Turkish startups have raised more than 10 times the capital this year than they did in all of 2020, as international investors warm up to the developing nation’s startup scene. 

Turkish startups have raised a total of €2.6bn so far this year, according to Dealroom. That compares to €250m in 2020 and is more than startups in countries like Spain and Finland have raised this year. 

2021’s number has been propelled by megadeals like e-commerce platform Trendyol’s massive $1.5bn round in August, with participation from General Atlantic and Softbank. The deal made Trendyol the country’s most valuable company full stop — even including listed companies. On-demand delivery startup Getir also raised a $555m Series D at a $7.5bn valuation earlier this year from international investors including Silver Lake, Mubadala, Sequoia and Tiger Global.

Even discounting deals over €250m, investment levels have nearly doubled. 

Turkey’s ecosystem started to take off after around 2017 when experienced VCs and founders emerged, and the country recorded big exits like Peak Games and Rollic and global successes like Getir, says Serkan Ünsal, founder of investment analytics platform startups.watch. 

“This created a FOMO effect on both local and global investors”, he says. 

The hotness of Turkey’s tech market marks a drastic contrast with the country’s rocky economic situation. The lira is down about 16% against the USD to date this year according to Morningstar, though economic growth rebounded in the second quarter. 

International investors pile in

The investment has been driven by interest from international investors, some of whom are investing in Turkey for the first time. Other notable deals in Turkey this year involving European investors are Dream Games’s $155bn Series B led by Index and Makers Fund, and in the earlier stages, Fazla Gida’s €2.5m round led by 212 with participation from Germany’s Atlantic Food Labs. 

“I’m very bullish on the Turkish startup ecosystem,” says Nathan Benaich, founder and general partner at Air Street Capital. The boutique VC firm participated in Istanbul-NYC-headquartered workplace health and safety AI platform Intenseye’s $4m seed round in February with Point Nine and followed on in the $25m Series A announced earlier in September with Point Nine. 

“I discovered Intenseye in the course of my online research for computer vision companies tackling “non-obvious” enterprise use cases,” he says. “Their focus on employee health and safety — a huge problem in the industry — was unique and particularly well suited to computer vision.”

Benaich also notes the talent and “drive” of graduates of universities such as Boğaziçi University and Izmir Institute of Technology, the alma mater of both Intenseye founders.  

Teddie Wardi, managing director at US-headquartered VC firm Insight Partners that led Intenseye’s Series A says, “the Turkish startup ecosystem is really exciting with world-class talent especially in areas such as AI / ML.” 

Need for capital in later stages

Investors and founders say that while Turkey has been best known for gaming (like Zynga’s acquisitions of Peak Games and Rollic in 2020 for a combined $1.98bn) and e-commerce successes, startups from more diverse sectors are starting to emerge. 

“There have been a number of success stories in B2C segments from Turkey such as gaming companies but we now see really promising B2B companies such as Intenseye emerging,” says Insight’s Wardi. 

But the ecosystem will continue to be dependent on foreign capital to finance the really big rounds, says startups.watch’s Ünsal. In all of 2020, foreign investors provided 92% of the capital to Turkey’s startup ecosystem but only participated in 22% of the rounds, according to KPMG analysis.