Lady Turks

Turkey’s startup scene is still small, but women could be its secret weapon

October 17, 2012
Obsession
Startups
October 17, 2012

Far from the towering minarets and tourists in the old center of town, Endeavor’s Istanbul office sits in a quiet neighborhood near the bridge that spans the European and Asian side of the city. IKEA bookshelves line the wall and Fast Company’s Co.Design website is up on a monitor at a shared workspace, where young Turks hunch around their MacBooks. The three-story startup NGO, minus the view of the Bosphorus, could be in Silicon Valley.

Along with 12 other offices in emerging markets, Endeavor’s goal in Turkey is to seek out and support high-impact entrepreneurs. Endeavor defines these startups as the companies most likely to employ hundreds of people and eventually see revenue in the millions. The Istanbul office opened in 2006 and has so far backed 40 entrepreneurs at 27 startups with a total of 1,700 employees.

The startup scene in Turkey has a handful of other incubators in both Istanbul and Ankara.  But unlike the rest of group, a third of Endeavor’s entrepreneurs are women. By comparison, they make up less than 9% of entrepreneurs countrywide.

In the Middle East, a surprisingly high percentage of internet entrepreneurs are women. In countries with strong Islamic traditions, the online world has fewer restrictions against women than conventional workplaces do, and there’s a ready-made and under-served market of other women for their online businesses to target. Turkey, by contrast, while a Muslim country, is a secular state with an 88-year-old democracy. The constitution bans gender discrimination and women have been voting for 82 of those years. There is no official dress code to follow.

But there’s a discrepancy between women’s legal standing and their social position. Turkey ranks 77th out of 146 in the gender inequality index of the Human Development Report, behind countries like Oman and Iran.  A quarter of women are in the labor force and only 15% of female small-business owners have access to financing, even though there are programs trying to open up funds.

So it’s a shrewd strategy for Endeavor to snap up members of this neglected group. So far, it’s been working out well.

Though it’s not an internet startup, B-fit is one of Endeavor’s biggest successes and still growing. The women-only fitness company sells franchises to women entrepreneurs to set up small gyms; it has 205 outlets, including a few outside Turkey. There are 240 franchise owners employing an additional 500 women to help run the gyms. Joe Biden, America’s vice-president, cited B-fit’s founder Bedriye Hulya as one of Turkey’s great entrepreneurs in a speech at the second Global Entrepreneurship Summit, held in Istanbul last year.

Hulya says she practices “positive discrimination” by only franchising to women. The gyms act as social centers for the 130,000 members, holding events like book clubs or breakfasts that don’t always have much to do with exercising. “They are role models in their community to their members,” she says.

Like many emerging markets, Turkey has a long history of entrepreneurship but on a small, family business scale. Small and medium-sized companies make up 97% of all companies and employ around 80% of the workforce. But Turkey is turning out be a particularly good place for internet startups, with a growing GDP and some of the highest internet use in the world.

Turkey is sixth in the world in terms of average time spent online. Social media reaches 96% of online Turks. According to the Interbank Card Center, e-commerce sales grew 52% in the first nine months of 2011.

Arda Kutsal is the founder of Webrazzi, a technology blog that’s been described as the TechCrunch of Turkey. Kutsal started covering the startup scene in 2006 and said he’s seen Turks pick up new technologies and ideas quickly. He points to a history of accepting change going back to Turkey’s founder Ataturk, who quickly pushed through the adoption of the Latin alphabet and education reforms.

“I think Turkish culture is suitable for the quick moves,” Kutsal said.

Kutsal says about 30% of his coverage is on startups with women, and it’s growing. He attributes this to the popularity of e-commerce, a sector that Kutsal said women do well in because there’s a female-dominated audience and e-commerce sites need less sophisticated coding compared to some other sites.

But Istanbul’s startups are mostly copycats of other successful businesses or geared towards their countrymen. There have not been any game-changing companies yet. “We’re still waiting for our Google,” says Buke Cuhadar, a project manager at Endeavor.

There are plenty of non-gender roadblocks Turkey needs to overcome. The country didn’t have an open economy until 1980 and capitalism is still playing catch-up. While some European venture capitalists are opening Istanbul branches, there are few local investors. Entrepreneurs are more comfortable with the idea of “cloning” or copying a tried and true idea like coupon sites than venturing into unknown territory. And bigger markets coax away talent.

Gulay Ozkan has consulted and taught entrepreneurs for the last 12 years in Turkey and says until its GDP catches up with established startup centers, there isn’t the ability to grow large at home. “If a startup can get the right investor,” she said. “I recommend to them to move to California.”

Even with these challenges, the changes in the last two years have been promising. Amazon just made its first investment in the Turkish market this year with Cicek Sepeti, an e-commerce flower site. The government is supportive with tax exemptions.

Market valuations in established markets are high and decent returns are becoming rare. Turkey bridges the familiar European with enough of the emerging Middle East mixed in to make it an appealing bet for investors.  Especially if they figure out how to get both men and women at the startup table.

“It’s called an emerging market,” Ozkan said. “There is room to grow.”

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