Attractive international VC markets

International venture capitalists continue to enter India in a big way. After commitments ranging from $530M to billions of dollars to invest in the country’s tech startups from each of Sequoia Capital, Tiger Global, and SoftBank over the last few months, Accel recently announced a new $305M fund dedicated to investments in India.

With so much attention on India’s tech startups, I wonder when we’ll start seeing similar interest in Turkey’s tech startups. Sequoia, Accel, and SoftBank have yet to invest in Turkey. To the best of my knowledge, Tiger has invested a total of less than $25M in Turkey so far, with its 2011 investment in Trendyol followed by multiple investments in Evidea, including its most recent $2M investment in 2013.

At the highest level, there are macroeconomic differences between India and Turkey. India’s population of 1.25 billion is 17 times that of Turkey at 75M. But India has a much lower gross domestic product (GDP) per capita than Turkey. This makes its GDP of $1.9 trillion only about 2.3 times that of Turkey at $820 billion.

However, in addition to these macroeconomic differences, India has a stronger base of technical talent than Turkey. While it’s difficult to state that either country’s engineers are of higher quality, India’s larger population gives it a much larger quantity of great engineers. This gives it an edge in producing globally competitive technology companies. While such R&D intensive global technology companies also emerge from Turkey, the country’s most successful startups like Sahibinden, Yemeksepeti, Gittigidiyor, and Bitaksi have local operational teams as their key competitive advantage.

Another difference across the countries in the last two years has been their political climates, with Turkey experiencing more political uncertainty than India. However this is simply the cost of doing business in an emerging market. A factor in disfavor of a country in one year could easily turn in favor of the same country a year later.

Keeping all these factors in mind, it’s natural for the largest venture capital firms to invest more in India than Turkey. However, it’s somewhat surprising for them to not invest in Turkey at all. It seems to me that for every $5 of international VC money going into India, $1 to $2 should be going to Turkey. This would mean several of the world’s largest VC’s raising $100M plus funds dedicated to the country.

I don’t know when this will happen. However, just like India is a very attractive market for global VC firms today, Turkey could be the same tomorrow.