The global VC winds and a glance into the Turkish investment market
During the last decade Fintech companies received around 100 billion USD investments and half of it is originated from VC firms globally.
In 2017 only, 12 billion USD investments have been poured into the financial services, %47 from VC funds. Yes, there are banking giants as Santander, UBS, Deutsche Bank in Europe or Citi, Goldman Sachs and JP Morgan Chase & Co in USA who invest with their deep pockets in Fintech start-ups but again the rolling force of this space is in the VCS hands.
As the exit is the main motivator for VC investors, they follow and assess with great interest the Fintech eco-system and with a closer look into the firms approaching their full cycle prior to potential exists. M&As and IPOs in Fintech space are more and more delicate focus areas to boost once again the investors’ appetite. At the beginning of 2015, the American payment and financial services unicorn Square had an IPO followed by ups and downs. Since its IPO, the stock price of the company has raised by 163% mainly due to its steady revenue and profit growth. Founded in 2009 by Jack Dorsey, also known as the CEO of Twitter, the start-up received in 7 rounds 590 million USD of VC funding, acquired 7 companies prior to its IPO and 5 other following its IPO. We believe that other IPOs will follow in 2017 and early 2018.
For start-ups, it is vital to understand in depth how VCs operate and what they are looking for in order to support a venture. They are two major axis of discussion and eventually agreement prior to investing in a firm, no matter what the type and timing of the deal: the economics of the deal and its governance. In order to match the Fintech start-up needs with the VCs vision in such an ecosystem, the economical valuation of company shall be “realistically” promising and the entrepreneurs shall be in line with their investors on the level of control they would like to release from their hands.
According to CBInsights Report published in March 2017, in 2016 the largest VC investments (in terms of size in USD) have been closed by Nea Enterprise Associates, Khosla Ventures and Index Ventures. Those VC firms have been investing in various areas, with key focus on technology verticals, for more than a decade (for some four decades). These VCs are at the summit of their expertise not only to pick the crème de la crème opportunities to invest in but also to guide the companies while sitting on their board. In the highly competitive start-up ecosystems, the experience is gold, creates and saves huge amount of money and time.
In Turkey, the VC presence is new and under evolution, ready to tap in the growing technology and Fintech start-up ecosystem in Turkey. In 2016, the large VC investments have been performed by 212, Revo Capital, Diffusion Capital Partners, Aslanoba Capital and MV Holding (CVC) on the Turkish side, and by Ribbit Capital, Amaedeus Capital Partners, 500 Startups, Vostok Emerging Partners, Endeavor Catalyst and Beenos Partners on the international ground. The Turkish Fintech start-ups that received VC investments are İyzico (online POS), Parasut (financial management) and Ininal (prepaid payment services)
Both volume of investment and number of investments are still low when we look at the greater picture of the economical and social potential in Turkey not just from the Turkish market perspective itself but also its geographic coverage.
We believe that the current VC and start-up relations, the emerging experience and lessons learnt will ease the future of the investment trends in Turkey.
