In June 2020, Turkey’s tech scene reached a milestone. Peak Games, an Istanbul-based mobile gaming company, became the country’s first start-up to be valued above $1bn, after being acquired for $1.8bn by US social gaming company Zynga.
At the time, Peak’s two mobile puzzle games, Toon Blast and Toy Blast, had a combined 12 million daily active users worldwide. Its success has helped inspire Turkey’s younger generation to set up their own companies with global ambitions.
“[Working at Peak] was the first time I felt it was possible to create a global consumer product from Turkey,” says Soner Aydemir, an alumnus of Peak Games and co-founder of Dream Games, another mobile gaming company valued at $1bn. “In the past five years, the younger generation has started to think globally, especially in consumer industries.”
As Turkish companies in e-commerce, delivery services and gaming lead the country’s booming tech scene, experts believe the stage is set for even more domestic start-ups to thrive at home and abroad.
Growing technology adoption
In the first half of 2021, Turkish tech start-ups raised more than $1.2bn in funding from venture capital and angel investors — more than the previous 10 years combined, according to Startups Watch, an Istanbul-based research platform.
By comparison, preliminary data from Invest Europe indicates that in the same period, just €300m was invested into start-ups across central and eastern Europe.
Almost $1bn of Turkey’s record funding went to Getir, which in 2015 pioneered the now prevalent model of delivering groceries within 10 minutes. In 2021, Getir expanded its operations into seven European markets and is now set to launch in the US.
Nazim Salur, Getir’s co-founder and CEO, says that Turkey was a great place to perfect Getir’s business model before expanding internationally, in part due to younger demographics compared with other European countries.
“If you have developed something good, the likelihood of millions of people using it pretty fast is very high in Turkey, whereas it may take you longer in other markets,” he says.
Technology adoption in Turkey has enabled other start-ups to expand in the highly competitive online retail space, including Hepsiburada which was valued at $4.4bn after listing on the Nasdaq stock exchange in July 2021.
“Turkey is arguably one of the most competitive e-commerce spaces globally,” says Çağlayan Çetin, the president of Trendyol Group, another online marketplace that serves customers in 81 Turkish cities, as well as Germany. “Digital penetration in the total retail market is still very low in Turkey, which creates ample growth opportunities.”
While e-commerce represents 5.3% of Turkey’s retail market, JPMorgan estimates it will expand on average by 14% every year until 2023. Mr Cetin says that the three largest Turkish cities — Istanbul, Ankara and Izmir — account for around 40% of the 200,000 sellers on Trendyol’s platform in Turkey.
“Expanding from Istanbul to other parts of Turkey is very feasible, as we have shown, but for headquarters Istanbul is the natural choice,” he adds, noting the “huge” tech talent pool in the city. But as the pandemic has caused a shift to remote working, some Turkish engineers have moved to other parts of the country, including seaside cities such as Antalya.
Given its low barriers to entry, mobile gaming has become a popular industry for Turkish entrepreneurs to enter, particularly as the Turkish lira has weakened and gaming companies are typically paid in US dollars.
Barış Özistek, a serial tech entrepreneur turned investor at Boğaziçi Ventures, says that gaming has provided a lucrative career path for Turkish graduates and set the foundation for further growth.
“Gaming in many countries is the first pioneer of tech entrepreneurship and the start-up ecosystem. Turkey has started in the right way. It starts with gaming and will lead into other industries,” he says.
According to Startups Watch, 250 new gaming studios were established in Turkey between January 2019 and August 2021, including Dream Games.
Dream Games became a ‘unicorn’ after raising $155m in June 2021, just 23 months after being founded, making it the fastest Turkish start-up to reach a $1bn valuation. Its puzzle game Royal Match has reached 4.2 million daily active users since its launch seven months ago, generating around $40m in monthly revenue.
Mr Aydemir says that the expertise gained across the gaming ecosystem will generate more start-ups and make Turkey more attractive for multinationals to set up studios in the country. “The potential will be huge, especially in engineering, art, product management and marketing.”
Turkey’s growing gaming scene, which features other companies such as Rollic and Gram Games, has created opportunities for start-ups from other sectors too. For instance, Istanbul-based Tarentum AI uses machine learning for predictive analysis and optimisation at companies in both the gaming and renewable energy industries.
Oz Silahtar, the co-founder and chairman of Tarentum AI, returned from the US in 2017 after noticing that there were talented engineers and a growing tech scene. He says that Turkey is attractive for start-ups thanks to its cost effectiveness, but legislative improvements could be made to enable founders to raise funding more easily.
Enis Hulli, the general partner of 500 Startups in Istanbul, a seed venture capital fund, notes that the Turkish ecosystem is particularly resilient given the global and regional geopolitical shocks its participants have to navigate, which is supported further by more than 50,000 engineering majors graduating each year.
“Turkish founders have an inherent disposition for the elusive but highly sought-after qualities of perseverance and creativity,” he adds.
Turkey’s tech scene is also driven by the country’s more than 200 universities, many of which are home to incubators, accelerators and technology transfer offices.
“Universities have a very central role in the start-up ecosystem because of their established science parks, which support entrepreneurship,” says Deniz Tunçalp, an associate professor of management and start-up mentor at Istanbul Technical University.
Some 6350 tech companies operate in Turkey’s more than 73 technoparks, offering benefits such as tax breaks and support for hiring engineers. Mr Tunçalp says that Turkish start-up culture has benefitted from close co-operation with US universities and the country’s geographic position.
“Being at the periphery of Western civilisation helps us understand both east and west, and enter those markets,” he explains.
Mr Aydemir says the achievements of Turkey’s start-up ecosystem reflects the country’s “service culture”, noting e-commerce and delivery as example areas where success is driven by service and operational quality. For Mr Özistek, it is the flow of Turkey’s talent to start-ups that continues to feed the ecosystem.
Altan Küçükçınar, an Ankara-based partner at venture firm Diffusion Capital Partners, which invests in deep tech start-ups, notes that despite Turkey’s recent successes and natural advantage from a growing population, it remains an untapped territory.
“Turkey will stay on the agenda of technological development,” he says. “We are at the end of a cycle, with valuations going up very fast. Now is the right time to invest.”
In association with Investment Office of the Presidency of the Republic of Turkey. Writing and editing were carried out independently by fDi Intelligence.
This article was first published in the December 2021/January 2022 edition of fDi Intelligence magazine. Read the online edition here.