EU-Startups was one of the partners of the European Business Angels Investment Forum which was held in Istanbul about three weeks ago. The Forum’s main topic was “Access to finance from start-up, to scale-up, to exits”.
As a new contributing writer for EU-Startups.com, I attended the event in Istanbul and sat down with Baybars Altuntas, who is the Chair of the European Business Angels Investment Forum, European Business Angel Network (EBAN), and Vice President and the Turkish Business Angel Association president (TBAA). TBAA recently signed a partnership protocol with Borsa Istanbul. which will allow easier access to early stage funding to young companies.
The number of business angels, who provide capital and knowledge to early-stage businesses for growth and development, is increasing rapidly throughout the world. Turkey, one of the top 20 economies of the world, is no exception.
Why are business angels preferred by entrepreneurs in Turkey?
Funding is not the only thing that entrepreneurs need to be successful. They also need know-how, mentorship and a network. The resources for funding, which can be used by an entrepreneur for his/ her startup are known. There are various funding methods throughout the world, such as funding by relatives, friends, and the family, ‘crowdfunding’, loans facilitated by the banks, the financing provided by business angels, and funds provided at early stages by incubators, which are called ‘seed-funding’. Furthermore, entrepreneurs can obtain funds through the aids provided by governments as well as the prizes that they earn from the business plan competitions that they participate in. However, none of them provides know-how, networking and mentorship, but we do. The ‘angel’ role given to the investor does not come from the finance that he/she provides, but from the fact that he/she provides such how-know etc.
Does the Turkish government have any projects regarding business angels?
The Treasury has started an accredited business angels system. A total of 265 persons have obtained business angel certificates, accredited by the Financial Markets Regulatory Department of Treasury since the enactment of the Law, and I am one of them. We can deduct 75% of our investments from our income tax in Turkey. There is also a joint mutual funds system, which is currently prepared by the government. Joint mutual funds can also make the same amount of contributions to the investments to be made by licensed business angels and can be their partners.
What is the role of the TBAA – Turkish Business Angel Association?
It seeks to promote and nurture startups, angels, and a dynamic business community throughout the region, from business angels to policymakers to academics. It is also shaping the future of an entrepreneurial South East Europe.
Turkey plans to enhance angel / early-stage investments in cooperation with stock markets. How?
Turkey has significant potential in terms of entrepreneurship and Borsa İstanbul aims to realise this potential and become a regional center for startups. According to the data by Eurobarometer, the ratio of those who want to start their own business stands at 37% in the EU, compared to 45% in the US, 56% in China, 63% in Brazil, and 82% in Turkey. According to same research by Eurobarometer, approximately 80% of small and medium-sized companies find access to finance to be the greatest impediment; Borsa İstanbul’s New Initiative ‘Private Market’ will bring together investors and entrepreneurs. In the post-crisis period, 560% of global employment was provided by small and medium-sized companies and on the employment side, half of the jobs created were attributable to SMEs. According to the Global Entrepreneurship Report, Turkey ranks first with 60%, in terms of the expectation to employ at least 5 persons in the next five years, so Borsa Istanbul started a new initiative called Private Market. This is a digital, web-based and membership-based platform where investors and entrepreneurs can find each other. In Private Market, startups and rising companies will be able to meet investors directly and have access to finance. Reliability of the local ecosystem is very important to get cross-border investments from angel investors. So, stock markets can play an important role by opening their doors to create a reliable platform for local startups and angel investors. A good way to create such kind of a platform is to open a Private Market for startups and enterpreneurs where they will be registered by stock exchanges and meet the registered accredited angel investors, as well as be able to access to finance in a secure environment. Such a platform provided by stock exchanges should be armed by mentorship programmes and service providers like independent audit firms, and law companies should be part of it.
What is the role of crowdfunding?
In 1884, the people of France donated the Statue of Liberty to the US. It was a gift from the heart, but it came with a condition: the US was required to fund the construction of the pedestal on which the statue would stand. When the US Congress and New York State declined to allocate money for the project, newspaper Publisher Joseph Pulitzer started a campaign that ultimately raised over $100K from more than 120K supporters, with 80% of the total being raised in sums of less than one dollar. This was the first mojor crowdfunding campaign. Then the most important change in startup financing since the establishment of US Securities and Exchange Commission happened on April 5, 2012, when the JOBS Act was signed by President Obama.
As a result, the crowdfunding system to fill the very early equity gap of startups has a legal infrastructure in the US, in the UK and some other countries. This legal infrastructure opened the way for crowdfunders, and now they should be accepted as mini business angels. Crowdfunders are supporting startups at the beginning stage of the entrepreneurial journey and have done this time and time again; the year 2013 saw the global volume of crowdfunders reaching $5 billion.
Are Turkish business angels open to cooperation with investors from abroad?
Business angel clubs in Turkey have to develop their connections with global investment markets to make better access to exit capital. So, this global event and creating links with the global players are very important for Turkey. Turkish business angels see foreign angel investors as mentors to themselves. Therefore, Turkish Business Angels are pushing policy makers to give more incentives to experienced foreign angel investors to be able to act together with them in their co-investments in Turkey and transfer their ‘exit’ know-how to Turkey.
Business accelerators play a crucial role in the startup ecosystem in Europe. What is the situation in Turkey?
The role of accelerators will become more important in the very near future. Startups like accelerators also because they know they are highways to access smart money (angel investors). And angel investors will check and decide professionally if the startups are investment ready or not.
Who is on your list of the top 5 startups in Turkey? Young companies with global potential…
Here is my top 5 list:
- IMONACLOUD is a silver-lined cloud on the horizon to manage everything about your
company - MEALBOX is an online order system for hygienic and ready food
- KUAX is a personalised shopping window, which uses transparent LCD and image-recognition technology to display promotional animations to shoppers matched to their
gender - G4TECH is a smart irrigation system that provides automatic soil mapping, yield
monitoring, precise irrigation and liquid fertilisation. It improves water and energy
conservation, reduces soil erosion and maximises crop yield and quality - HANGAAR is an augmented reality middleware, connecting vision gadgets, image
processing and ERP systems, to automate warehouse and retail processes
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