While most tech followers might not know it yet, there’s a new country emerging as a leader in technology. Turkey’s rapid economic growth, even in the face of the global economic downturn, has made it a model for dozens of countries across the world looking to develop everything from a robust banking system to health care reform. While this growth was impressive, it has set up the country for an even more exciting period: an explosion of technology-based businesses and homegrown innovation.
With its young and connected population, Turkey is becoming a hotbed of invention and a target for investment. Half of the country’s population is under 30, and Turkey has a higher expected college graduation rate than Italy. Eighty-four percent of the country owns a mobile device, and more than 11 million Turks are expected to buy their first smartphones this year. According to the most recent statistics, Turkey had more than 30 million Facebook users — more than France or Germany.
A young population and rapid technology growth means that Turkey is leapfrogging old technologies, with many people using mobile devices for banking and shopping, instead of desktops. Turkey is third in the world in the use mobile devices for e-commerce, and more than 4 million people in Turkey use mobile banking.
Companies, both Turkish and international, are already taking advantage of this. The top-three fastest-growing companies in Turkey last year were based on mobile or e-payments. International capital firms have started backing businesses in Turkey, and a number of local angel investors and venture capital firms are already supporting new startups.
For example, 212 Capital Partners recently launched with $30 million in investments, while Dubai-based Abraaj Group has invested more than $800 million in Turkey since 2007, and is raising funds for a $500 million fund devoted to the country. Many of these new startups are emulating models that have found success elsewhere, such as daily deals, ridesharing services and food delivery services. Other startups are developing innovative ideas to serve the Turkish market.
For example, Yemek Sepeti, a food delivery service, has raised $44 million in funding and now operates in UAE, Oman, Qatar, Saudi Arabia, Lebanon and Greece. Flat4Day, Turkey’s answer to Airbnb, has locations in 71 countries and has raised more than $3.5 million in capital. Ininal is another successful startup that is serving young people who do not yet have credit cards, by offering prepaid cards that are accepted by more than 200,000 businesses nationwide. As of December 2014, it had issued more than a million cards since its founding in late 2012.
Startups are not the only companies reaping the benefits of Turkey’s connected society; many established companies have begun to see the many opportunities in the country. Spotify recently announced that it would offer its premium service in Turkey, in partnership with Vodafone Turkey. Other American companies, such as eBay, which acquired GittiGidiyor.com for more than $200 million, and Amazon.com have entered the Turkish market by purchasing shares in online retailers in the country alone. And Naspers, a South Africa-based company, last year acquired Markafoni, a Turkish online fashion sales site.
These investments are driven by incredible growth in the online retail sector, which has grown seven times faster than store-based retail since 2007, according to the Abraaj Group.
This growth in startups and technology companies is bolstered by investments and incentives from the government. Turkey has built a series of “technoparks” to host and support these businesses, offering tax exemptions and reduced operating costs to encourage investments in the technology sector. Revenue from software developed in these parks is exempt from income and corporate taxes and all sales are exempt from VAT, as well.
The culture and history of Turkey have also propelled this growth. Turks are no strangers to the rigors of starting and running a business. Small- and medium-sized businesses make up 97 percent of Turkey’s businesses and employ 80 percent of its workforce.
The country’s position between East and West makes it fertile ground for startups and multinational businesses alike. Just a short plane ride from many of the world’s capitals, businesses operating in Turkey have access to both Asian and European markets and the best minds in business.
Although its location is a benefit in many ways, the growing instability in Turkey’s neighborhood has been cause for concern among investors. However, security issues remain confined within its neighbors’ borders, and Turkey’s economy has grown steadily in spite of problems in the region.
Commentary on Turkey’s economy has largely focused on investments in the energy sector and infrastructure, but savvy investors are turning to the technology sector as the new place for growth. Many of the world’s most innovative companies are already invested in Turkey, and the blossoming startup economy will only drive further investment. With its entrepreneurial spirit, an already growing economy, a strong telecommunications infrastructure and a large market to tap into, Turkey is poised to become a regional and international innovation hub.
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