Turkey becomes paradise for angel investors with 75% tax deduction – an interview with Baybars Altuntas

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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 (Pavel Curda) attended the event in Istanbul and sat down with Baybars Altuntas – Chair of the European Business Angels Investment Forum, European Business Angel Network (EBAN) 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 an 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.

EU-Startups: Why are business angels preferred by entrepreneurs in Turkey?

Baybars Altuntas: Funding is not the only thing that entrepreneurs need to be successful. They also need knowhow, mentorship and a network. The resources for funding, which can be used by an entrepreneur for his/ her start-up are known. There are various funding methods throughout the world, such as funding by relatives, friends, and the family, “crowd funding”, loans facilitatedby 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 earned from the business plan competitions that they participated. 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.

EU-Startups: Does the Turkish government have any projects regarding business angels?

Baybars Altuntas: The Treasury has started 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 percent 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.

EU-Startups: What is the role of the TBAA – Turkish Business Angel Association?

Baybars Altuntas: 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.

EU-Startups: Turkey plans to enhance angel / early stage investments in cooperation with stock markets. How?

Baybars Altuntas: Turkey has a significant potential in terms of entrepreneurship and Borsa İstanbul aims to realize this potential and become a regional center for start-ups. 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 USA, 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 the 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. It is a digital, web-based and membership based platform where investors and entrepreneurs can find each other. In the Private Market, start-ups 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 the cross-border investments from angel investors. So, stock markets can play an important role by opening its 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 and be able to access to finance in a secure environment. Such platform provided by stock exchanges should be armed by mentorship programs and service providers like independent audit firms, law companies should be part of it.

EU-Startups: What is the role of crowdfunding?

Baybars Altuntas: In 1884, the people of France donated the Statue of Liberty to the US. It was a gift of the heart, but it came with a condition: US was required to fund construction of the pedestal on which the statue would stand. When the US Congress and New York State declined to allocate money fort he 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 Commissiom happened on April 5, 2012 when the JOBS Act was signed by President Obama.

As a result, crowdfunding system to fill the very early equity gap of startups have a legal
infrasture in US, in UK and some coutries. This lelag infracture opened the way foe crowdfunders and now they should be accepted as mini business angels. Crowdfunders are supporting startups at the beginning stage of the entrepreneurial journey and made this times and times again until now. 2013’s global volume of the crowdfunders is 5 billion dollars.

EU-Startups: Are Turkish business angels open to cooperation with investors from abroad?

Baybars Altuntas: Business angel clubs in Turkey have to develop their connections with the 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 the 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 the ‘exit’ know-how to Turkey.

EU-Startups: Business accelerators play a crucial role in startup ecosystem in Europe. What is the situation in Turkey?

Baybars Altuntas: The role of accelerators will become more important in the very near future. Startups like accelerators also because they know they are highways of the access to smart money (angel investors). And angel investors will check and decide  professionally if the startups are investment ready or not.

EU-Startups: What is your list of top5 startups in Turkey? Young companies with global potential…

Baybars Altuntas:  Here is my top 5 list:
1.) IMONACLOUD– A silver lined cloud on the horizon to manage every thing about your
company
2.) MEALBOX – Online order system for hygenic reaady food
3.) KUAX- a personalized shopping window, which uses transparent LCD and image
recognition technology to display promotional animations to shoppers matched to their
gender.
4.) G4TECH is a smart irrigation system that provides automatic soil mapping, yield
monitoring, precise irrigation and liquid fertilization. It improves water and energy
conservation, reduces soil erosion and maximizes crop yield and quality.
5.) HANGAAR- an augmented reality middleware, connecting vision gadgets, image
processing and ERP systems, to automate warehouse and retail processes.

If you’re interested to check out two more posts from my trip to Istanbul, check out my blog.