Managing around 80 million euros (nearly $84 million) of capital and 25 investments, Turkey-based venture capital fund 212 is investing in growth-stage B2B and technology companies that have strong teams, achieved product-market harmony and are seeking to scale internationally.
The sale of iyzico to PayU for $165 million (TL 2.7 billion) in 2019 was among the important exits of the fund. Among 212’s active and portfolio companies it made exit from, there are iyzico, Turkey’s first unicorn software company Insider, 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 with Ali Karabey and Numan Numan, the founding partners of 212, among the rare investors who have completed 10 years in the Turkish startup ecosystem, to talk about their experiences in Turkey.
Telling how the venture capital fund started its journey, Karabey said “the first was purely a test.”
“Everything in Turkey was just at the beginning. When we set out for the fund, we invested in 12 startups and set out with an investment of $30 million. From there we extracted successful startups such as Insider, which became a unicorn, and iyzico, from which we made a successful exit,” Karabey noted.
Their second fund was established at the end of 2018 with 50 million euros, he noted.
“Turkey became different. There were many startups that would be more successful. Our sine qua non was the initiative that could be successful abroad. We invested in software companies, B2B technology initiatives,” he added.
Now, Karabey says, they have just announced the third fund. “Our goal is the same. Investing in new ventures that can be successful abroad.”
For his part, Numan cited the fact that “we learned to invest in a developing country.”
“What happens in four to five years in the United States happens in just a year in Turkey. In the 10-year fund, it is necessary to act accordingly. There was a learning process in creating a successful fund in a developing country. And that took time,” Numan explained.
He said they had established the fund 10 years ago to develop the entrepreneurship ecosystem in Turkey and to support startups with strong teams.
“Today, we continue to support entrepreneurs in Turkey, Eastern Europe and the Middle East in their growth journey by investing.”
But nothing comes easy, Karabey said.
“We didn’t have an easy time. Entrepreneurs are also used to a lot of risks. Startups also have agile structures. We need to build teams accordingly. Coming together from very different backgrounds, we have to convince them to work in an agile way. We also have to act differently, as startups do,” he noted.
Stating that there are different fund structures abroad, Numan added that he thinks that the fund structures in Turkey will not change in the coming five-six years.
Together with success stories came different perspectives when it comes to how Turkey is viewed, said Karabey.
“There are unicorns and decacorns that came out of Turkey 10 years later. We have initiatives that have gone or had to go public. We are still at the beginning of the road. We still have to grow twofold or threefold. It takes more time to set up a fund. It is not installed immediately in six to seven months,” he noted.
He said opportunities in Turkey should be advertised more and explained in an extensive manner.
“We are in much closer contact with investors. Travel restrictions are now lifted. If necessary, we should be going abroad to explain ourselves better to investors,” he said.
Together with the coronavirus pandemic, Numan emphasized that investors in the United States turned their focus abroad.
“Investors in the U.S. were initially calling everyone to Silicon Valley. They started looking at other states first. Then they started investing in different talents coming from around the world. After the success stories, they started to ask us about the new talents that will come out of Turkey. We talked about investment opportunities with three to five investors,” he noted.
Celebrating their 10th anniversary, Karabey said they decided to gather all the ventures they invested in to offer a site for greater experience sharing.
“We thought that if we could bring everyone together and enable them to share their experiences, it would be beneficial for all initiatives. As a result, we have gained significant experience over the course of 10 years,” he added.
Numan echoed Karabey’s view on the importance of experience sharing.
“In fact, there is a great deal of experience in investors. We went through an important experience in the processes that all entrepreneurs go through. We have created an environment where entrepreneurs ‘feed off’ of each other. We talk until late about the question marks in our minds and share solutions,” he noted.
Karabey stressed the fact that there are nearly 100 venture capital funds in Turkey, noting that the target for the third fund of 212 is 70 million euros.
He also said 212 had enabled many to have their first experience as investors.
“We are currently at the beginning of the third fund. We have set the target size as 70 million euros. However, according to the demand, this figure may go up. Many of the people who were investors in our first fund became angel investors or established venture capital funds. I think both we and our investors have learned a lot from the first fund. I think venture capital funds, which motivate people from different lifestyles by bringing them together, will come to the fore,” he noted.
Numan also noted the importance of the team as he spoke of how 212 funds grew over the years.
“When we embarked on our journey, only me and Ali were there. Over time, this number increased and now we are a team of 12 people. At 212, we have tried to collect the experience that entrepreneurs can consult at every stage. We looked at what we needed. We have added new people to build a team that will support entrepreneurs. We want to better serve the portfolio,” he said.
Karabey also underlined that although it looks very attractive from the outside, a venture capital company is a service company and emphasized that they want to gather colorful personalities in the team to provide better service.