on the dominance of locally founded and headquartered support organizations and investment firms in the city. Because most of the technology companies in Istanbul are early stage (the median age of tech companies is 4.5 years), the majority companies supported by accelerators and incubators is also young. As organizations keep growing, they will keep gaining expertise.

20 THERE ARE FURTHER OPPORTUNITIES Entrepreneurship programs should address Local support organizations can also TO INCREASE THE IMPACT OF LOCAL the needs of scaling entrepreneurs, including maximize their economic impact by SUPPORT ORGANIZATIONS BASED services to help with talent recruitment, showcasing successful entrepreneurs who ON ENDEAVOR INSIGHT RESEARCH IN retention, and development. As it is discussed have attended their programs, thereby OTHER GEOGRAPHIES. in earlier sections of the report, access to signalling to other founders with ambitions to talent is a major challenge for tech founders scale that their support services are equipped Government-funded entrepreneurship in Istanbul. Research from other geographies to assist them with their challenges, and they support should adapt to the needs of the demonstrates that support programs can are not limited to early stage companies. ecosystem as they evolve and provide better help entrepreneurs scale if they move services tailored to entrepreneurs in specific beyond providing access to financing and A NUMBER OF CURRENT TRENDS MAY Research that Endeavor sectors and stages. assist entrepreneurs with recruitment (for HAVE IMPLICATIONS FOR THE FUTURE Insight has conducted with entrepreneurship example through targeted job fairs), and OF THE TECH ECOSYSTEM IN ISTANBUL. policymakers around the world also suggests talent development (for example, offering The following trends may shape the challenges that support services tailored to entrepreneur government-sponsored online courses, such as of scaling entrepreneurs and the availability of needs in specific sectors and stages are the governments of Sweden or Colombia). resources, and as a result, inform the actions of associated with measurable improvements in support organizations in Istanbul in the future. their economic footprint. Local support organizations should cooperate with experts in selecting entrepreneurs 1. The emergence of a new generation of The government is often a first mover in for their pipeline. TÜBİTAK BIGG’s new entrepreneurs in new domains; providing entrepreneurship support, but with practice in cooperating with universities in time, as other actors appear in an ecosystem, their entrepreneur selection and mentoring 2. Continuing trends in talent migration; government-funded entrepreneur programs suggests that support organizations can perform best when they adapt to the needs 3. A newly emerging corporate VC better maximize their impact if they cooperate in the ecosystem and fill the gaps that private environment; with other organizations with demonstrated sector actors are unable to fill. expertise in vetting entrepreneurs. 4. New resource injections from current exits, especially if coupled with new giveback policies.

21 RECOMMENDATIONS

1. FOCUS SUPPORT ON FOUNDERS 2. ENCOURAGE THE LATEST 4. WORK WITH GOVERNMENT WITH TOP-PERFORMER GENERATION OF ACCOMPLISHED REGULATORS TO FACILITATE CHARACTERISTICS. ENTREPRENEURS TO GIVE BACK. EMPLOYEE RETENTION. The tech sector in Istanbul has been able One of the keys to Istanbul’s magnificent Regulation was one of the highest rated to grow and thrive because of a small growth over the past decades has been challenges among entrepreneurs in this percentage of founders who scaled the fact that early generations of founders study. Over 50 percent of all interviewed and reinvested their resources in the who scaled were engaged in supporting considered it either a severe or very severe community. The next generation of these scaling entrepreneurs. Fewer companies obstacle. In particular, regulation related founders is going to emerge from the tech are now achieving scale, companies are to employee retention was frequently companies that are growing fast today. acquired earlier and for lower amounts, mentioned by entrepreneurs. and employees are leaving en masse Decision makers in the public sector Employees are Istanbul’s competitive to seek opportunities elsewhere. and private sector will maximize their advantage, but tech employees are in short impact by designing support programs In this tough environment, support and decreasing supply in the city. Top- to select and support entrepreneurs organizations will need to engage an even performing entrepreneurs are able to keep with these characteristics. higher percentage of new companies at employees and attract members of the scale to reinvest their resources in the next diaspora back by sharing their profits with Top-performing companies are distinctive generation. This will help maintain the them, by investing in employee culture, and from lower-performing companies in their levels of network activity that allowed the by creating appealing work environments. industry representation and founder’s work community to thrive in the past. Support history. These companies were more likely Keeping and developing talent in Istanbul organizations should continue to involve than other founders to start companies in and bringing talent back is a collective entrepreneurs in their leadership, measure e-commerce and payments or analytics. priority for the tech community. Previous their impact, and listen to the challenges that Founders were twice as likely to have worked Endeavor Insight research has demonstrated top performing entrepreneurs are voicing as for a tech company that reached significant that comprehensive regulation around they are working to scale their companies. scale. They were also twice as likely to have employee stock options and fiscal incentives 10 or more years of collective experience on 3. INCREASE DOMESTIC for returning employees are powerful tools the co-founding team. In addition, they twice INVESTOR ACTIVITY. for employee recruitment and retention. as likely to have connections to experienced Turkey’s political struggles coupled with Decision makers in the public and private entrepreneurs who have built companies the currency and debt crisis had significant sectors should work to pass policies that with 100 or more full-time employees or sold negative impact on founders’ ability to would create a comprehensive framework their companies for over 5 million dollars. raise capital outside of Turkey, but Turkey to facilitate employee retention for growing has significant resources at home and companies. As part of this work, policymakers for the first time, a large diaspora. should work to separate startup support from R&D support strategies what are ill- Decision makers in the public and fitted for companies seeking to grow fast. private sectors who wish to support tech entrepreneurs in Istanbul should work to leverage private wealth in Istanbul. They should also work to engage the Turkish diaspora living near other developed tech communities like London, Amsterdam, and New York.

METHODOLOGY:

GLOSSARY: SAMPLING FRAME: DATA COLLECTION:  Angel investment: an investment in Companies were considered “targets” The data collected for this a company made by an individual, not on and included in the sampling frame project comes primarily from behalf of a business or investment firm. if they met the following criteria: surveys and interviews with local entrepreneurs and stakeholders.  Entrepreneurial firms: for-profit 1. The company is local. businesses that are started by individuals This study began by identifying “VIP Companies were included if they were: who possess ownership and control of entrepreneurs” and other stakeholders the firm. This excludes businesses that a) Founded in the Istanbul who had an in-depth perspective on began as either government entities metropolitan area, or the sector (Heads of venture capital or subsidiaries of larger companies. firms, government officials, etc.) in each b) Currently headquartered in city. VIP entrepreneurs selected for  Local companies: businesses the city’s metropolitan area after interviews were identified based on: that were founded or are they were founded elsewhere. currently headquartered in the A) Scale – i.e., the current largest Target companies also included Istanbul metropolitan area. companies in the sector, or businesses that have closed after  Mentorship: a connection through being founded or headquartered in B) Influence – i.e., companies that which a mentee will meet the mentor at the metropolitan area, and those have made large exits, received a least three times for a minimum of 30 that have been acquired after being large investments, or were otherwise minutes to discuss critical business issues. founded or headquartered in the area. noteworthy or influential.  Metropolitan area: the boundaries 2. The company fits the definition The preliminary interviews, which were of a city’s metropolitan area were of a technology company. mostly in person, focused on these defined using local input. important stakeholders. The responses Software companies are defined as helped establish a list of the sector’s  Serial entrepreneurship: the for-profit businesses whose primary most “influential organizations,” i.e., activity of founding of a company by activity could be described as either: organizations with outsized influence. someone who previously founded a) Software development for enterprises It also provided critical data on the one or more companies. (e.g., CRM, logistics systems, or challenges, city characteristics, and  Software companies: firms security software), or consumers (e.g., each industry’s entrepreneurial scene where the primary business activity mobile apps, digital gaming); or that helped inform later analysis. is either software development, b) Internet-based or mobile-based retail The resulting primary company list fintech, or e-commerce. or services (e.g., e-commerce or fintech). formed a basis for the study, along  Spin-off: a company started by a with additional companies identified This definition excludes firms for former employee of another company. through other sources including which software development is a databases such as Pitchbook, D&B  Startups: companies founded secondary activity, such as consulting Hoovers, and Crunchbase, as well as no more than three years earlier. firms and graphic design firms, as well the portfolio companies of investors as businesses in which internet and  Target companies: entrepreneurial and entrepreneurship support mobile-based platforms are secondary firms founded or currently headquartered organizations operating in the city. platforms, such as print newspapers. in the city’s metropolitan area Only target companies moved and in the software industry. 3. The company is entrepreneurial. forward for further investigation, i.e., those founded or headquartered in  Top performer: a company in the top Entrepreneurial companies are those the mapped city, entrepreneurially twenty percent of all local, entrepreneurial started by individuals. This excludes founded and in the selected industry, companies founded in the same year businesses that began as either: and those fitting the aforementioned based on its number of employees. a) Government entities, or criteria on scale and influence. Used interchangeably with high-growth companies throughout the report. b) Local divisions of corporations Entrepreneurs from the target list based in other cities. received invitations to fill out an online survey or set up an interview (either in-person or over the phone). This mass outreach campaign used standard questions, but the interviews were adapted to be more conversational.

24 In order to ensure that the company LinkedIn provided data for the analysis authors used the median number of list was comprehensive, a secondary of founder work and education histories. employees for companies founded in the list of companies was compiled from The responses to these questions formed same year, where companies founded those mentioned in the interviews and an edge list of connections among over ten years ago were combined into surveys that were not already on the organizations, along with a corresponding one cohort. Companies that were no primary list. The secondary list also set of four types of outbound connections. longer operating were included in the included additional companies sourced The edge list then informed all subsequent analysis if it was possible to find enough from the portfolio companies of those network analyses and created the data to target them. For companies that associated with the new mentions. T network map visualizations in D3. were acquired, the number of employees at the time of acquisition were used. he secondary list also included new For all network analyses, each founder companies found on LinkedIn while was assigned to only one company or LIMITATIONS: collecting data on entrepreneurs and organization. Where an entrepreneur Omitted variables may have played a companies. These secondary targets had founded multiple companies, his or role in sampling, creating bias that would then received invitations to complete her most prominent company represents otherwise expose gaps in the research surveys and interviews. The research and his or her influence in the analysis and process. The study’s double interview, outreach process was repeated multiple on the map. This was based on an index verification and analysis procedures times depending on the size of the city. of founding date, number of employees, were meant to offset any adverse effects. total investment, and exit sizes. Where an Additional data was included on invest- If gaps in or misinterpretations of the entrepreneur had founded an investment ments and support organization portfoli- data were revealed during the analysis, firm or support organization, it was the os using Startups.watch. the map and results were corrected. company entity that took precedence (if they founded one), followed by the While efforts were made to be as The number of companies mapped founder’s investment firm, followed by complete as possible in data collection and entrepreneurs interviewed varied the accelerator or support organization. by using a mixed methodology depending on the size of the sector. for data gathering and a detailed The size of an organization’s influence NETWORK ANALYSES: respondent verification process, the in the network was based on directed Previous research by Endeavor Insight observed data used in this study is closeness centrality for unconnected has found that there are four main only a highly developed representation graphs. In other words, the size of an connection types among entrepreneurs of the entrepreneurship network organization was a function of the that drive the growth of an industry. in each community and may omit number of first-, second-, third-, etc. certain data or attributes. For analyses that only include degree connections that the organization connections between entrepreneurial and its entrepreneurs had to others in CONFIDENTIALITY: tech companies, these are: the network. All connections on the Endeavor maintains confidentiality, map were weighted equally. Financials and collected data is accessible only to 1. Angel investment; and employee counts did not factor Endeavor and its research partners. 2. Mentorship; into an organization’s centrality. 3. Serial entrepreneurship; and 4. Former employee spinoffs. Connections accrue to an organization based on the time period in which the To learn about these connections connections occurred. Where the year of within entrepreneurship communities, a connection was unknown, two different the surveys and interviews discussed approaches informed the date used in above focused on four core questions: the study. Where year information for a 1. Who invested in your company? former employee, investment, or founder (This includes both angel and connection was missing, it was assumed institutional investors.) that the year of the connection between the source and the target companies was 2. Who was your mentor during equal to the year the target company the growth and development was founded. To estimate a mentorship of your company? relationship start year, authors 3. Have you founded other tech reviewed mentorship relationships. companies in your city? Companies were only included in the 4. Which of your former employees analysis if it was possible to identify their have gone on to found tech founding year. For companies whose companies in your city? employee count could not be determined,

25 ENDNOTES:

1 CNN Money. CEO shares $27 million with staff after selling his firm, July 29, 2015 URL: https://money.cnn.com/2015/07/28/news/companies/turkish-ceo-staff-bonus-millions/index.html 2 The Wall Street Journal. Delivery Hero Acquires Turkey’s Yemeksepeti URL: https://www.wsj.com/articles/delivery-hero-acquires-turkeys-yemeksepeti-1430802002 3 The Independent. Best boss of the world? Turkish tech CEO gives employees £150,000 each after sale of company URL: https://www.independent.co.uk/news/business/news/yemeksepeti-turkish-tech-ceo-nevzat-aydin-hands-workers-bonuses-worth-17-after-sale- of-firm-10424378.html 4 Venturebeat. Zynga buys 1010 maker Gram Games for $250 million. URL: https://venturebeat.com/2018/05/30/zynga-buys-1010-maker-gram-games-for-250-million/ 5 Endeavor Insight interviews. 6 The Economist. The struggle to restore Turkey’s stricken economy URL: https://www.economist.com/finance-and-economics/2019/03/14/the-struggle-to-restore-turkeys-stricken-economy 7 Endeavor Insight interviews. 8 Endeavor Insight interviews. 9 Endeavor Insight analysis. 10 Endeavor Insight interviews. 11 Endeavor Insight interviews. 12 The industry distribution of recent exits over USD 1 million demonstrates the way the tech sector has diversfied over time as experienced founders rein vested their resources in the network. 13 Endeavor Insight analysis based on data from startups.watch, accessed September 13, 2019.

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