Turkey’s tech ecosystem rises

Deals boosted by General Atlantic’s investment in Turkey’s first decacorn set the scene for more activity in the country’s tech and media sectors.

This year, Turkey welcomed its first-ever decacorn: e-commerce platform Trendyol raised $1.5 billion in August, in a massive funding round that valued the company at $16.5 billion. General Atlantic co-led the round, along with SoftBank’s Vision Fund 2, Princeville Capital, Abu Dhabi’s state investment firm ADQ and Qatar Investment Authority.

Trendyol, which was established in 2010 and is backed by Chinese internet giant Alibaba, serves more than 30 million shoppers and delivers more than one million packages per day. It claims to have evolved into a super-app, combining its marketplace platform with its own last-mile delivery solution, Trendyol Express. Its services also include: instant grocery and food delivery through its own courier network, Trendyol Go; a digital wallet, Trendyol Pay; and a consumer-to-consumer channel, Dolap.

Melis Kahya Akar
Melis Kahya Akar: ‘[Turkey is] able to sustain some of the volatility that we see in emerging markets’
General Atlantic sees “a lot of opportunities in expanding that ecosystem within Turkey”, Melis Kahya Akar, managing director and head of consumer for EMEA at General Atlantic, tells PEI. “The Trendyol team has great potential with its tech know-how, fashion know-how and regional expertise. We believe we can extend that in Eastern Europe and the Middle East, both organically and with M&A.”

While there isn’t comprehensive data yet on deal activity in 2021, disclosed M&A – including PE-backed deals – in Turkey stood at approximately $9 billion in 2020, according to a report from Deloitte. With an all-time high of 304 transactions, 2020 saw year-on-year growth of 70 percent in deal volume and 30 percent in deal number.

Within financial investors’ activity, private equity firms made up only 12 percent of the deal count in 2020, halving since 2016. New private equity transactions were highly limited in 2020 as managers focused on portfolio management and exits, the report said. Venture capital funds and angel investors, meanwhile, contributed the most (82 percent) to total deal count for the year. Internet and mobile services and tech were two of the most in-demand sectors, followed by financial services, e-commerce and energy and logistics.

That said, some domestic firms are seeing one of their busiest periods. Turkven, one of the first homegrown PE funds in Turkey, will have closed six exits and completed four new deals in the 18 months to June 2022, says Seymur Tari, chief executive at the firm. In fact, its latest vehicle, Turkey Growth Fund IV, is set to have four “very high growth deals” in its first six months. Fund IV is targeting $400 million and is expected to hold a final close in June.

Akar notes that Turkey’s demographics – a highly urbanised population of 84 million, half of which is under 30 – make it attractive to investors. “Internet penetration is also very high at nearly 80 percent,” she says. “Mobile penetration is over 75 percent and household debt is very low. We believe that, from an economic standpoint, [Turkey is] able to sustain some of the volatility that we see in emerging markets.”

Tari adds: “Turkish equities are trading at 50 percent discount to emerging markets peers, and we are very excited about this vintage in a buyers’ market with negligible competition.

“While changes in the global macro environment combined with the pro-growth policies of the government caused the excess devaluation of the Turkish lira – which has been the main headwind since 2016 – we have learned to operate and make money in Turkey across cycles and over the past two decades.”