Managing approximately €80 million (nearly $84 million) in capital and 25 investments, Turkey-based venture capital fund 212 invests in growth-stage B2B and technology companies that have strong teams, have achieved product-market harmony and seek to expand internationally.
The sale of iyzico to PayU for $165m (TL 2.7bn) in 2019 was among the fund’s significant outflows. Among the 212 active and holding companies it emerged from, there are iyzico, Turkey’s first Insider unicorn software company, 123 Form Builder, App Samurai, Artboard Studio, Avatao, Chooch AI, Fazla Gıda, HotelRunner, Meddy , Metrobi, Mall IQ, Martı, OMMA, SmartMessage, Solvoyo and Trio Mobil.
We sat down with Ali Karabey and Numan Numan, the founding partners of 212, among the few investors who have completed 10 years in the Turkish startup ecosystem, to talk about their experiences in Turkey.
Doing business internationally
Recounting how the venture capital fund began its journey, Karabey said “the first one was purely a test.”
“Everything in Turkey was just the beginning. When we got into the fund, we invested in 12 startups and left with an investment of $30 million. From there, we extracted successful startups such as Insider, which became a unicorn, and iyzico, which we successfully released,” Karabey noted.
Their second fund was created at the end of 2018 with 50 million euros, he noted.
“Turkey has become different. There were plenty of startups that would be more successful. Our sine qua non was the initiative that could succeed abroad. We have invested in software vendors, B2B technology initiatives,” he added.
Now, says Karabey, they just announced the third fund. “Our goal is the same. Invest in new businesses that can succeed overseas.
The learning process takes time
For his part, Numan cited the fact that “we have learned to invest in a developing country”.
“What happens in four to five years in the United States happens in just one year in Turkey. In the 10-year fund, you have to act accordingly. There has been a learning process in setting up a successful fund in a developing country. And that took time,” Numan explained.
He said they established the fund 10 years ago to develop Turkey’s entrepreneurship ecosystem and to support startups with strong teams.
“Today, we continue to support entrepreneurs in Turkey, Eastern Europe and the Middle East on their growth journey through investment.”
But nothing is easy, Karabey said.
“We haven’t had it easy. Entrepreneurs are also used to a lot of risk. Startups also have agile structures. We have to build teams accordingly. Coming together from very different backgrounds, we have to convince them to work in an agile way. We also need to act differently, like startups do,” he noted.
Stating that there are different fund structures abroad, Numan added that he believes the fund structures in Turkey will not change in the next five to six years.
Success stories from Turkey
Along with the success stories, different perspectives were brought in on how Turkey is perceived, Karabey said.
“There are unicorns and decacorns that came out of Turkey 10 years later. We have initiatives that have been or should have been made public. We are still at the beginning of the road. We still need to double or triple our growth. Building a fund takes more time. It is not installed immediately in six to seven months,” he noted.
He said opportunities in Turkey should be advertised more and thoroughly explained.
“We are in much closer contact with investors. Travel restrictions are now lifted. If necessary, we should go abroad to better explain ourselves to investors,” he said.
Along with the coronavirus pandemic, Numan pointed out that investors in the United States have focused overseas.
“Investors in the United States initially called everyone in Silicon Valley. They started looking at other states first. Then they started investing in different talents from all over the world. After the success stories, they started asking us about new talent coming out of Turkey. We discussed investment opportunities with three to five investors,” he noted.
Celebrating their 10th anniversary, Karabey said they decided to bring together all the companies they have invested in to offer a site for greater sharing of experiences.
“We thought that if we could bring everyone together and allow them to share their experiences, it would be beneficial for all initiatives. As a result, we have gained significant experience in 10 years,” he added.
Numan echoed Karabey’s view on the importance of experience sharing.
“In fact, there is a lot of experience among investors. We have had significant experience in the processes that all entrepreneurs go through. We have created an environment where entrepreneurs “feed” on each other. We talk until late about the question marks in our minds and share solutions,” he noted.
Objective 73M euros in the 3rd fund
Karabey pointed to the fact that there are almost 100 venture capital funds in Turkey, noting that the target of the third fund of 212 is 70 million euros.
He also said that 212 gave many their first experience as investors.
“We are currently at the start of the third fund. We have set the target size at 70 million euros. However, depending on demand, this figure may increase. Many of the people who were investors in our first fund went on to become angel investors or set up venture capital funds. I think we and our investors learned a lot from the first fund. I think venture capital funds, which motivate people of different lifestyles by bringing them together, will come to the fore,” he noted.
The 212 team is growing
Numan also underscored the importance of the team when discussing the growth of 212 funds over the years.
“When we started our journey, only Ali and I were there. Over time, that number grew and now we are a team of 12 people. At 212, we tried to collect experience that entrepreneurs can consult at every step. We looked at what we needed. We added new people to build a team that will support entrepreneurs. We want to serve the wallet better,” he said.
Karabey also pointed out that although it looks very attractive from the outside, a venture capital company is a service company and stressed that it wants to bring together colorful personalities in the team to provide better service.