Fostering entrepreneurship in Turkey
I have often been invited to speak on the topic of entrepreneurship at various universities in Turkey. It is a topic I am familiar with and passionate about. I have founded several companies in the United States and Turkey, and have had many failures and far fewer successes. I try to tell students what no one else will tell them: What I would have wanted to be told 17 years ago before I started my first company. I discuss with them the major obstacles they will face in establishing a start-up. As there are many obstacles that are universal, but I will discuss those that are germane to Turkey so that the discussion on how to better foster entrepreneurship in Turkey can be furthered.
The first and most important obstacle is mindset. Nearly half of the world's top 100 largest firms have changed in the last 15 years. The world's largest companies, Google and Apple, were nonexistent and miniscule, respectively, at the turn of the millennium. Accepting the fact that countries that are not rich in natural resources such as Turkey have no other choice but to foster entrepreneurship is step number one. The problem is Turkey's bureaucracy is bloated with government employees from older generations who are unable to accept this fact.
While having leadership who legislate ways to simplify starting-up a venture is essential, it is also insufficient. Leaders must allow citizens to by-pass this very bureaucracy - a bureaucracy that is often unaware and disinterested in the fact that revenue generated from taxes is how civil servants are paid.
When I first started researching start-ups in Turkey in 2002, I questioned why I needed five partners to incorporate. "But I don't have five partners," I told the clerk at the registration office. You can imagine her enthusiasm at trying to help me solve my dilemma. Fast forward a decade-and-a-half, and this ridiculous requirement has been changed. Eager entrepreneurs no longer need to ask friends to pretend to be their partners in order to incorporate.
One of the first things I tell students is, "Don't register your company." While Turkey has moved in the right direction on the World Bank's Ease of Business index, it is far from realizing its potential. It is easier to conduct business in countries such as Peru and Belarus, according to this index. While I disagree with the practicality of the index - it implies you speak the local language and is not meant for foreigners looking to establish a company overseas - it is a good starting point to address structural issues. My warning to students obviously does not mean run a black market enterprise, it means wait until you have arrived at a minimum viable product that you know will be able to carry the weight of running a business in Turkey.
The cost of doing business in Turkey, while much improved during the tenure of this government, has a lot of room for improvement. You can start a company in the United States, for example, for as little as $15, do your own taxes and have no other out-of-pocket expenses in most of the 50 states for that year. In Turkey, you currently must hire an accountant and pay them a minimum monthly fee imposed by the national accountant's association. You also need to make several trips to a notary public during the registration of your company and pay the notary fees that are at least 20 times more than the fees associated with notaries in countries such as the U.S.
Changing the address of your startup will cost you approximately one month's salary on minimum wage in taxes and fees. This in and of itself is such a ludicrous burden to any startup - and more importantly, is an indication of the numerous archaic regulations that have yet to be repealed. I have listened to many speeches by professors, industry leaders and policymakers about the importance of fostering entrepreneurship and encouraging the next generation to compete with their global peers, but this topic is almost always ignored. Discussions about garnering venture capital and seed funding ignore the fact that getting to those steps takes time and money.
The next generation of entrepreneurs need to be unburdened by old rules and regulations, remnants of generations past. Why would an entrepreneur choose to run a start-up in a country that will more quickly deplete the little resources that startups generally have when alternatives exist at a fraction of the cost? Incorporating in many countries around the world can be done online in minutes, where there is no need to stand in countless lines and pay exorbitant fees so you can get back to the work of running your start-up.
Turkey: We need to work harder in fostering entrepreneurship if we are to compete in the global marketplace.
The first and most important obstacle is mindset. Nearly half of the world's top 100 largest firms have changed in the last 15 years. The world's largest companies, Google and Apple, were nonexistent and miniscule, respectively, at the turn of the millennium. Accepting the fact that countries that are not rich in natural resources such as Turkey have no other choice but to foster entrepreneurship is step number one. The problem is Turkey's bureaucracy is bloated with government employees from older generations who are unable to accept this fact.
While having leadership who legislate ways to simplify starting-up a venture is essential, it is also insufficient. Leaders must allow citizens to by-pass this very bureaucracy - a bureaucracy that is often unaware and disinterested in the fact that revenue generated from taxes is how civil servants are paid.
When I first started researching start-ups in Turkey in 2002, I questioned why I needed five partners to incorporate. "But I don't have five partners," I told the clerk at the registration office. You can imagine her enthusiasm at trying to help me solve my dilemma. Fast forward a decade-and-a-half, and this ridiculous requirement has been changed. Eager entrepreneurs no longer need to ask friends to pretend to be their partners in order to incorporate.
One of the first things I tell students is, "Don't register your company." While Turkey has moved in the right direction on the World Bank's Ease of Business index, it is far from realizing its potential. It is easier to conduct business in countries such as Peru and Belarus, according to this index. While I disagree with the practicality of the index - it implies you speak the local language and is not meant for foreigners looking to establish a company overseas - it is a good starting point to address structural issues. My warning to students obviously does not mean run a black market enterprise, it means wait until you have arrived at a minimum viable product that you know will be able to carry the weight of running a business in Turkey.
The cost of doing business in Turkey, while much improved during the tenure of this government, has a lot of room for improvement. You can start a company in the United States, for example, for as little as $15, do your own taxes and have no other out-of-pocket expenses in most of the 50 states for that year. In Turkey, you currently must hire an accountant and pay them a minimum monthly fee imposed by the national accountant's association. You also need to make several trips to a notary public during the registration of your company and pay the notary fees that are at least 20 times more than the fees associated with notaries in countries such as the U.S.
Changing the address of your startup will cost you approximately one month's salary on minimum wage in taxes and fees. This in and of itself is such a ludicrous burden to any startup - and more importantly, is an indication of the numerous archaic regulations that have yet to be repealed. I have listened to many speeches by professors, industry leaders and policymakers about the importance of fostering entrepreneurship and encouraging the next generation to compete with their global peers, but this topic is almost always ignored. Discussions about garnering venture capital and seed funding ignore the fact that getting to those steps takes time and money.
The next generation of entrepreneurs need to be unburdened by old rules and regulations, remnants of generations past. Why would an entrepreneur choose to run a start-up in a country that will more quickly deplete the little resources that startups generally have when alternatives exist at a fraction of the cost? Incorporating in many countries around the world can be done online in minutes, where there is no need to stand in countless lines and pay exorbitant fees so you can get back to the work of running your start-up.
Turkey: We need to work harder in fostering entrepreneurship if we are to compete in the global marketplace.