Despite challenges, Türkiye remains one of the most promising startup hubs, offering a robust ecosystem fueled by government backing, diverse investment opportunities, and a skilled workforce.
According to data released by Industry Monitor Startups Watch, a total of 219 investment rounds amounting to $154 million were made in the first nine months of 2023, spanning seed, early, and late-stage ventures.
The figure underscores Türkiye’s status as a startup hub, with diverse sectors benefiting from this surge.
Although the count and deal sizes came in far above the pre-pandemic, they were still far below the figures during the outbreak. The overall investment amount declined 47% compared to the previous quarter, marking the lowest figure among the last 13 quarters.
4th in Europe
A detailed analysis of startup watches data positions Türkiye as the fourth most active player in the European and Middle East and North Africa (MENA) region for seed-stage investments, trailing behind the United Kingdom, Germany and France.
In terms of the size of the deals, standout sectors included software as a service (SaaS), artificial intelligence (AI), gaming, retail technology and energy.
As for the number of deals, startups engaged in gaming, AI, SaaS, energy and financial technology, or fintech attracted significant attention from investors.
Meanwhile, the data showed that venture capital investment funds (VCIF) joined one out of every two investments from January through September.
Moreover, the rise of crowdfunding platforms in Türkiye has further empowered startups, with 21 authorized equity-based crowdfunding platforms, nine of which are actively conducting campaigns.
Startups raised a collective $16 million through 44 campaigns in the first nine months of 2023.
On average, they secured $363,000 in funding through crowdfunding platforms, marking a 58% increase from the previous year’s average.
Foreign investors participated in 10% of angel and venture capital (VC) transactions, marking a six-year low.
Furthermore, the third quarter of 2023 witnessed several significant events, including the initial public offerings (IPOs) of companies like Martı through exceptional purpose acquisition companies (SPAC) and ebebek.
Mobility and cybersecurity
Turkish startups, such as Param and Papara, also made noteworthy international acquisitions, indicating a growing appetite for domestic and global expansions.
While sectors like SaaS, AI, gaming, retail technology, and energy continued to dominate investments, other emerging areas garnered attention.
Sixteen climate technology startups generated $13.3 million in revenue, even without being among the top five most invested sectors. Moreover, three startups engaged in Web 3.0 raised $4.2 million, highlighting the growing interest in decentralized technologies.
The mobility sector also saw substantial funding, with ten startups securing $12.5 million, while three cybersecurity ventures attracted $7.4 million, reflecting the potential growth areas within Türkiye’s entrepreneurial landscape.
Fintechs forge ahead
Meanwhile, in the wake of regulatory changes in digital banking, financial technology startups, or fintechs, in Türkiye are continuing to expand through investments and acquisitions. Companies like Param, Colendi, and Papara are inching closer to the billion-dollar valuation mark through collaborations, acquisitions, and investments.
Since the beginning of 2020, Türkiye has witnessed the emergence of six unicorns, companies valued at over $1 billion.
Despite a global tightening in investment climates in 2023, fintech startups like Param, Colendi, and Papara are persistently expanding both domestically and internationally through acquisitions, banking, insurance, and payment licenses, as well as collaborations.
The growth of these potential unicorn startups has been significantly influenced by regulatory decisions.
Digital banks, authorized by the Banking Regulation and Supervision Agency (BDDK) to operate entirely in the digital realm without physical branches, are shaping the future of the financial industry. These institutions are enhancing user experiences through seamless digital services.
Acquisition in London
Colendi, with a valuation of $120 million in 2021, raised $30 million in a Series A investment round, pushing its valuation to $150 million. The company proceeded by acquiring SETL, a London-based blockchain solutions and payment provider, last year.
Similarly, Param expanded its reach by acquiring Twisto, obtaining the European Payment Institution license, granting access to 27 European Union member states and positioning itself as an important player in the $1.1 trillion e-commerce market in Europe.
A key focus for these Turkish fintech ventures has been neobanks, which operate solely on mobile and internet platforms, challenging traditional financial services with their technological prowess.
Rebellion, a company providing financial products like money transfers and prepaid cards to Generation Y and Z users, was acquired by Papara in June. This strategic move allowed Papara to strengthen its position and expand its offerings in Spain and other European markets.
The initiative, a developer of the financial technology application that received the most positive votes in mobile application stores in Spain, has secured an investment of 15 million euros to date. Rebellion was Papara’s first acquisition deal completed in Europe in 2023.
1 billion users
Deniz Devrim Cengiz, a Board Member at Colendi, emphasized their mission to reach one billion users rather than merely becoming a unicorn.
“We are the fastest growing fintech startup in Türkiye. We are the creators of the Colendi’ buy now, pay later micro-credit vertical. Our goal is to transform companies into fintech entities. We are achieving this goal not on our own but with our partners such as Turkcell, Migros, Türkiye Petrolleri, Limak and many others, having reached a user base of 18 million,” said Cengiz.
“After Colendi insurance and Colendi securities, we are starting a new era with the Digital Bank License we received from the BDDK. Our goal is to reach the target of 1 billion users together with the ecosystem. Then we want to carry this success abroad,” he noted.
Cengiz said they think they would successfully implement the success of the neobanks they have seen abroad in Türkiye.
“The main goal within the company is not to become a unicorn, but we want to reach 1 billion users directly or indirectly. The other one will come on its own anyway. We have ensured that the financial alternatives offered to customers by our business partners, such as Turkcell and Migros working with us, have increased.”
Europe as primary target
Emin Can Yılmaz, the founder and CEO of Param, expressed their determination to expand into Europe.
“We have completed every year profitably except the first year we were established and continued to grow. We tried to become a profitable company without securing the first investment. We have contributed significantly to implementing payment solutions in various sectors. In this sense, we have contributed to the culture of doing business in trade and solved the needs of our business partners related to payment technology from end to end,” said Yılmaz.
He stressed what he said were “amazing” engineers in Türkiye.
“What we do in Europe in a few months, we do in Türkiye in weeks. We want to take the strength we gained in Türkiye to Europe. We will continue our growth in Europe, just as we did in Türkiye, as of the beginning of 2024,” Yılmaz said.
The purchase of Twisto will also make it easier for the company to offer solutions to its European partners, he stated.
“We believe that the investment from the EBRD (European Bank for Development and Reconstruction) will help us connect with the right investors in our future endeavors. There were other investors at the table. We have continued by choosing an investor that will contribute to our growth,” Yılmaz noted.
“We aim to be a venture that makes Türkiye proud, similar to Getir, by continuing our rapid growth until the Series C investment.”
Sensemore: Transforming industries through data-driven monitoring
Sensemore, a graduate of Türk Telekom’s startup acceleration program, PILOT, is revolutionizing industries by preventing production halts caused by machinery failures through the analysis of billions of data points.
At the heart of the Industry 4.0 transformation lies smart sensors and the Internet of Things (IoT) technology. Witnessing Turkish startups striving to gain power in the global market is exciting.
Sensemore, preparing to open its European office and plans to expand to the U.S., has recognized a crucial gap.
After graduating from PILOT, the startup expanded its capacity and vision, offering a vital technological solution for monitoring machine health in various industries.
Gökalp Caniklioğlu, the marketing strategy manager at Sensemore, said to ensure production continuity, they monitor machine health.
“We enable preventive measures by accurately predicting when critical components such as motors, compressors, and fans might malfunction. This approach not only prevents downtime but also contributes to reducing carbon emissions. Using AI-powered tools, we predict these failures. We say, ‘The machine will break down in 2 months. The production line will stop.’ We have developed expertise not in the industry but in machines. By tracking vibration, temperature, and data, we monitor machine health, ensuring production continuity for manufacturers in different industries,” said Caniklioğlu.
Customers in 17 countries
He noted that Sensemore collects a vast amount of vibration data, approximately 24,000 data points daily, amounting to 1.8 billion points when accumulated.
“Along with the historical data library, we help companies save up to $129 million annually by preventing losses. Using the world’s smallest wireless vibration sensor, Sensemore tracks machine pathways with smart technologies, facilitating timely improvements and reducing maintenance costs,” said Caniklioğlu.
“By automating the process of machine health management, especially along with the pandemic, Sensemore aimed for complete human-free operations. We focus on executing maintenance planning processes smoothly, eliminating human errors. After delivering instant notifications based on data-driven predictions, we leave the final decision to the operators. We want to accompany the entire production journey by notifying all the risks that will occur on the production line in advance. We currently have customers in 17 different countries who use the end-to-end solution. We found our customers before we went to these countries. We also did the remote installation.”
Highlighting the significance of PILOT, Caniklioğlu emphasized the unique aspect of investment at the program’s conclusion.
“We are currently in a new investment round. We aim to complete this investment round shortly. Our biggest desire is Europe, especially Germany, the largest manufacturing country. We want to increase our partners in Europe to ensure that all machines used are offered for sale alongside Sensemore,” he added.