How Are Digital Startups Diversifying Turkey’s Economic Ecosystem?
From app developers to e-commerce providers, 2018 was a year where tech startups helped to diversify Turkey’s economy, a move which was much needed given the country’s economic problems.
This digital-led transformation has attracted significant foreign investment, too. This is evidenced by Alibaba acquiring Turkish e-commerce startup Trendyol for $753 million, which was the largest internet sector acquisition in Turkey to date.
The e-commerce sector itself also acts as an interesting case study in how digital startups have diversified the failing Turkish economy, causing a slight resurgence. While e-commerce’s market volume was $6.7 billion in 2016, a report from the Turkish Informatics Industry Association claims that this figure rose to $9.2 billion in 2017.
Startups and the Turkish Economy
Turkey’s economic expansion and diversification come in response to the country’s economy slipping into recession for the first time in over a decade, with market analysts attributing this to rising inflation and interest rates as the lira crashed, losing 40% of its value against the dollar. New economic steps announced in August 2018 aimed to secure economic growth at 3-4%, decrease inflation from 15% to single digits and cut the budget deficit to around 1.5% of GDP.
This announcement aimed to address the stark signs of investor unease with the country’s economic direction. On a national level, central banks hiked Turkey’s interest rates by 500 basis points and foreign investment fell from nearly $18 billion in 2015 to only $11 billion in 2017. On an individual level, CFD traders with an IG trading account profited from falling lira prices, as investors went long on the USD/TRY currency pair.
Turkish Success Stories from 2018
Turkish startups, however, remain a success story for the Turkish economy, attracting £130 million in private equity investments and personal investments. A significantly growing sector of the market, the Turkish Science Foundation is investing large sums in the market, while large companies are investing via their venture funds.
The innovation of Turkey’s startups has given the country global recognition. Of over 131,500 applicants, Turkish startup Dine & Pay was recently voted as one of startupturkey.com‘s four 2019 winners, placing fourth behind entries from Denmark, Indonesia and Mexico. Of the 10 finalists, three entries were Turkish: Dine & Pay, Procube IoT and Mantiscope.
As a result, these companies should be watched closely over the next 12 months, as they’re likely to catch the eye of mentors, angel investors and global companies.
Further Diversification Ahead in 2019?
Looking to the future, it’s likely that we will see even greater co-operation between startups, venture capitalists and the Turkish government. While the past few years have been characterized by Turkey losing its top entrepreneurs and programmers to Silicon Valley, the continued success of Turkish startups, allied with the international recognition they’re receiving, means that further growth of the sector, particularly in Istanbul, seems inevitable.
Venture capitalists continue to circle some of the country’s hottest startups, including marketing platform Insider (who acquired some funding from Sequoia Capital in 2018), virtual reality gaming developer Teleporter and FinTech startup Iyzico.
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