{"id":56893,"date":"2012-09-16T13:39:28","date_gmt":"2012-09-16T10:39:28","guid":{"rendered":"http:\/\/www.turkishnews.com\/en\/content\/?p=56893"},"modified":"2012-09-16T13:39:28","modified_gmt":"2012-09-16T10:39:28","slug":"the-clone-wars-of-istanbul","status":"publish","type":"post","link":"https:\/\/www.turkishnews.com\/en\/content\/2012\/09\/16\/the-clone-wars-of-istanbul\/","title":{"rendered":"The Clone Wars of Istanbul"},"content":{"rendered":"
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The entrance to the Markafoni offices were vast and empty. \u00a0They were on the outskirts of Istanbul, somewhere even the cab driver could not find.\u00a0\u00a0 The reception desk was new, the Marcafoni logo behind it still factory polished, and the expanse of warehouse space to left of it blocked only with a few bushes.\u00a0\u00a0 The company\u2019s logistics team had moved out less than two weeks before, and the all the emptiness\u2014it felt like acres of it\u2014was to be converted to office space for Markafoni and its subsesidiaries.\u00a0 The building smelled like ambition.<\/p>\n

The man driving the operation was Sina Afra, a german educated 44 year old that had been managing director of Ebay Turkey.\u00a0 He founded the fashion flash sales company in 2010, and it has quickly become the largest ecommerce site in Turkey, with 8 subsidiaries that operate all over the Black Sea region.\u00a0 Markafoni alone sells upwards of 600,000 articles a month.<\/p>\n

The company is sitting on top of one of the fastest growing ecommerce markets in the world.\u00a0\u00a0 Online sales make up only 1.5% of the Turkish retail market, according to Mr. Afra, but he predicts that there will rise to 6 or 7 percent in the next four years.\u00a0\u00a0 But they are far from the only ones trying to get at the market.<\/p>\n

\u201cTurkey is a country of digital Darwinism,\u201d said Sina, referring to the intense competition for market share in each tech vertical.<\/p>\n

70 other flash sales sites have sprung up since 2010, and 150 groupon clones.\u00a0 A visit to the Startup Factory, Istanbul\u2019s only incubator, yielded startups cloning everything from Quirky to Talkbin.\u00a0 Almost all of them are doomed to failure before ever getting out of Beta.\u00a0 Almost none had an original idea.<\/p>\n

The reason is that despite a city of 17 million people, the angel community is smaller than Princeton\u2019s\u00a0 crew team, and about as tight knit.\u00a0 \u201cThere are about 20 serious angels, and 1000 qualified startups,\u201d said Emre Kurttepeli, founder of Galatta Business Angels and MyNet, Turkey\u2019s largest internet property.\u00a0 The numbers are indeed a bit scary for someone trying to break into the tech industry. \u00a0\u201cThere have been less than fifty major deals made,\u201d Cem Sertoglu, on of Turkey\u2019s leading VC\u2019s, told me.\u00a0\u00a0 Even if you do get an investment\u2014it\u2019s expensive. \u00a0Emre estimated that a 500,000 dollar investment would buy about 30% equity stake in an angel round.\u00a0 But getting an investment is hard.\u00a0 \u201cStartups will talk to anyone with money,\u201d he said emphatically.<\/p>\n

At the Startup Factory, Istanbul\u2019s leading incubator, startups expressed their frustration.\u00a0\u00a0 \u201cIt\u2019s really difficult to get investors.\u00a0 They\u2019re like banks, they want a proven idea,\u201d said Dilfer Nasir, co-founder of TinkFabrik,\u00a0 a crowd-sourced manufacturing site.\u00a0 TinkFabric eventually garnered a small investment from a large Turkish Multinational.\u00a0 \u201cEntrepreneurs have been taken advantage of legally and financially.\u00a0 They often didn\u2019t know their options very well.\u201d said Tugce Ergul, founder of Turkbridge, a nonprofit dedicated to bringing investors to turkey and educating entrepreneurs, and a partner at Startup Labs.<\/p>\n

Things are starting to change.\u00a0 Kleiner Perkins and Tiger Global have made some significant investments in B and C rounds.\u00a0\u00a0 Cem is graduating from investing his and his friend\u2019s private money to founding one of the city\u2019s first VC firms, Young Turk Ventures, which is capitalized at just under 30 million. Major exits have also jumpstarted cash flow and advertised opportunity in the city.\u00a0 The money is flowing in, if only your company can get big enough.<\/p>\n

But the problem of the angels persists, despite the fact that conditions seem to be ideal for encouraging investing.\u00a0 Term sheets generally favor the investors, and the long term capital gains tax for Turks is a whopping zero.\u00a0 The problem, according to Emre, is that many Turkish investors don\u2019t know how to value tech companies, and aren\u2019t willing to swallow investing in companies with no revenue.<\/p>\n

But even the elite club of twenty angels in Istanbul tend to be risk averse; they stick to proven business models.\u00a0 The costs and risks of real innovation is left to the Californians.\u00a0 \u201cModels are replicated as a matter of course in business.\u00a0 For the internet business, I think the topic is a silly debate,\u201d said Cem.\u00a0 Their attitude has created a tech community with a single goal: to clone startups and sell them to foreign companies who want a foothold in the Turkish market.<\/p>\n

It\u2019s a controlled risk model that stands to make a lot of money, given the explosive growth to come in Turkey.\u00a0 It\u2019s even good enough to trigger a small \u201creverse brain drain,\u201d a phenomenon that everyone I interviewed mentioned with pride.\u00a0\u00a0 But the truly ambitious will follow easier money that gives them a little more leeway.\u00a0\u00a0 Until angel capital starts to really flow in Turkey, and angels come who are willing to accept a higher margin of risk, Istanbul will remain short of its potential.\u00a0 It will not found a company that will become a global force, nor one that disrupts an accepted way of doing business.\u00a0 And in an economy of 80 million people whose average age is 29, the potential is enormous.<\/p>\n

It is a good time to enter Turkey as an investor.\u00a0 Over the next few years, more companies will become profitable, and a larger amount of the retail economy will move online.\u00a0 Traditional business will start to feel the pinch of their encroached market share enough that they will begin to build their own bids for internet market share, most likely through acquisitions. Nonprofit organizations like Turkbridge, and thought leaders already in the market will bring in more foreign capital as the market booms.\u00a0 \u00a0In short, the money will come soon enough, and the profits and investors with it.\u00a0 The market will mature.\u00a0 What will not come by itself is a culture of risk taking.\u00a0 Turkey needs a real cowboy investor, someone with enough money and guts to back the crazy ones.\u00a0 Until the cowboy comes, Istanbul will find it tough to attract the best talent, or to create truly disruptive companies that do not have to fight with foreign ones for market share.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The entrance to the Markafoni offices were vast and empty. \u00a0They were on the outskirts of Istanbul, somewhere even the cab driver could not find.\u00a0\u00a0 The reception desk was new, the Marcafoni logo behind it still factory polished, and the expanse of warehouse space to left of it blocked only with a few bushes.\u00a0\u00a0 The […]<\/p>\n","protected":false},"author":83,"featured_media":68792,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[846],"tags":[5272,8365],"class_list":["post-56893","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-ebay","tag-markofoni"],"_links":{"self":[{"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/posts\/56893","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/users\/83"}],"replies":[{"embeddable":true,"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/comments?post=56893"}],"version-history":[{"count":0,"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/posts\/56893\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/media\/68792"}],"wp:attachment":[{"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/media?parent=56893"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/categories?post=56893"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.turkishnews.com\/en\/content\/wp-json\/wp\/v2\/tags?post=56893"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}