On Entrepreneurship in Turkey

Ziya G. Boyacigiller

This presentation was created and given by Ziya Boyacigiller who was leading Angel Investor and a loved mentor to many young entrepreneurs in Turkey. We have shared it on the web for everyone’s benefit. It is free to use but please cite Ziya Boyacigiller as the source when you use any part of this presentation. For more about Ziya Boyacigiller’s contributions to the start-up Ecosystem of Turkey, please go to www.ziyaboyacigiller.com

Entrepreneurship in Turkey?

Entrepreneurship / Intrapreneurship circa 2008

Ziya G. BoyacıgillerSabanci University

Ziya G. Boyacigiller (c) 2005 EMBA 4

Entrepreneurship won’t work in Turkey… Whatever works in USA won’t work here… No one will invest here in a new business… Holdings will destroy you once your business becomes

significant enough… There is no legal protection, intellectual property rights… They will copy you, all your efforts will go to waste… Government will back their supporters, will damage you if

you don’t work with them… You can’t overcome the government bureaucracy… When there is corruption, the mafia you can’t be in

business honestly… If you are a minority partner, they will cheat you… etc…

Ziya G. Boyacigiller (c) 2005 EMBA 5

A Question? How did the following companies start

and become successful in Turkey? Hedef Alliance? Dizayn Group? Mavi Jeans? Logo Yazilim? Gantek? Artesis? AirTies ….

Ziya G. Boyacigiller (c) 2005 EMBA 6

… it is easy to be an entrepreneur in the US?

And who says…

Ziya G. Boyacigiller (c) 2005 EMBA 7

Spin-Off Companies… In 2000, there were 454 spinoffs, within all American academic

institutions, pp57

In 2000, average was 4.2% spinoffs-to-disclosures ratio within 26 selected universities (~37% of total with spinoffs) in USA. Pp68

During 1980-1996, MIT spinoffs = 134, went public = 24, 18% public “spin-off ratio, pp19 & pp30

Using 4.2% and 18%, we get 0.3%. This means only 3 spinoffs

for each 1,000 disclosures succeed to go public (IPO). (Note that this ratio is for MIT and is much higher than non-academic success rates. However, the rate for VC backed companies is 100 times worse!)

Moreover, during 1980-1996, average years to IPO for 24 MIT spinoffs equaled 4.5 pp30

Why does one become an

entrepreneur?

money

excitement

power

fame

work

social contribution

knowledge

competition

Ziya G. Boyacigiller (c) 2005 EMBA 9

Top 10 US BillionairesName Age Worth Company

Bill Gates 48 $48B Microsoft

Warren Buffet 74 $41B Berkshire Hathaway

Paul Allen 51 $20B Microsoft

Alice Walton 55 $18B Wal-Mart

Helen Walton 85 $18B Wal-Mart

Jim Walton 56 $18B Wal-Mart

John Walton 58 $18B Wal-Mart

S. Robson Walton 60 $18B Wal-Mart

Michael Dell 39 $14B Dell

Larry Allison 60 $14B Oracle

Source: 2004 Forbes 400

Ziya G. Boyacigiller (c) 2005 EMBA 11

Example for Good VC Investments:

KP’s star companies: Google 240x Netscape: 80x @home: 87x Amazon.com: 44x Exite: 73x Rambus: 51x Citrix : 40x

Ziya G. Boyacigiller (c) 2005 EMBA 12

Returns of VC Companies

Kleiner Perkins Caufield & Byers

IRR Sequoia IRR Matrix Partners

IRR

1992 fund 39%/y 1992 fund 110%/y 1995 fund 223%/y

1994 fund 122%/y 1995 fund 175%/y 1997 fund 516%/y

1996 fund 287%/y 1998 fund 93%/y 2000 fund -30%/y

1999 fund -21%/y 1999 fund -5%/y 2001 fund -39%/y

2000 fund -16%/y 2000 fund -25%/y

Source: Venture Scoreboard

Ziya G. Boyacigiller (c) 2005 EMBA 13

Global VC Investments 1998-2002Region Invest Funds Raised Not-

Committed

$ Billion $ Billion $ Billion

Global 660 788 128

North America 466 554 89

Western Europe 123 154 31

Asia Pacific 46 55 8

Middle East & Africa 11 12 1

Mid and South America 12 10 -3

Eastern Europe 2 3 1

Source: pwcmoneytree.com 2004

Ziya G. Boyacigiller (c) 2005 EMBA 14

Favored Industries?

Source: pwcmoneytree.com 2004

VC Yatirimlari ve Endustrilerin Dagilimi 2004

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

Mil

lio

n $

0

2

4

6

8

10

12

14

16

18

20

22

242000

2001

2002

2003

2004

2000/2003

Ziya G. Boyacigiller (c) 2005 EMBA 15

10 Top Countries Region Investment

2000 2002

US $105B $62.7B

UK $9.6B

France $1.1B $5.5B

Italy $2.5B

Japan $2.9B $2.4B

Germany $1.2B $2.4B

South Korea $0.1B $2.0B

Netherlands $1.6B

Canada $1.6B

Sweden $0.6B $1.4B

India $0.3B $1.1B

China $0.1B $0.35B

Source: UN Human Development Report, 2001

2003: US $18.2BEurope $3.0B

Source: pwcmoneytree.com 2004

Ziya G. Boyacigiller (c) 2005 EMBA 16

How can China run? What has changed in China… In the last 5 years IDG Technology

Venture Investing invested $170Mio with %43 IRR.

In 2004 record 253 companies received $1.3 billion.

Selecting investments fit for China’s economy and markets…

Ziya G. Boyacigiller (c) 2005 EMBA 17

What is changing in Turkey? EU forcing structural changes Economic reforms (IMF) Government encouraging

entrepreneurship EU supporting entrepreneurship Turkic and ex-soviet markets EU and USA have difficulty working in

Middle East EU market opening up (customs union)

Ziya G. Boyacigiller (c) 2005 EMBA 18

Entrepreneurship is a Strong Driver of Economy Approximately 4% of US labor force is

involved in starting a new company every year.

Business owners in US is 13% of nonagricultural labor force.

All this, despite the odds – 40% of new businesses started in US live over a year, only 25% survive for 8 years.

Why is Nigeria the most entrepreneurial country?

Ziya G. Boyacigiller (c) 2005 EMBA 19

Additionally “creative destruction” is at work; very few Fortune 500 companies stay on the list for more than a decade or two.

Corporate Entrepreneurship

Ziya G. Boyacigiller (c) 2005 EMBA 20

Microsoft, Apple Computer

Ziya G. Boyacigiller (c) 2005 EMBA 21

Walmart, Target

Ziya G. Boyacigiller (c) 2005 EMBA 25

Dr. Edward Demings’Famous Beads Experiment

The output of a process produces both random and systematic deviations. By replacing people or putting a gun at people’s heads it is not possible to reduce or eliminate either. Instead, you need to understand and eliminate the root-causes of the deviations.

Ziya G. Boyacigiller (c) 2005 EMBA 26

Nature of Growing and Aging

Ziya G. Boyacigiller (c) 2005 EMBA 27

Corporate Lifecycles

Ziya G. Boyacigiller (c) 2005 EMBA 33

Obviously, something separates successful entrepreneurs (inside or outside companies) from the masses of others…

Ziya G. Boyacigiller (c) 2005 EMBA 44

Tell a Story…

Narrative stories overcome these issues:

1. Set the stage(who are the actors)

2. Define dramatic conflict (difficulties)

3. Resolution(how you win)