Entrepreneurship in Silicon Valley vs. in Turkey

GES22 March, 2011

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 Silicon Valley

vs. in Turkey

Ziya G. BoyacıgillerSabanci UniversityFaculty of Management

Angel Investor

Ziya G. Boyacigiller (c) 2005 EMBA 3

Bumblebee can’t fly!

Ziya G. Boyacigiller (c) 2005 EMBA 4

Flying bumblebee…

Ziya G. Boyacigiller (c) 2005 EMBA 5

Started in 2004 CEO, CTO from USA (does reverse brain

drain - %15 returned from USA) Structured as a Silicon Valley startup Using business practices common in

Silicon Valley 2007 sales $45M+, market share in

Turkey 70%, growing over 50% per year 2007 Expanding to Greece, Ukrain,

Russia, Kazakistan, … Preferred vendor for Turkish Telekom

winning bids, even when not the lowest World Class innovations – Wireless IPTV Got US VC investment (2010) for global

expansion

Ziya G. Boyacigiller (c) 2005 EMBA 6

Entrepreneurship won’t work in Turkey…

Whatever works in USA won’t work here… No one will invest here in a new business… Big holding companies will destroy you once your business

becomes significant enough… There is no legal protection, intellectual property rights… They will copy your business model, all your creative

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 don’t use bribes you can’t survive.

If you are a minority partner, they will cheat you… Etc. etc. etc.

Ziya G. Boyacigiller (c) 2005 EMBA 7

A Question?How did the following companies start and become successful in Turkey?

Hedef Alliance? (pharma distributor) Dizayn Group? (plastic irrigation pipes) Mavi Jeans? (fashion blue jeans) Logo Yazilim? (enterprise software) Gantek? (systems integrator) Kariyerim.com? (job site) GittiGidiyor.com? (local eBay – acquired) ….

Ziya G. Boyacigiller (c) 2005 EMBA 8

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

And who says…

Ziya G. Boyacigiller (c) 2005 EMBA 9

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 ratio to spin-off, 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

fun

power

fame

work

social contribution

knowledge

challenge

Ziya G. Boyacigiller (c) 2005 EMBA 11

Who are the Entrepreneurs in Turkey? Result of opportunity 32% Result of necessity 15% Men 73% Women 27% Most have below-college-level education

Early-stage entrepreneurs are young & educated

Opportunity seeking entrepreneurs are more educated (college and above), higher income

Ziya G. Boyacigiller (c) 2005 EMBA 12

Financial SupportFor seed and early-stage: Own savings 44% Friends 17 Banks 15 Family 11 Coworkers 9 Government 4 Business Angels 3(developing countries 5.57%, GEM 3.93%)

Ziya G. Boyacigiller (c) 2005 EMBA 14

Four Factors Effecting Success1. Intelligence

(If you don’t have enough, form a team)

2. Competitiveness/Motivation(Guns, Steel, and Germs…Jared M. Diamond factor)

3. Patience (Success is 1% inspiration, 99% perspiration)

4. Luck(Luck smiles on the prepared…Knowing when…)

Ziya G. Boyacigiller (c) 2005 EMBA 15

World’s Top 10+ Billionaires

Source: 2007 Forbes

Rank Name Citizenship Age

Net Worth ($B) Residence

1 William Gates III United States

51 56 United States self made MICROSOFT2 Warren Buffett United

States76 52 United States self made finance

3 Carlos Slim Helu Mexico 67 49 Mexico self made telecom4 Ingvar Kamprad & family Sweden 80 33 Switzerland self made IKEA5 Lakshmi Mittal India 56 32 United Kingdom inherited & growing steel6 Sheldon Adelson United

States73 26.5 United States self made hotels, casinos

7 Bernard Arnault France 58 26 France inherited & growing luxury good8 Amancio Ortega Spain 71 24 Spain self made ZARA9 Li Ka-shing Hong Kong 78 23 Hong Kong self made diversified10 David Thomson & family Canada 49 22 Canada inherited media11 Lawrence Ellison United

States62 21.5 United States self made ORACLE

12 Liliane Bettencourt France 84 20.7 France inherited L'Oreal13 Prince Alwaleed Bin Talal Alsaud Saudi Arabia 50 20.3 Saudi Arabia self made investing14 Mukesh Ambani India 49 20.1 India inherited & growing petrochemicals15 Karl Albrecht Germany 87 20 Germany self made Aldi supermarket

Ziya G. Boyacigiller (c) 2005 EMBA 16

25 Turks listed in the Richest of the World (Forbes) Among the world's 946 billionaires, 25 are from

Turkey, according to a recent survey by Forbes magazine.

Husnu Ozyegin was ranked the world's 249th richest man with $3.5 billion.

Mehmet Emin Karamehmet followed him with $2.4 billion, the 390th-richest person.

Third and fourth place in Turkey were Sevket Sabanci and Erol Sabanci with $2.1 billion. They both ranked 458th in the Forbes list.

There are now more billionaires in Turkey than there are in Japan.

Ziya G. Boyacigiller (c) 2005 EMBA 23

Factors Effecting EntrepreneurshipGeneral Country Infrastructure•Economic

•Technological

Entrepreneurship Infrastructure•Human Resources

•Finance

•Legal

•Social, cultural, political infrastructure

•Entrepreneurship support and encouragement mechanisms

Newly Started Companies

Economic Development

3 Ts: The Rise of the Creative Class,

Richard Florida

Ziya G. Boyacigiller (c) 2005 EMBA 24

What is changing in Turkey? EU forcing structural changes Economic reforms (IMF) Government encouraging entrepreneurship – Technoparks, taxing

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

Middle East – improved relationships Reverse brain-drain ! Interest Rates moving down IRR

Ziya G. Boyacigiller (c) 2005 EMBA 25

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 26

Benjamin Graham Value Investing = Warren Buffet

Ziya G. Boyacigiller (c) 2005 EMBA 27

Turkey offers better opportunity in Value Investing then USA:

- No corporate tax for 10 years in

Technoparks,

- No tax for R&D workers,

- No income tax on stock options held over

2 years!

Ziya G. Boyacigiller (c) 2005 EMBA 28

Top 10 List of Factors Affecting Entrepreneurship in Turkey

1. 4.06 A new or growing business can reach communication tools with ease

2. 3.89 Successful entrepreneurs are well respected in society3. 3.86 Entrepreneurs are perceived as skillful, capable people4. 3.83 Media frequently covers stories of successful entrepreneurs 5. 3.78 Starting a new business is perceived as a good way to get rich6. 3.74 A new business can obtain power, water, natural gas services

within a month with ease7. 3.56 Within the last 5 years, opportunities for starting new

business has significantly increased8. 3.47 Consumer goods and services market is growing significantly

year to year9. 3.46 Women and men are presented equal opportunities to start a new

business10. 3.33 Cost of communications (phone, internet, etc.) is not very

high for a new company.

Ziya G. Boyacigiller (c) 2005 EMBA 29

Bottom 10 List of Factors AffectingEntrepreneurship in Turkey

1. 1.52 For new and growing companies venture capital is not available

2. 1.59 For new and growing companies IPO financing is not available

3. 1.63 Tax burden is significant for new and growing companies4. 1.70 New and growing companies cannot compete in high-

technology5. 1.72 For new and growing businesses equity funding is not

feasible6. 1.78 Illegal copies of CD, DVD, computer programs is rampant7. 1.82 New companies cannot obtain required permits within a

short time period.8. 1.85 Government policies do not support new companies9. 1.91 Local governments are insufficient in their support of

new companies

Ziya G. Boyacigiller (c) 2005 EMBA 30

Ziya G. Boyacigiller (c) 2005 EMBA 31

Ziya G. Boyacigiller (c) 2005 EMBA 32

Ziya G. Boyacigiller (c) 2005 EMBA 33

Flying bumblebee…