Turkish Startups Raise $154 Million in 9 Months

Despite a challenging global economic climate, Türkiye continues to shine as a promising startup hub, characterized by a robust ecosystem, strong government support, diverse investment prospects, and a highly skilled workforce.

Data released by Industry Monitor Startups Watch reveals that during the first nine months of 2023, a total of 219 investment rounds worth $154 million were completed. These investments span a wide range of startups, including those in the seed, early, and late-stage phases. This data reinforces Türkiye's status as a thriving startup hub, with numerous sectors benefiting from this surge in investments.

While the number of investment rounds and their sizes have significantly increased compared to the pre-pandemic period, it's important to note that they still lag behind the peak experienced during the outbreak. The total investment amount decreased by 47% compared to the previous quarter, marking the lowest figure in 13 quarters.

Ranking fourth in Europe, Türkiye is recognized as one of the most active players in the European and Middle East and North Africa (MENA) region when it comes to seed-stage investments. The United Kingdom, Germany, and France lead the way in this ranking.

Noteworthy sectors in terms of deal size include software as a service (SaaS), artificial intelligence (AI), gaming, retail technology, and energy. On the other hand, gaming, AI, SaaS, energy, and fintech startups have attracted significant attention from investors in terms of the number of deals.

The rise of crowdfunding platforms in Türkiye has provided additional support to startups, with 21 authorized equity-based crowdfunding platforms, nine of which are actively running campaigns. These platforms have helped startups raise a collective $16 million through 44 campaigns during the first nine months of 2023. On average, these campaigns secured $363,000 in funding, reflecting a 58% increase from the previous year.

Foreign investors have played a crucial role in Türkiye's startup scene, participating in 10% of angel and venture capital transactions. However, this marks a six-year low in foreign investor involvement.

The third quarter of 2023 witnessed significant events in Türkiye's startup landscape, including the initial public offerings (IPOs) of companies like Martı through special purpose acquisition companies (SPACs) and ebebek.

Start-ups engaged in climate technology have shown promise, generating $13.3 million in revenue despite not being among the top five most invested sectors. Additionally, Web 3.0 startups raised $4.2 million, demonstrating a growing interest in decentralized technologies.

In the mobility sector, ten startups secured $12.5 million in funding, while three cybersecurity ventures attracted $7.4 million, highlighting the areas of potential growth within Türkiye's entrepreneurial landscape.

Türkiye's fintech sector is expanding with the backing of regulatory changes in digital banking. Fintech startups like Param, Colendi, and Papara are making strides both domestically and internationally through acquisitions, banking licenses, insurance, and payment licenses, as well as collaborations. Since 2020, six Turkish unicorns, companies valued at over $1 billion, have emerged, with Param, Colendi, and Papara moving closer to reaching this valuation.

Notably, 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 solely in the digital realm without physical branches, are reshaping the financial industry by offering seamless digital services.

For instance, Colendi, valued at $120 million in 2021, raised $30 million in a Series A investment round, increasing its valuation to $150 million. Param expanded its reach by acquiring Twisto and obtaining the European Payment Institution license, giving it access to 27 European Union member states and a strong position in the $1.1 trillion e-commerce market in Europe.

One of the primary focuses for Turkish fintech startups is neobanks, which operates exclusively on mobile and internet platforms, challenging traditional financial services with their technological capabilities. For example, Rebellion, a company providing financial products to Generation Y and Z users, was acquired by Papara in June, strengthening its position and expanding its offerings in Spain and other European markets.

The growth of these fintech startups is driven by their mission to reach one billion users, emphasizing their focus on user-centric financial services. Türkiye's fintech ventures are increasingly targeting Europe, with a strong emphasis on expansion.

These innovative companies are supported by exceptional engineers in Türkiye, who enable them to achieve in weeks what they would typically do in months in Europe. The acquisition of Twisto has made it easier for these startups to provide solutions to European partners.

Overall, the robust growth of Türkiye's fintech and startup ecosystem is a testament to the resilience, innovation, and global ambition of these emerging companies, driven by regulatory decisions and a talented workforce.