Surviving on the edge
Istanbul’s startup ecosystem has gotten a lot of attention lately, because Peak was sold for $1.8 billion recently. However, I believe that it is still not very high on the government’s agenda. At least it is not as important as it should be. For some reason, authorities favor the construction industry above all and seem not to care about the technology industry that much. This is a mistake.
The technology industry is very vital for the future of our country. I have been writing this exact same sentence for over 15 years now, at least once each month. But looking back, I don’t believe that we have come far enough.
It is hard to understand because technology companies do wonders for the financial bottom line that politicians care so much about. They create extreme value per person, they cut the need for imports and help to boost exports. Also, they increase high level employment like no other industry. By 2019, there were an estimated 865 entrepreneurial tech companies founded or headquartered in Istanbul. Between them, they employed over 25,000 people on a full-time, permanent basis.
Therefore, the latest report by Endevor caught my attention as I saw it as an early warning.
The report is entitled “Mapping the Istanbul Tech Ecosystem” and is published by Endeavor in cooperation with Istanbul Development Agency and the Industry and Technology Ministry.
Key findings in the report are:
The Istanbul tech community has been able to thrive because earlier generations of founders generously reinvested their resources in the ecosystem.
The Istanbul tech sector has been growing steadily for decades, but dynamism has slowed down in recent years.
The tech community’s resilience was tested in recent years when Turkey entered a period of geopolitical instability, followed by a currency and debt crisis. Valuations dropped, as did the influx of foreign capital into tech companies in Istanbul. Companies with foreign revenue sources weathered the crisis more easily, but new entrepreneurs have not been able to scale at the same rate as their predecessors. Looking ahead, strategies that previously enabled entrepreneurs to thrive in Istanbul may not ensure future growth at the same rate.
Decision makers need to focus on helping a new generation of tech entrepreneurs reach scale in Istanbul. Companies with 50 or more employees have been driving most of the economic growth in Istanbul’s tech sector, but only 13 percent of these firms were founded in the past five years. This is an indication of slowing dynamism that could have long-lasting implications for the sector’s growth if the city does not increase the number of new companies.
Decision makers should work to address the challenges that scaling tech founders have identified. Based on interviews with the founders of high growth companies (the fastest 20 percent of companies with over 10 employees), access to tech talent and late-stage capital are two main barriers holding entrepreneurs back.
Decision makers in the public and the private sector who want to help more tech entrepreneurs scale need to focus on connecting established company founders with the new generation of entrepreneurs.
Once you read the finding it is obvious that a handful of people did a great job so far, but the ecosystem needs more attention and help from big companies and the government. They are living on the edge so to speak, and if we eye the future, we need to broaden the support that we give to these handful of souls working in the technology industry.