A Triumph and Avoiding Potential Tragedy in Turkey

If, as the saying goes, success has many fathers/mothers and failure is an orphan – no surprise the European venture community has rallied to take credit for the gaming juggernaut, Zynga, acquiring Peak Games last month for $1.8 billion.

Peak Games, in fact, is an Istanbul-based mobile gaming company founded by CEO Sidar Sahin with an outstanding Turkish team beginning back in 2010. Today it's the maker of two big global hit games, Toy Blast and Toon Blast . Founder of another massive Turkish success in eCommerce, Trendyol, Demet Mutlu, and top Turkey and Eastern European investors Evren Ucok and Cem Sertoglu and their Early Bird Venture Capital were founding investors. It is a distinctly Turkish story, the most recent of successes we rarely hear about in the West but in very familiar spaces such as eCommerce, food delivery, fintech and more.

Another leading tech entrepreneur and now early staged investor in Turkey told me: “The recent large exits, such as Delivery Hero's acquisition of YemekSepeti for nearly $600 million and Alibaba’s acquisition of Trendyol at a near-unicorn valuation serve to remind global investors of the massive opportunity in this region. Of course, now the Peak transaction will once again turn heads over this way and we hope that Turkey will gain its rightful place on the European tech map. Also a great thing happens to the ecosystem here when acquired from abroad. Now the Peak team will see Zynga from the inside, and we hope, will get bolder and more excited about their own dreams.”

Turkey as a global startup community for the entire region of central Europe and Asia has been vexing. A decade ago, it seemed to be the place to invest in. A sizable domestic market a bit shy of 100 million, growing even with political uncertainty 3-5% a year, with an average age of 30, regularly the top five or ten market for social media platforms like Facebook, Twitter, Whatsapp – and a few sizable exits – perked investor interest.

A local entrepreneur in her own right notes, “But with recent volatility in the geopolitical state, all that interest that was looking at the domestic potential literally vanished. All of a sudden, Turkey became a contrarian, an irrationally risky bet versus a consensus market.”

As VC money paused, world class tech talent stubbornly held out, with 17% annual growth in developers (1st in Europe), 52,000 engineering graduates per annum (3rd in Europe) and incredibly economical human capital (approximately six times cheaper compared to the US and a quarter of the cost as western Europe).

The Peak Games exit was important to every investor and entrepreneur I speak with on the ground not because it was one of the largest in the region or it was incredibly capital efficient, returning its early investors' funds by 9x alone. As one of the founding team at Peak Games told me, “I think it sends a clear message to the world. Great talent and incredible companies can be found anywhere.”

Is this the beginning of a newly resurgent Turkey in the global tech and innovation scene?

It is a matter of conscious choice.

I enjoy reading geopolitical strategist, Peter Zeihan, not because I agree with him often but because he always makes me think. His lens is decidedly not about technology trends, but looks at the world and rising economies provocatively through the lens of geography and demographics. 

His most recent book, Disunited Nations, is surprisingly hopeful for Turkey in the next decade. Analyzing Turkish advantages I mentioned above – in talent, geography, market size and age – “The Turks are about to come roaring back… Turkey will always be smack dab in the middle of everything. It’s relationships with outside powers may wax and wane, but it will always be the economic and military heavyweight of its region.”

But he offers caution: “While Turkey easily has the power to go any direction it wishes, it has nowhere near the power to go every direction it wishes. It will have to choose.”

It is so often said, I have so often argued, that the unleashing of tech innovation and literally billions of new consumers is a “bottom up” phenomenon. That now that 70% or more of the world have access to smart devices, innovation, problem solving, entrepreneurial success will be unleashed bottom up – not dictated or led by traditional institutions (governments, big companies, big foundations) top down.

But the top-down matters. Infrastructure, rule of law, ability to move people, ideas, goods, capital safely and reliably is the difference between great and reliably repetitive startup communities versus the occasional massive success notwithstanding. Some governments believe they can follow a more constrained, and new “China” model of greater central control missing unique advantage in scale China has and how much they unleash bottom up innovators as well.

I am thrilled by Peak Games and the vast majority of Turkish entrepreneurs and investors I compare notes with regularly.

But I am looking for decisions – a pattern of different decisions than we have seen lately – that signal a belief in these women and men and desire to unleash them and their ideas again and again.