“Access to Finance”, Is it that hard in Turkey?

Quote from KOSGEB country report prepared for COMCEC :

“Despite their importance, SMEs have some weaknesses and constraints, such as

  • the poor grasp of technology, R&D and innovation;
  • low usage of bank credits;
  • insufficient access to finance,
  • insufficient credit guarantee system,
  • inadequate usage of modern marketing techniques,
  • unawareness of quality and trademark concepts,
  • insufficient educational level,
  • lack of capital for high technology investments,
  • lack of institutionalization,
  • low level of cooperation,
  • lack of harmonization with global standards.

Because of their small size, SMEs usually lack management capacity and often “don’t know what they don’t know”, and their capacity is generally poor.”

Another observation from a recent VC/entrepreneurship conference, two different international VC Fund Managers convey the same message:

“Turkish start ups do not make compelling presentations in their screening meetings, usually the investment case is seen as incomplete”.

What I understand from these comments is, they do want to invest and seek for compelling projects but there are better deals somewhere else other than Turkey. Better? I guess, less complex, well structured, technology trends aware, having good marketing and management skills/plans and know what to know for a VCist (exit). And if we look at the success stories having received multimillion dollar VC investments in Turkey, we see these characteristics at the founder teams/plans.

In fact this is only half way to the end of the story. Receiving VC funding would be a success for the founder, only if the VC investor make a good return from its investment, the story will have a happy ending for all.

If the building blocks of the business is there:

  • competitive technology/innovation and/or capability to enhance that
  • sound business/market potential,
  • product combined with a service which can be perfected with right contributions
  • committed team, trust among the partners and trust to VC investor
  • connectivity and openness to ideas, new experts/partners and willingness to collaboration

than I say presentation does not have to be perfect. As long as we, VC fund managers understand the nature and culture of local entrepreneur ecosystem (and SMEs), we can seek and pick the building blocks from imperfect presentations. It is our value add, to enhance, target and polish before and after deployment in addition to the capital we provide. Not to mention that, we have better entry valuations and conditions in these cases.

This puts more responsibility to the local VC teams but what extra advantage we have other than the global/regional VC competitors. We are close to the investees and we are happy with that.