Istanbul’s potential as a regional hub for tech startups

I’ve spent the last two months immersed in the tech startup scene of Istanbul, Turkey. During this time I’ve had the great fortune to meet hundreds of entrepreneurs and investors in my attempt to understand Istanbul’s potential as a tech startup hub. I’ve spoken with college entrepreneurs who came up with a business idea in their dorm room the night before, as well as the founders of Turkey’s leading e-commerce sites. On the investor side, I’ve met with the figures behind incubator programs, early stage funds, and late stage firms. As the result of this deep immersion, I’ve realized just how far Istanbul’s tech startup scene has come since I first visited the city back in 2008. What’s more, the city has an even brighter future. Istanbul is a very strong candidate to become a vibrant hub for tech startups emerging from not only Turkey but also the Middle East and Eastern Europe.

When I first visited Istanbul in 2008, I could count the number of angel investors and venture capital funds on the fingers of one hand. 4 years later, there are local funds specializing in incubation, seed, and early stage investing, as well as later stage international funds who have established a local presence. There are also a large number of international funds scrutinizing the market from abroad and patiently waiting for the right moment to enter. Investor interest in the local market has exploded after the success of ventures like Gitti Gidiyor in e-commerce, Trendyol and Markafoni in private shopping, Peak Games in social gaming, Yemek Sepeti in online food ordering, and Cicek Sepeti in online flower shopping. The near double digit growth rate of the Turkish economy, young demographics, rising internet and smartphone penetration rates, and high social media engagement levels suggest that Istanbul has an even brighter future as a regional technology hub.

However, for Istanbul to realize its full potential within Turkey and as a launching board to the Middle East and Eastern Europe, entrepreneurs, investors, and the government need to continue innovating and collaborating. Successful entrepreneurs need to help grow the next generation of founders by serving as angel investors and mentors. Investors need to adopt a true partnership mindset with the founders which they back so that they can create value together. The Turkish legal system needs to accomodate new investment instruments like convertible debt which facilitate early stage investing.

Fortunately for Istanbul, it is still in the very early stages of a long journey. The seeds of Silicon Valley were planted when Bill Hewlett and Dave Packard founded Hewlett-Packard in a Palo Alto garage in 1939. The term Silicon Valley was not coined until 1971, and did not enter everyday language until the 1980s. Similar to Silicon Valley, it will likely take 30 to 40 years for Istanbul to achieve its full potential as a regional technology hub. All the right ingredients are in place and the trajectory has been set. Just like the boats advancing with the wind behind their backs on the Bosphorus, Istanbul is sailing in the right direction.