Startups with technology-integrated business models are becoming more prevalent, setting higher standards, and achieving valuations that surpass US$1.7billion annually in the Turkish business community. Istanbul is now on pace with digital capitals such as London, Paris and Berlin, thanks to a wave of investment that exceed US$1.7billion. However, Turkiye’s recent tech success has been years in the making.
Traditionally known as a key manufacturing hub of Europe, Turkiye and – especially Istanbul – has emerged as a key global tech hub. In this article, I’ll review the key players and factors behind the Turkish tech boom and what lessons we, as a country, can draw from the Turkish experience.
A few years ago, Trendyol – a technology business now valued at US$16.5billion, became the first ‘decacorn’ (a tech company valued at US$10billion) in Turkiye; thanks to funding raised from the Qatar Investment Authority and SoftBank Vision Fund 2. Trendyol began as an online apparel shop in 2010 before branching out into meal delivery and introducing a digital wallet. Trendyol’s story typifies the strong growth in Turkiye’s tech sector in the last two decades.
The data-driven Turkish economy is currently fuelled by gaming, e-commerce, food delivery apps and software companies. Retail is being revolutionised by businesses like Trendyol and Hepsiburada. Dream Games stands out as a global leader in the burgeoning gaming sector. Getir, a pioneer in quick grocery delivery with a valuation of over US$7.5billion, has a completely distinct retail strategy. These companies and several others have revolutionised the digital sector in Turkiye from a strong local and regional player to a global powerhouse. But how did this revolution happen so quickly?
The pandemic’s effects significantly increased the global online retail market, and as a result e-commerce penetration in Turkiye increased from 3.5% before the pandemic to about 18.6% currently. More importantly, the success of local online shops can also be attributed in part to the difficulties faced by global titans Amazon (which entered the Turkish market by acquiring shares in local online retailers) and eBay (which paid over US$200million to purchase GittiGidiyor.com) to properly penetrate the Turkish market the way it has successfully done in most countries.
As already indicated, a key growth sector in the Turkish tech sector is gaming. With millions of people globally playing games created in Turkiye, gaming startups are booming into global brands. The gaming industry continues to see the growth of new billion-dollar firms. Peak and Rollic, two Turkish game developers, both acquired by the global giant Zynga for US$1.8billion and US$180million respectively, demonstrated the capacity of Turkish startups to think and succeed globally. In only a few years, Dream Games’ capitalisation is now at about US$2.7billion.
To better appreciate the factors behind this meteoric growth, it’s crucial to better understand the key advantages Turkiye leveraged to build its tech sector. Let’s review a few key ones.
Geographic and Demographic advantages
The Turkish government and business community have successfully leveraged Turkiye’s unique Eurasia location to the maximum. Businesses operating in Turkiye have access to the brightest minds in Asia and Europe, with only a short plane trip from many of the world’s capitals.
Crucially, Turkiye’s population is young and well-connected; making it a hub for innovation. People under 30 make up around half of the over-80 million population. A staggering 75% of Turkish people own a smartphone, with 68.7 million Internet users. These numbers naturally make Turkiye a strong market for tech businesses and investments. It is thus no wonder that many global tech brands are queuing to invest in Turkiye’s tech sector.
Shrewd Government Policy and Investment
Government investments and incentives to encourage entrepreneurship have been crucial to supporting growth of the tech industry. The tech industry’s development is actively pursued by Turkish national organisations like the Technology Development Foundation, Scientific and Technological Research Council and TUBITAK. Turkiye also actively collaborates with the international intergovernmental network Eureka as a member, hosting initiatives like EuroSTAR and Teknofest to promote innovation, research and development.
The Turkish government has also constructed a number of technology parks, or “teknoparks,” that serve as homes to companies that have represented Turkiye in various cutting-edge initiatives overseas in addition to hosting and assisting firms. Businesses working within technology parks had exported goods worth more than US$7.6billion as of 2022. There are around 85 technology development areas that employ over 56,000 people in research and development and host over 5,500 enterprises. The entire income of the teknoparks reached US$17.6billion in 2022.
Strong local and international collaborations and partnership
Turkiye has witnessed tremendous expansion in its cloud and digital service offerings in the last few years, primarily as a result of alliances with multinational corporations.
For instance, Turkcell Group, the nation’s top digital services provider, recently teamed up with Huawei to roll out 5G and drive a transformative shift. Meanwhile, KoçDigital – a leading AI provider in Turkiye, and Blue.cloud – a global leader in digital transformation, teamed up to accelerate AI innovations and enhance predictive analysis in enterprise digital transformation.
In order to accelerate innovation through cloud-native application development and scaling from core to edge, Red Hat and Türk Telekom worked together to optimise micro services architecture and integrate services, data management and analysis.
Furthermore, the digital infrastructure company Equinix, in partnership with TTI – a subsidiary of Türk Telekom, launched the Microsoft Edge Node; enabling Turkish businesses to accelerate their digital transformation by gaining access to the entire suite of Azure Services, encompassing AI and machine learning, IoT and hybrid and multi-cloud environments. Additionally, Türk Telekom and Odine collaborated on cloud-native virtualisation technologies.
These strategic collaborations have been crucial in rapidly developing the technical and commercial capabilities of Turkish tech businesses.
The Magic of Istanbul
The strong geographic and infrastructure advantage of Turkiye’s biggest and most populated city is a crucial factor in the country’s strong tech development. For instance, the city is a key hub for underwater cable traffic between Europe and Asia – which supports the cloud’s explosive expansion and low-latency connectivity to offer high-speed data at a reasonable cost.
Microsoft, Google, Amazon, Oracle, Alibaba and many other multinational tech companies have already made investments in Turkiye – many of which are in Istanbul.
The country’s booming startup scene will only attract more investments and businesses. Less than ten years were required for Trendyol and Getir to reach such high valuations. Numerous B2B SaaS businesses, like Insider, Akinon and Picus Security, have great potential to become global leaders in the next few years as well.
What this means for us in Ghana
Turkiye has achieved all this remarkable technological growth by leveraging key strengths and productive policies. These include its robust technological infrastructure, which is a function of a sound long-term policy of investment in the right things, a sizable market, and an innovative spirit, as well as Turkiye’s geographic location. The country is now well-positioned to emerge as a global centre of innovation.
Over the last few years, the government of Ghana has zeroed-in and invested heavily in various technological projects, with the very noble goal of digitising the economy. This is absolutely crucial in our quest to fully develop the technological potential of this country. It is however important that we do well to fully leverage our unique advantages, as Turkiye smartly did. Studying Türkiye’s incentive schemes for the tech sector could also prove highly beneficial to attract more FDI.
While we may not have the market size of Nigeria or Turkiye, we offer the safest political and socio-economic environment for FDI. We have to leverage this key strength in our quest to draw in as much FDI as possible, especially as companies that settle here can always take advantage of AfCFTA to tap into opportunities in other African countries.
It is also super important for the overnment of Ghana to understand its crucial role in building a strong foundation to enable private sector players to thrive. This foundation, as seen in the Turkish case, is to invest smartly in the right infrastructure as well as champion business-friendly policies to spur private investment and enhance innovation and creativity. Furthermore, government must as a matter of urgency take important steps to stabilise the economy – as this is the ultimate engine for all growth and investments, be they local or foreign.
Finally, it’s always a good idea to learn from the right pacesetters. In my opinion, Turkiye is a much better partner in our drive to develop our tech sector than most western countries, as they are not reluctant to share the know-how with their partners. One of the best examples took place this year, when Turkish satellite pioneer TURKSAT signed an MoU with Crystal TV – fostering efforts to grow the Ghanaian tech sector. Crucially, the fact that Turkiye was able to successfully develop homegrown, billion-dollar tech companies in spite of competition from global western tech powerhouses is an important template we can learn from.
Fortunately, the Turkish government, and indeed the Turkish private sector, have shown strong interest in building mutually beneficial relations with Africa. Ghana is a crucial country they are looking to work with in their quest to attain this goal. It will be useful for the powers that be to explore this opportunity more fully, and ascertain how we can leverage this strategic relationship in the important quest to develop our tech sector.
The writer is a Turkiye-Africa Relations Expert