Venture capital investment funds (VCIF) have proved to be the pioneers of the first-quarter investments in Türkiye’s startup ecosystem, data unveiled by an industry monitor has shown.

It comes as investors across the world scaled back their funding throughout the January-March period of 2023 in the face of a grim economic outlook.

The VCIFs were involved in one out of every two investments in Turkish startups in the first three-month period of this year, the startups.watch data showed. Half of the 243 VCIFs that have been established so far have been created in the last 1.5 years, resulting in investment diversification in the startup ecosystem.

Global decline

Global venture capital (VC) firms and startups have been plagued by rising interest rates and a continued economic downturn, marked by plunging valuations and thousands of layoffs.

A fresh wave of concern emerged after the sudden collapse last month of Silicon Valley Bank, one of the pioneering sources of capital for startups and venture firms.

The data showcased that the global downturn in the investment climate worldwide also spread to Türkiye.

Startups.watch founder Serkan Ünsal said that compared to the first quarter of 2022, investments in the U.K. decreased by one-third, in Germany by half and in France by one-third.

"There is no top league anymore. Türkiye has dropped to the second league, ranking below Greece and Estonia," Ünsal noted.

"Investments in Türkiye decreased to $56 million with 55 investment deals in the first quarter," he said. It marks an 89% decline compared to the $502 million that poured through 66 investment deals in the same period of 2022, excluding fast grocery delivery pioneer Getir's deal.

Gaming investments

In terms of the number of deals, startups engaged in gaming, SaaS, IoT, fintech and energy turned out to be the drivers in the first quarter of 2023. A total of $9 million was invested through eight investment rounds in the January-March period.

Türkiye ranked 13th in terms of gaming investments compared to other countries. In the first quarter, nine of 55 investments had female founders, indicating limited numbers of female-led startups.

Twelve startups received a total of $3.5 million in investments through equity crowdfunding platforms. Authorities have greenlighted the establishment of 14 equity crowdfunding platforms to date, with seven currently active.

The startups.watch data showed ventures had raised an average of $290,000 in investments through equity crowdfunding platforms in the first quarter.

Increased acquisition appetite

The value of money in the startup ecosystem has also triggered mergers and acquisitions.

There were three notable features of acquisitions in the first three months. Firstly, Turkish startups acquired other Turkish startups. Secondly, Turkish startups acquired startups abroad. Thirdly, a startup went public in Türkiye.

This has resulted in financial diversity in the startup ecosystem and has provided alternative methods for investors.

Simya’s 1st investment

Simya VC, an international accelerator fund focusing on early-stage startups, has made its first investment in the artificial intelligence-based content production platform Evercopy.

With this investment, Evercopy plans to expand its team and grow in the global market.

Simya VC was launched by 212, one of the startup ecosystem pioneers, in collaboration with Neo Portföy and Alchemist Accelerator, one of the world's top accelerator programs.

Evercopy, which produces personalized creative content within seconds through its artificial intelligence infrastructure, will use this investment to support its global market growth, expand its team and increase its marketing and sales activities.

"Artificial intelligence will be able to generate fully personalized content for each individual in the near future. This means a completely different internet and interaction experience for each of us," said Evercopy co-founder Deniz Özgür.

"With Evercopy, we offer a solution that will completely improve our content creation and consumption process. We aim to be the first brand that comes to mind in the field of AI-based creative content production within a year," Özgür added.

For their part, Selma Bahçıvanoğlu, managing partner at Simya VC, said the firm is focused on innovative technology and early-stage startups with B2B business models.

"After we established our fund, we started investments quickly. We made our first investment in Evercopy with the aim of investing in the technology of the future. We are very excited to accompany Evercopy’s global journey as an early-stage venture," Bahçıvanoğlu noted.

Experienced mentor network

Rachel Chalmers, president of Alchemist, said as a B2B early-stage accelerator program, they support startups to open up to international markets.

"With our experienced mentor network, startups find the opportunity to work one on one with leaders who have gained experience in international markets. We will also provide guidance to Evercopy at all stages it needs in its growth process in the global market," Chalmers added.

Emission premium

Meanwhile, the emission premium used as capital for technology startups has also been high on the investors’ agenda.

"Everyone should contribute to earthquake relief efforts without exception. However, it has been evaluated on the same scale as investment emission premium for startups," said Kenan Çolpan, one of the investor partners at Boğaziçi Ventures.

"I believe that a corrective decision should be made to address the issue noted by entrepreneurs and investors. We think that this detail of the issue has been overlooked. The news also supports our opinion," Çolpan noted.

PILOT launches 11th term application process

Meanwhile, one of Türkiye’s leading technology and communications companies, Türk Telekom’s venture capital arm TT Ventures has announced the start of the application process for a new term of its startup acceleration program.

Startups selected for the 11th term of PILOT will be eligible to receive a $50,000 investment and TL 100,000 ($5,160) cash support from TT Ventures.

The ventures will also have the opportunity to collaborate with Türk Telekom and receive investment from TT Ventures. In addition, at the end of the program, they will have the chance to join the U.S. program.

Applications are being accepted through the website www.turktelekomventures.com.tr.

Innovative ideas

Muhammed Özhan, the general manager of TT Ventures, said one of their main aims is to be a bridge that opens startups to the world.

"Our goal from day one has been to strengthen the startup ecosystem and contribute to their growth by collaborating with startups. Since 2013, we have been supporting early-stage technology startups with PILOT with the aim of creating 'unicorns' that will showcase Türkiye's successes in the international arena," said Özhan.

While continuing investments in startups with TT Ventures, he said they also invest in advanced-stage startups, including PILOT graduates, through the TT Ventures Venture Capital Investment Fund.

"On the other hand, we are preparing our Entrepreneurship Center, which will be used as a workspace at the Atatürk Cultural Center, of which we are the main supporter, while also providing office space for startups in our building in Eminönü," Özhan noted.

"We are eagerly waiting for entrepreneurs to apply for our 11th term of the PILOT program this year."

Business connections

At the end of the new PILOT term, startups supported by TT Ventures will have the opportunity to participate in the U.S. program, which will also enable their global growth.

Participating teams will have the opportunity to meet with TT Ventures' extensive investor stakeholders and receive one-on-one support and training from numerous mentors and industry experts.

Teams may also benefit from various support, such as investment and cash support from TT Ventures, collaboration opportunities with Türk Telekom, office space, technology infrastructure, mobile communication package and promotional support. In addition, entrepreneurs will also have a chance to access Türk Telekom's business connections.

Support for children's education

Meanwhile, Özhan also stated that PILOT graduates, including Kidolog, a parent consulting company in which TT Ventures is also an investor, are conducting activities that align with Türk Telekom's mission to produce technology for the good and benefit of humanity.

He particularly referred to the relief efforts in provinces in Türkiye’s southeastern region that were struck by catastrophic earthquakes in early February.

"Kidolog, a PILOT graduate that has received support from TT Ventures, provides support in tent cities and container cities in earthquake areas. Kidolog is also conducting many activities to enable children to learn through methods at a truck that Türk Telekom has set up in the earthquake zone to host multiple social activities," said Özhan.