Investor Catch-up 2016 Survey (Turkey)

INVESTOR CATCH-UP 2016
Annual survey aiming to gauge investor sentiment in
the Turkish venture capital space
Istanbul, 2016

2
Table of content
Introduction...........................................................................................................................3
1. The respondent profile ...............................................................................................4
2. Current market conditions......................................................................................... 7
3. Future market expectations..................................................................................... 10
4. Projects / niches.......................................................................................................... 12
5. Fundraising................................................................................................................... 14
6. The role of state.......................................................................................................... 15
Conclusion........................................................................................................................... 17

3
Introduction
European VC fund Buran Venture Capital and Startups.Watch have conducted
the “Investment Catch-up” survey assessing investor attitudes towards the early
stage market in Turkey and related factors. This is our first survey aiming to
gauge investor sentiment in the Turkish venture capital space.
Respondents were asked six groups of questions to gain insight on the current
state of the early stage investment market, expectations for the future and
factors impacting the industry.
The level of investor confidence gives a glimpse of important trends that affect
startups, investors and anyone actively involved in the early-stage market. By
understanding market expectations of leading early stage investors, we hope
to develop an insight on future investment behavior and help founders and
investors make more informed decisions around fundraising, hiring and growth
strategies.
We would like thank our colleagues who have responded to our calling and
shared their valuable perspective. We hope to see more participation in the
next year’s “Investor Check-up Survey”, which we plan to conduct on a yearly
basis. We believe that this investor sentiment assessment of the Turkish venture
capital space, derived from the survey results, will not only be interesting to
you, but also be useful in your line of work.
Sincerely yours,
Buran VC team
Alexander Konoplyasty Managing Partner
Burkan Beyli Venture Partner
Alexey Sidorov Investment Analyst

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1.The respondent profile
We sent out our survey to more than 60 local players in the Turkish VC market.
We have collected data from 19 respondents acting under multiple roles
producing 32 data points.
For the purposes of further segmentation, the responders were divided into
two groups:
1. Seed stage Capital providers (Angels, Incubators, Accelerators, Seed
funds)
2. Growth stage Capital providers (Series A / Late stage VC)
12 responders are identified as seed stage capital, whereas 7 as growth stage
capital providers.
4 Incubators / accelerators took part in the survey, two of which are investing
at angel / seed stage as well and only one with follow-on interests in Round A
deals. It is worth noting that only 3 VC firms out of 19 respondents are looking
to invest in late stage opportunities.
In terms of geographical focus, 50% of the investors is covering other regions
besides Turkey. 6 seed investors and 1 growth stage investor are only focusing
on Turkey.
9
8
4
8
3
Angel Seed stage VC Incubator /
Accelerator
Round A VC Late stage VC
Breakdown of respondents by type (multiple choice)
Seed stage Growth stage

5
Angel investors have a particular interest in the US and Western European
markets – 9 out of 12 respondents are considering these markets, while there
are only 2 growth stage VC funds included these regions in their investment
strategy. As to CEE, the pattern is reversed - 3 growth stage VCs are interested
in the region. MENA is listed as 2nd
most attractive region for both groups of
investors.
In 2015, the respondents closed 81 deals, of which 46 investments were done
by growth stage and 35 by seed stage investors.
In terms of median values, growth stage players are two times more active
compared to the latter. In the meantime, the conversion to portfolio companies
from a total number of reviewed opportunities differs slightly among two
12
3
5 4
7
3
1
1
3
Turkey MENA USA Western
Europe
CEE
Breakdown of respondents by
geographical focus (multiple choice)
30
46
Breakdown of deals closed in 2015

6
groups – 1.6% at seed investors as opposed to 1.4% at growth stage investors.
This means that in order to make one investment seed investors consider 63
opportunities on average whereas growth stage investors review 72 projects.
We also asked our respondents to give us a guidance on changes they are
planning in their investment strategy. Growth stage VCs prefer to keep their
strategy at the same level in terms of the number of target industries whereas
half of seed investors plan to a change in strategy by either extending or
narrowing down focus.
Survey question: Do you plan to change your industry focus?
Total Seed stage Growth stage
Remain the same 12 6 6
Extend industry coverage 3 2 1
Focus on fewer niches 4 4 0
As to the number of expected deals in 2016, the general picture has a similar
pattern. Unlike growth stage players who are keeping the same level of activity,
seed investors are willing to increase their activity.
Survey question: Do you plan to change your deal activity in 2016?
Keep the same 9 4 5
Increase 7 6 1
Decrease 3 2 1
Almost all investors have no plans to change their ticket size and more than a
half of the investors do not plan to exit in 2016. The other portion of
respondents is evenly distributed between 1, 2 and 3 exits.
Survey question: How many exits are you planning in 2016?
1 3 2 1
2 3 2 1
3 2 1 1
No plans to exit 10 6 4
The reason behind these results could be the fact that portfolio companies of
the respondents generally performed within their budgets in 2015 and

7
investors expect further growth in their businesses. Thus, no investor has a
portfolio over 90% of underperforming companies. Moreover, every seed
investors claimed that at least 33% of their portfolio performed its 2015 revenue
budget. On the other hand, in 3 out of 7 cases, only 10-33% of portfolio
companies achieved budgeted sales when it comes to growth stage investors.
Survey question: How many of your portfolio companies met expectations
in terms of growth plan in 2015?
less than 10% 0 0 0
10-33% 3 0 3
33-66% 5 4 1
more than 66% 9 6 3
2.Current market conditions
Despite the spectacular indicators of success in portfolio companies, the
investors are not too impressed about the performance of the Turkish VC
market. The results demonstrate the average performance is at 5.3 out of 10.
We asked the respondents to select the factors which most likely impacted
underwhelming performance in 2015.
3
1
5
6
2
1
1 2 3 4 5 6 7 8 9 10
Assessment results of the performance of
Turkish VC market in 2015

8
Survey question (multiple choice): What are the main factors limiting the
growth of Turkish VC market?
Weak exit environment 15 10 5
Weak entrepreneurial infrastructure 12 8 4
Weak entrepreneurial culture 10 5 5
Lack of capital 7 5 2
Difficulties with fundraising from LP 7 4 3
Low level of incoming projects 6 6 0
Imperfect legislation 3 2 1
General decline in investment activity 2 1 1
The most popular causes in both groups are due to weak exit environment,
weak entrepreneurial infrastructure and weak entrepreneurial culture.
Surprisingly, but no growth stage VC pointed out the low level of incoming
projects, though this seems to be a quite popular cause among seed investors.
However, we determined a list of factors that make Turkish VC market attractive
for both regional and international investors.
Survey question (multiple choice): What are the main drivers of Turkish VC
market?
Total Seed Growth
High potential of internet penetration 12 8 4
Large size of local market 10 5 5
Activity of local angel investors 8 5 3
Low cost of labor force 7 5 2
Funding by international funds 6 6 0
Large number of high-quality professionals in the market 3 2 1
Reduced traditional investment instruments for private investors
in the country
2 2 0
Highly developed infrastructure for early stage companies 1 1 0
The presence of large local Internet companies 1 1 0
Investors found the size of Turkish market and its growth potential as the main
drivers for the VC ecosystem. This line of reasoning is proven by a considerably
higher amount of startups focusing on local markets rather than internationally
oriented ones, which are mainly operating in B2B space. Besides, such factors
as an activity of local angel investors and low cost of labor force are popular
answers as well.

9
Additionally, both groups of investors highly assess the contribution of local
angel investors as well as domestic VC funds. Seed investors also point out a
positive impact by foreign VC funds.
In the survey, we asked the participants to identify any changes happened in
2015 compared to prior years. In general, both groups of investors noticed the
growth of the competitiveness to invest in early stage opportunities as well as
the strengthening of funding sources to some extent. 9 respondents found the
number of fundraising companies growing indicating that Turkish VC
ecosystem demonstrated further development in both supply and demand.
However, there is no general agreement on the how accommodating / flexible
entrepreneurs had become in 2015 – 5 participants found it easier to agree
with startups, while 3 investors think in a contrary way. 4 participants indicated
no changes in 2015.
Total Seed Growth
Number of fundraising companies increased 9 5 4
The quality of projects increased 6 4 2
Entrepreneurs became more accommodating / flexible 5 4 1
I didn’t observe any changes 4 2 2
Entrepreneurs became less accommodating / flexible 3 2 1
The quality of projects decreased 3 3 0
Number of fundraising companies decreased 2 1 1
9
6 5
3
5
6
1
1
Angel investors Domestic private
VC funds
Foreign VC
investors
State funds Development
institutions
Investors that have the greatest impact on the
development of the Turkish ecosystem (multiple choice)

10
3.Future market expectations
In addition to the question on the expected changes in own investment
strategies, we also asked the respondents about deal activity. In 2016, we
expect to see higher activity in seed stage compared to Series A and later
stages.
The majority of seed investors (ca. 60%) expect the number of transactions to
increase, whereas growth stage investors don’t anticipate any changes in 2016.
Dynamics of deal activity seem to be more deterministic. Almost all
respondents indicated that the deal numbers will increase by 2021; two-thirds
believe that the number of transactions is going to increase significantly and
about one-third expects it to grow slightly. However, there was one respondent
predicting no changes in the long run.
Almost none of the growth stage investors expect any changes in the exit
environment, though 4 seed investors think that it will improve slightly. 3
respondents anticipate a downward slope.
1
3
1
5
2
4
1
2
Will not change
Reduce slightly
Reduce significantly
Increase slightly
Increase significantly
Expectations on the number of transactions in 2016

11
In addition, almost all growth stage investors predict entry from new strategic
buyers. Seed stage investors have no common opinion on this point – half of
the think the same way as growth investors, the other half doesn’t expect new
strategic players in 2016.
Many respondents expect a growth in number of players. 12 investors predict
that investor competition in early stage opportunities will increase as new
funding sources become available.
Total Seed Growth
The number of Turkish startups with international potential will
increase significantly in the next few years
14 10 4
Turkish investors will prefer projects with clear international growth
strategies
13 9 4
The angel activity will increase 10 7 3
Valuation multiples will decrease 9 6 3
The number of Turkish startups with focus on local markets will
increase significantly in the next few years
4 1 3
Turkish investors will prefer projects focusing on local markets 3 2 1
Valuation multiples will increase 1 0 1
Only 3 respondents expect that projects with local market focus will attract
Turkish investors even though the size of Turkish local market and its growth
potential have been identified as the strongest driving factor of the ecosystem.
By contrast, companies with international growth potential seem to be the
4
1
1
5
1
6
Increase slightly
Reduce slightly
Will not change
Expected developments in exit environment

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center of attention for investors. This contradiction could be explained if
investors buy into international expansion plans in follow on rounds.
Another data point which is worth pointing out is that investors anticipate a
reduction in valuation multiples. This expectation is indicative of changing
attitude of the Turkish entrepreneurs towards company valuations. If this
becomes a reality, we should expect an increase in the number of signed term
sheets since valuation multiples is the most frequent reason for deals falling
through.
4.Projects / niches
Among the most promising niches, FinTech, B2B SaaS, mobile tech and e-
services seem to be leading the charts. Looking at the past market activity,
these sectors were popular especially back in 2015. FinTech is the leader among
seed stage investors, whereas growth stage investors assess the attractiveness
of e-services and marketplaces higher in comparison to the other sectors. E-
commerce of physical goods, online media and gaming ventures seem to be
least interesting to both investor groups.
Survey question (multiple choice): What are the most promising niches?
Total Seed Growth
Fin-Tech 11 9 2
B2B SaaS 10 6 4
Mobile Tech 8 5 3
e-services / marketplaces 7 2 5
Big Data 5 4 1
Internet of Things 5 4 1
Security 4 3 1
Online media 2 2 0
Gaming 2 2 0
e-commerce of physical goods 1 0 1
Since venture capital investors provide additional services to their portfolio
companies besides monetary injection, we asked the participants which key
areas of value creation are the most important for startups.

13
Survey question (multiple choice): Which area do you think early stage
companies need most help on?
Total Seed Growth
Growth strategy 17 10 7
Funding 9 6 3
Operational processes 8 5 3
Financial reporting / legal support 8 5 3
HR 6 3 3
Both groups indicated the growth strategy as the main area where early stage
companies need most help on. The other areas are also considered important
but to a lesser extent.
Assistance in a fundraising process is the second most popular answer among
value creation activities. It appears to be that the later stage the opportunity is,
harder it is to raise funds.
Survey question (multiple choice): At which stage do you think funding is
scarcer for early stage companies?
The results are actually proven by retrospective data on fundraising rounds in
2015 represented by Startups.Watch. 75 out of 80 VC deals on the Turkish
market in 2015 fall on rounds within Series B / C capital. However, the reason
behind could be just that a fewer number of companies look for such
opportunities. In total, seed stage deals happened 4 times more frequently
than growth stage deals, including Series A / B / C.
7
5
3 2
3
4
1
1
Round A Late stage Seed Angel

14
5.Fundraising
11 out of 18 respondents raised money in 2015. 4 out of 9 respondents indicated
that there were no changes in fund raising in 2015 compared to prior years.
In 2016, fewer investors are going to raise money compared to 2015, 8 instead
of 11 respectively. 5 of them are seed investors and they would like to raise up
to USD10 mln, while 3 growth stage investors plan to raise as little as USD 10 m
and as much as over USD50 mln.
The most promising sources of capital for VC firms are international funds
and development institutions as well as individual investors and their family
1
2
2
2
2
Attracting new investors (LP) became more difficult
The number of potential investors in funds decreased
Attracting new investors (LP) became easier
The number of potential investors in funds increased
I don’t see any changes
Investors' attitude towards changes in the fundraising process
for investing in early stage companies (multiple choice)
7
4
1
4
1
1
1
We don't plan to raise money
USD1-5m
USD5-10m
USD30-50m
USD10-30m
Over USD50m
Investors' attitude towards changes in the fundraising
process for investing in early stage companies

15
offices. Besides that, 9 respondents pointed out that local former and existing
entrepreneurs in TMT sector are capable to be potential LPs. It’s noteworthy
that far fewer respondents expect an investment interest from large Turkish
organizations, private or state-owned.
Survey question (multiple choice): What are the most promising groups of
potential LPs in VC funds?
Total Seed Growth
International funds and development institutions (EBRD, World Bank,
etc.)
12 7 5
High net worth individuals and family offices 10 6 4
Former and current entrepreneurs in the field of Technology / Media /
Telecom
9 5 4
State programs 6 4 2
Turkish private companies (including banks) 4 3 1
International private companies 1 0 1
Turkish state-owned companies and companies with state
participation
0 0 0
6.The role of state
While the government programs weren’t the most popular answer for the
question on potential LP candidates, some of the respondents mainly from the
group of seed investors found the strength of government funding for early
stage companies in Turkey increased in 2015, but more slightly rather than
significantly. Growth stage investors did not indicate any improvements and
have not observed any changes.
In general, there are similar expectations regarding further developments on
this matter. Mainly seed stage investors anticipate growth on state activity,
whereas growth stage investors aren’t expecting any changes.

16
Additionally, we asked the respondents on what areas the government should
be focusing on. There are different opinions among seed and growth stage
investors. Seed stage investors believe that the technology entrepreneurs and
investors should obtain further tax exemptions and the legislation should be
improved. On the other end, growth stage investors picked recapitalization of
existing VC funds and education / promotion in the field of innovative
entrepreneurship and IT as the main areas in need of improvement.
Survey question (multiple choice): Which areas should the government
focus on?
Total Seed Growth
Preferences and tax exemptions for technology entrepreneurs and
investors
11 8 3
Improvement of legislation 9 6 3
Grant funding for projects at early stages 5 3 2
Recapitalization of existing VC funds 8 3 5
Education in the field of innovative entrepreneurship and IT 7 3 4
Concessional lending to late stage technology projects 6 3 3
Direct investment in projects at an early stage 3 3 0
Promotion of entrepreneurship and VC business 9 5 4
1
5
6
2
5
Reduce slightly
Increase slightly
Will not change
Investors' expectations on the goverment funding for
early stage companies in Turkey to change in 2016

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Conclusion
The Turkish VC market resulted in 80 deals accounting for USD56 mln in 2015,
indicating 80% growth compared to total investment amount in 2014 and 3%
reduction compared to total investment amount in 2013.
2015 investment distribution by round type
Source: Startups.Watch
Investors assess the performance of the Turkish market to be mediocre (at 5.3
out of 10) while pointing out the lack of capital for late stage opportunities.
According to Startups.Watch, out of total capital raised in 2015 only 6% had
ticket size of more than USD2.5 mln. The most popular causes seem to be weak
exit environment, weak entrepreneurial infrastructure and weak
entrepreneurial culture.
Based on gathered results, we expect to encounter increased activity in seed
sector compared to deals at Series A and later stages. The expectations are
higher on the dynamics of deal activity by 2021 – almost all respondents
indicated that it will increase.
In order to boost investment activity, industry players identified following
measures to be helpful:
● tax exemptions and other preferences for entrepreneurs and investors
will likely increase activity at seed stage
● recapitalization of VC funds focusing on growth stage
● education / promotion in the field of innovative entrepreneurship and IT
as the main areas needing further improvement.

About Buran Venture Capital
Buran Venture Capital is a Central and Eastern European venture fund founded
in 2012 targeting to invest US$75m over the course of the next 4-5 years in
Central and Eastern Europe, Turkey, Israel and CIS. Headquartered in Budapest,
the fund has offices in Istanbul and Moscow, as well as active presence in Tel-
Aviv and Warsaw.
Our target sectors are E-commerce Services, B2B SaaS, Mobile technologies
and Internet of Things.
We invest from US$500k up to US$5m in a single portfolio company.
We know how to build a successful company and contribute significant
energy/attention to each project. Key areas of value creation includes strategy,
M&A / fundraising, HR, financial controls and leveraging our relationship
network.
Current portfolio companies:
To learn more about BVC, visit our website or feel free to get in touch with us:
Budapest office:
Ponty u. 6
Budapest, 1011
+36 (30) 859-0475
Istanbul office:
T. Huseyin Sofu Sok
No:4, Karakoy 34420,
Beyoglu
+90 444 1 855
Moscow office:
Khlebny Lane 8
Moscow, 121069
+7 (495) 540-4842
e-mail: info@buranvc.com

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