| Interview: Mehtap Özkan - GoldenHorn Ventures |
| 16 December 2007 |
Mehtap (Mae) Özkan, founder of GoldenHorn Ventures, was kind enough to be interviewed via email concerning her fund, and about venture capital and entrepreneurship in Turkey. I am not suprised that Mae is someone that is very passionate about entrepreneurship in Turkey and also the part that she plays in supporting that end. For an overview of GoldenHorn Ventures, you can visit the GoldenHorn Ventures website (www.goldenhornventures.com). You can also visit the GoldenHorn Ventures Blog.
I think it is very telling when, speaking of Golden Horn, Senior Investment Officer at the IFC, Ralph Keitel, states, "I believe the Turkish market currently offers excellent investment opportunities for early-stage VC firms such as GoldenHorn Ventures which understand the challenges of entrepreneurs in a globalized world." I'll let Mae tell you the story. This will be the first part of that interview.
THE FUND - GoldenHorn Ventures
Tell us something about your background and how did it evolve into venture capital?
I was an entrepreneur. I had been involved with numerous startups and technology companies. I have a technical background, I started my career as software engineer and mathematician. Then I started founding technology companies and had to understand the business as well as technology. At least, I pretend to understand.
What brought you back to Turkey?
The passion to change the world! I can do it in a much wider scale then I used to.
How did you get your start as a VC?
I was coming back to Turkey and I was seeing all the ideas and projects disappearing after a while and people start doing mainstream jobs instead of realizing their dreams. That was very frustrating for me, because they were coming up with innovative technologies.
I started thinking about what the idea owners needed to become world changing companies. That is more crucial for the emerging markets, because you can change the world so much faster when you are in an emerging country, if you can. Then I started spending a lot of time thinking what would be the right investment model for a VC in Turkey, what is needed, etc.
I have come to a conclusion that more than the money, people who needed success are needed in the region. Success stories are needed. People who know and have been successful are needed.
Another exciting part of being a VC in the emerging country is you set up the rules. You train and teach everybody what venture capital is, how it is structured etc, from the attorneys to the entrepreneurs. Yes, it is very time consuming but it is very rewarding as well.
VC business used to be an old and very private community. That is changing as well. The VC business needs to go through a revolution. Silicon Valley and all the other set players have a hard time understanding what it would become. We have a shot there too.
All these exciting changes and my belief in innovation coming from emerging countries made me think what I know would be very valuable in Turkey. I can leverage myself and help create a self-sustaining ecosystem by investing all I have here – and I don’t mean only time and knowledge, but money, connections, emotions, really everything. So, I took a major decision and started fund-raising for GoldenHorn Ventures. That was 2 years ago. But the idea and modeling is a 5 year-process.
Then I was fortunate enough to meet my partners in Turkey. They are very courageous and open minded with great connections and experience. It is very hard to find partners who are so visionary as well as experienced and practical.
When was GoldenHorn Ventures formed?
GoldenHorn Ventures was formed very recently in August 2007, launched September 2007. The fund size is $25 Million, but we are raising more meanwhile and trying to have $50 M for this fund.
Where are you in the VC Cycle - fundraising/investing/divesting?
We are investing at the moment, but also preparing for a second close.
What will be your typical investment size?
$500 K to $3 Million. Our average investment size is $2.5 M.
How long will your typical exit period be?
We are looking at 3 to 5 years.
What position(%) are you typically taking in a company?
It really depends on the stage of the company we are dealing with as well as the valuation and how much money will take the company to the next stage. I can’t say we wouldn’t get in deals less than 30% or 20%. This will be untrue. Our preference is to take minority stakes.
Can you provide us with some details about some of your investments?
 Yogurt Technologies, we are betting on a virtual world idea that connects your real identity with the virtual one. As well, there are a few nanotech projects that are quite interesting.
We tend to get excited for ideas that can be a global phenomenon. In addition yes we also look at some companies in the Internet space as well. But we really believe in innovative and disruptive components in ideas or companies.
ENTREPRENEURSHIP IN TURKEY
As a VC focusing on Turkey, what are some of the biggest problems/challenges you encounter when looking for and investing in Turkish entrepreneurs?
We end up training everybody on what Venture capital is. That is a problem but also an opportunity.
Would you invest in Turks outside of Turkey? Or consider investing in Turkish companies and exporting them to countries that would facilitate their entrepreneurial ideas better (ie. Silicon Valley)?
Yes, definitely, We require a headquarters or idea production/ realization facility in Turkey. But we focus on creating international companies rather than only Turkish companies.
Overall, what suggestions do you have for a Turkish entrepreneur looking for VC funds?
Be bold,
Be honest,
Change the world.
VENTURE CAPITAL IN TURKEY
Why is the Turkish VC space still such a fledgling industry?
Because there are no success stories yet,
People tend to go after easy money,
Venture Capital requires entrepreneurial knowledge instead of just a pure finance background.
What are the typical concerns by LP's/potential fund investors in a Turkish fund?
People were laughing at me when I started talking about a technology VC in Turkey. The biggest concern was the deal flow, which is easy to prove. I have flown so many people here (investors and VCs eg. DFJ) to show the ideas and companies. The other concern is the exit strategy.
What do you think the government could do to promote:
- Entrepreneurship/Innovation
- The Turkish VC Industry
Let people work free. I don’t think there is much the government can do. Of course they can start programs like Yozma, but I am not really sure that governments understand entrepreneurship or startups. The best they could do is let people work free, decrease the bureaucratic steps, etc.
Being less bureaucratic as well as more entrepreneur friendly is very important.
Is the strategy and focus of Turkish VC's different from your stereotypical VC?
It has to be different in any emerging country.
I think being a good VC is about reading weak signals and detecting good ideas, good teams and good companies from those weak signals. There are many differences being a VC in an emerging country and, for example, the US.
- Weak signals are even weaker in the emerging countries.
- There is no ecosystem to support entrepreneur/idea owners or an entrepreneurial VC, so as a VC you need to disseminate your beliefs, bets, without getting tired, bring the value together from anybody possible to make things happen.
- For example in the US, the companies pretty much know what a VC expects so they tell the story according to what is being expected. That is good and bad. Good because it is easier to evaluate but bad because you are creating an environment assuming the finance world is more valuable than the ideas or idea owners. So you can actually miss big ideas just because they don’t know your rules of doing business. However, In emerging worlds, you need to understand the world of the entrepreneur/idea owner.
There are so many more differences but these are the ones that come to my mind first.
What are your predictions for the future of the Turkish VC space?
There will be more and more. The space will change very fast. There are many opportunities being a VC in Turkey, not only in technology but in many spaces. Soon, the education process will not be as tiresome and long and people will know what venture capitalists do. If we are good, than the idea of venture capitalism will be positive such as us being supporters, people who know things and support the idea owners not only with money but with experience and connections.
That is the main difference between a good VC and a bad VC. The good adds great value to a company. They praise the entrepreneur and the idea owner. They know that finance is just the means, it is not what matters, but the idea matters.
{ --- End of Interview ---}
For those entrepreneurs interested in submitting their business plans (or .ppt's ;-))to GoldenHorn Ventures, I urge you to check out the GoldenHorn Ventures website.
 Technorati Tags: Venture Capital, GoldenHorn Ventures, Entrepreneurship, Fund Closings, Deal Flow, TurkeyLabels: Emerging Markets, Entrepreneurship, Fund Closings, fundraising, Golden Horn Ventures, Venture Capital
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| KKR Makes First and Largest PE Investment in Turkey |
| 14 October 2007 |
In September, some suprising news came out that KKR (Kohlberg Kravis Roberts & Co) was attempting a takeover bid for the Turkish UN Ro-Ro shipping firm. Well, news has just been released coutesy of Reuters (KKR buys 98 pct of Turk shipper in $1.28 bln deal) and Forbes (KKR Ro-Ros To Turkey) that the deal has gone through. KKR will purchase a 97.6% stake worth 882.2 million euros ($1.2 billion) from the consortium of international shippers. While this may pose as a landmark deal for private equity enthusiasts such as myself, not to mention the largest private equity deal ever to be done in Turkey, KKR first appeared to have bitten off more than they could chew. In September, there was negative speculation both from Chairman Saffet Ulusoy (who said that he would never sell) and the Turkish Armed forces as to the selling-off of national security interests.
 UN Ro-Ro, a roll-on/roll-off shipping company, owns 9 ships and was founded in 1993 during the Yugoslav-Balkans War - a war that closed overland shipping routes connecting Turkey and Europe. The ships sail daily from the port of Ambarli-Pendik, Turkey carrying lorries and container vehicles filled with Turkish goods to Trieste, Italy.
Speaking on the deal, KKR's John Pfeffer commented, "We believe in the growth of trade between Turkey and Europe and U.N Ro-Ro’s important role in that development. We are very interested in the Turkish market and believe that private equity can play a helpful role by investing to support the growth of businesses. This is our first investment here, and we hope to find other investment opportunities in the future."
On one hand, this type of deal with a large private equity player coming to Turkey was inevitable. The economy is still holding on, the elections are over, and Southeastern Europe funds have been circling around Turkey for quite some time now. The Forbes article makes an interesting comment concerning the increased desire for private equity deals in emerging markets due the "lack of appetite for credit to finance more expensive acquisitions in developed markets."
On the other hand, Golden tier US funds are currently on the fence and gaming to set up new offices or affiliates in Europe. For example, DFJ has bought a stake in European Esprit Capital Partners and has also just launched a VC fund in Russia. In addition, AIG has made motions and new hires to launch back into Turkey (more on that later). It seems even with the bubble bursting 7 years ago in the US, and with different cultures between US and European private equity deals, the US funds are willing to give it another go. It should be interesting to see if Europeans are still open to the idea and which firm will be next.
But for Turkey, this large scale private equity deal should send signals to other large international players and make them take note. The advantage will remain with those firms (both legal and consulting) on the ground in Turkey that have the resources to spot and get the deals, not to mention the large Turkish firms with buyout potential.
Technorati Tags: KKR, DFJ, Private Equity, Investments, Deal Flow, Turkey, UN Ro-Ro, Takeovers, Shipping, AcquisitionsLabels: Buyout, deal flow, DFJ, Emerging Markets, KKR, Private Equity, Shipping, Takeovers
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| Turkish Real Estate: The Sleeping Giant |
| 17 April 2007 |
A close colleague with over 9 years in the Turkish VC/PE industry recently told me that real estate, of all potential Turkish investments, will have the greatest investment potential going forward in the next 10 years. Indeed, perhaps Turks have always known this, when markets were between crises, or politicians were finished with their rhetorical recants, the people have always held their greatest assets either under their mattresses or in the land that they own (and not in the banks).
Yes, we have seen this, but with the recent passing of mortgage laws and banks scrambling for a piece of the action, not to mention the need for 150,000 new homes every year because of the increase in population, Turkey is coping with a construction boom, and finally consumers may have the ability to get cheap credit. As well, according to a report on Turkey by the US Commercial Service, "projections made for 2005 to 2015 state that, on an annual basis, 900,000 houses should be built to meet demand." Naturally with a boom in the construction sector, you must also look at the building materials, cement and architecture sectors. As of 2006, all of these subsectors in construction accounted for roughly 30% of GDP! Building products alone made up a 20% share of total Turkish exports. To further drive his point home, my friend forwarded this fantastic 6-page Turkey factbook by Europe Real Estate (europe-re.com).
 What people fail to understand or consider is the girth of Turkey's greatest asset: its land. While we look at it as Turkey making good use of its resources, others might look at it as exploitation. But let's face it - Turkey is an emerging market territory reaching "emerged" status; it is the bread basket and manufacturing localle of Europe, and its simply expanding. Naturally, as more and more businesses and people discover its potential, land values will continue to inflate. In addition, by simply searching for success stories pertaining to accession countries to the EU (like Spain, Ireland, the eastern European countries), large gains were reaped in those years after accession occured - the same can be true for Turkey.
This means we will continue to see growth in construction materials, construction and architecture (which, in addition, is promising for GDP). Those firms that smartly have a man on the ground to monitor the truly lucrative opportunities in these construction sector firms, as well as projects, will be the differentiating factor for foreign investors. Established PE firms in Turkey are already salivating and chomping on the bit - ready to go.
Following the advice given to me by my friend, Grandstanding Traction will attempt to keep a closer eye on this market and on the future by dividing posts into various sectors for easier access and closer analysis.
Technorati Tags: architecture, Building Materials, construction, Emerging Markets, EU Accession, Turkey, Real EstateLabels: Architecture, Building Materials, Construction, Emerging Markets, EU Accession, Real Estate
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| The Shopping Center Boom in Turkey |
| 01 April 2007 |
The beginning of 2007 has been marked by some notable entries into the Turkish market: foreign investment into Turkish shopping centers. According to an article in the TDN in February quoting a WSJ article, "prime shopping centers offer yields of around 8 percent to 9 percent. Investors buying shopping centers before they are completed hope for yields of 10 percent to 11 percent." I would venture to guess that ROI’s are very much in the teens when it comes to Turkey’s current environment, hence the future demand. (Corio’s Real Estate Investment Fund expects a 5-year return of 20%!)
 In another example, Andrew Finkel writes in Today’s Zaman that, "the new Kanyon shopping mall designed by Venice Beach headquartered Jerde Associates is now estimated to be worth three times its $200 million ticket price." Aside from these numbers, the rush towards investment can be attributed to one important statistical comparison: Turkey has just 30.4 square meters of retail space per 1,000 people, a fraction of the European Union average of 171.1 square meters, according to advisory firm Cushman & Wakefield Inc.
In addition, the WSJ goes on to state that about 3 billion euros to 4 billion euros ($3.9 billion to $5.2 billion) of real estate deals are expected to be transacted in Turkey this year. This compares with about 1.1 billion euros in deals last year, which, in turn, represented a tenfold increase from 2004.
Recent entries, acquistions and investments are as follows:
- 14th, February 2007 - Citigroup Venture Capital is in talks to buy stakes in two of Turkey's leading retail chains, Boyner and Beyman, in a deal that highlights the growing interest of private equity groups in acquiring Turkish assets.
The Boyner family, an Istanbul-based business dynasty, said in February that its holding companies had entered into exclusive talks on selling stakes in Boyner Department Stores and Beymen, a luxury goods chain, to CVCI in a deal that could value them at $450m.
Boyner said the family believed it was the right time to sell. "It gives the holding company liquidity at a time when there are lots of opportunities in the market," she said.
Under the terms of the proposed deal, CVCI will buy 30 per cent of Boyner and 50 per cent of Beymen.
The largest private equity deal so far in Turkey was Texas Pacific Group's investment in Mey, a local beverage group. TPG purchased 90 per cent of the company last year in a transaction that valued Mey at $900m.
- 5th, October 2006 - Merrill Lynch in partnership with İstanbul-based Krea Real Estate made its first real estate investment with 50 percent share of the Neo Shopping Mall in Eskişehir.
Merrill Lynch is hoping to acquire 100%. According to Merrill Lynch Turkey Global Markets and Investment Banking head Kubilay Cinemre, "Here we have a business capacity of $1 billion," referencing both commercial and housing projects.
- 15th, November 2006 - Cevahir Mall, Europe’s largest shopping centre acquired by St. Martins Property.
St Martins Property, part of the Kuwait Investment Authority, has purchased Europe's largest shopping centre, Cevahir, in Istanbul for a sum in the region of $750 million from its joint owners, the İstanbul Municipality and the Cevahir family.
- 23rd, January 2007 - VastNed Retail buys Turkish shopping center.
Dutch based pan-European retail property investor VastNed Retail enters Turkey by acquiring a neighbourhood shopping centre in Istanbul at a price of €9.7 million. The shopping center is located on Kazim Orbay street, Sisli, Istanbul and is called Elysium Shops. This neighbourhood shopping centre is newly built and comprises 4,850 ²m of retail space and 200 parking spaces.
In the area of Contract Management firms and Consultants:
For Dutch property group, Corio, who paid a benchmark $192 million for an initial 46.9% stake in the nearby Akmerkez mall in a 2005 public offering, the shopping center boom of Turkey seems to have fit into their plans.
- 9th, February 2007 - Corio purchases 40% interest in Turkish shopping center.
Corio has announced the acquisition of a 40% interest in Teras Park shopping center currently under development in Denizli, in the south west of Turkey, for an amount of approximately €55 million.
- 2nd, March 2007 - Two more Acquisitions for Corio in Turkey
Corio, one of the largest listed property investment companies in Europe, said it would acquire the Adacenter shopping center currently under development in the northwestern city of Adapazarı, Turkey for about $65 million. In addition, the property developer said it will also take a 7 percent stake in "potentially large scale" project Acıbadem, to be developed in Istanbul.
- 21st, March 2007 - Corio has signed an agreement for the acquisition of a 50%-interest in Esenyurt shopping center currently under development in the Esenyurt district on the European side of Istanbul for a total amount of approx. €42 million (US$60m).
On a final note, I’ll leave you with some slides to ponder from Corio’s Andre Van den Berg’s presentation to Ak Yatirim in January 2007. His model of Turkey being in the center of the development cycle is very telling for what still is to come, and as you can see by the statistics of plans under development, it doesn’t look like it will be slowing down anytime soon. He also leaves a final concern: the need for strict planning policies in the public administrations. Istanbul does have the potential to overbuild without regulating infrastructure and legal framework and this can be worrisome. Very poignant indeed.
For further reading:
Technorati Tags: Shopping Centers, Venture Capital, Private Equity, Acquisitions, Deal Flow, Turkey, emerging markets, Turkish, Corio, REIT, Citigroup, Boyner, Beymen, Merrill Lynch, KREA Real Estate, Kubilay Cinemre, St. Martins Property, Cevahir, VastNed Retail, VC, Donaldsons, Jones Lang LaSalle, Andre Van den Berg, Ak Yatirim, Akmerkez, KanyonLabels: acquisitions, deal flow, Emerging Markets, Private Equity, Shopping Centers, Turkey, Venture Capital
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| New Turkish PE Fund by Actera Partners to welcome Canadian Pension Funds to Turkey |
| 09 February 2007 |
On February 7th, I happened to notice a page view in my statistics from the office network of Financial News Online, a UK financial newspaper. They just so happened to be searching google for "Private Equity Turkey 2006". So I decided to bite, and to my amazement, it seems the Private Equity industry (in addition to the foreign investment in the Turkish banking industry) is taking off.
Actera Partners, formed by Isak Antika, managing director of Antika Partners, and Murat Cavusoglu, formerly a managing director at Bedminster Capital Management, which runs a South Eastern Europe fund (formerly Soros Investment Capital Ltd), have formed a targeted €250m ($325m) joint venture between the €65bn Ontario Teachers' Pension Plan and the €67bn
Canada Pension Plan Investment Board (press release).
That's right. Two very large Canadian pension funds have come together to form one of the largest PE funds focusing exclusively on Turkey. The fund will be focusing on buyout and growth equity investments across all sectors in Turkey, and will also partner with Turkish groups to help them expand internationally.
The deal is cited to be the result of increased harmonization between Turkey and Europe. Jim Leech, senior vice-president of Teachers' Private Capital, was quoted as saying, "Turkey is an attractive private equity market, with a large and growing population, a high number of quality mid-market businesses, and a developing economy which is expected to benefit from becoming increasingly harmonised with Europe."
Maybe the hopes and dreams cited in Evren Unver's powerpoint slide from Athens VC Conference in 2004 have finally come true for Turkey.
As well, perhaps that is why I saw so many google searches for Antika Partners last month – due diligence taking its course. But regardless, would anyone else care to have a beer over the continued traction of Private Equity in Turkey? Most likely Murat and Isak are. I ask you, are we finally seeing the fruits of an emerging market and perhaps more entries to come? Stay tuned.
Technorati Tags: Private Equity, Isak Antika, Antika Partners, Deal Flow, Turkey, Murat Cavusoglu, Bedminster Capital, George Soros, Ontario Teachers' Pension Plan, Canada Pension Plan Investment Board, Actera Partners, Jim Leech, Evren UnverLabels: Actera, deal flow, Emerging Markets, fundraising, Venture Capital
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Publisher: Jon H. Black
