Globalturk and SEAF launch joint venture fund

The vehicle will provide funding and support to Turkish small and medium enterprises that want to expand beyond their domestic markets.

Istanbul-headquartered Globalturk Capital and US-based Small Enterprise Assistance Fund have established a partnership to fill a funding gap in the Turkish SME market.

Both firms are in the process of raising a joint Turkey-specific SME growth fund, with a target of $75 million. In the interim, funds will be drawn from SEAF’s existing vehicles, who together manage a total of $740 million of assets.

Globalturk and SEAF will seek investment opportunities in companies whose business model is built on niche but proven technologies, and who are looking to expand within and beyond their domestic market. Support will be provided through a mix of equity and debt, with the share of capital involved ranging between $1 million and $7 million.

“This is very new for the market,” Baris Oney, founding and managing partner of Globalturk, told Private Equity International. “All private equity investors who have been looking for opportunities in the Turkish market are targeting investment sizes above $10 million, $20 million, $30 million dollars, and even more than $100 million dollars. But when you target a market like that, you are basically targeting the top-1000 or so companies.”

This is very new for the market.

Baris Oney

That left almost 500,000 companies without adequate funding, he said. “The real need for private equity is really the early stage private equity, which requires less than $10 million dollars of investment. But when you search the market for such investors, they don’t exist.”

Neither were bank loans really a solution for SMEs, Oney said. Their collateral requirements, as well as Turkey’s still high interest rates, made it difficult for business owner to secure long-term debt.

The joint-venture will be primarily looking for opportunities in the ICT, healthcare, niche manufacturing, and energy efficiency sectors. Investments will help fund organic growth as well as acquisitions.

Globalturk and SEAF were ideal partners, Oney said. “Turkish SMEs need not only capital, but also support in corporate governance, reporting, internationalisation of the company. At Globalturk Capital, we’re very expert in the Turkish market; SEAF has the capability, skill set, and know-how to invest in emerging markets.”

Globalturk was founded in 2011 to invest in Turkish SMEs, as well as provide both foreign investors and Turkish entrepreneurs with pre and post investment advice. It is active in a variety of sectors of the Turkish economy, including real estate, energy, transport, and manufacturing.

SEAF, headquartered in Washington DC, was created in 1989. A not-for-profit organisation, it is the largest early stage private equity fund with a specific focus to invest in emerging market SMEs, with 140 employees and 28 offices across Latin America, Central and Eastern Europe, and Asia.

SEAF manages 28 funds across 30 countries and also operates CEED, the Center for Entrepreneurial and Executive Development.