Firat Ileri, Partner at Hummingbird Ventures. Series of interviews with investors in Turkiye n°9.
As stated before, malls in Istanbul are there to have meetings, especially Kanyon. More specifically at Pain Quotidien, which is by the way Belgian. Alain Coumont is the founder of this success, started 25 years ago. When he opened his first store he already had a first franchisee after 10 months. Remarkable story, remarkable man becoming famous with sour dough breads and a long table. The interior was born out of necessity, not a design marketing conceptual strategy something something. I loved his quote in the Financial Times, 2011: “Basically, you create a product or a concept and the consumer validates your ideas. And then you hire people that are better than you.” Brilliant.
Firat Ileri is sitting in front me. He was born in North Cyprus. He talks very decided and clear. Not sure it is the island or his education in the States that provoked this, but it kicks off very open and friendly. He finished MIT in Boston as electrical and computer engineer, double degree, studied Finance as well, adding a Master’s degree. Also at MIT. JPMorgan is his first working experience (as an intern) where he gets a full time offer for NY office but ends up in London office straight after college for 2.5 years. He works on emerging markets with a focus on Turkey, CEE and CIS countries.
He was fascinated by technology and innovation since very early ages and while studying at MIT, which is a very entrepreneurial university (Dropbox, Hubspot, Buzzfeed, Khan Academy, Bose, Zipcar), he got interested in VCs. In 2011 he started reading about funding startups, the first wave of Turkish startup successes and contacted a Belgium-UK based VC, Hummingbird. They were actively investing in the market with promising investments such as Peak Games and Ciceksepeti, which excited him. He must have been very convincing as he starts right away and joined as an associate. The goal was to find more deals with feet on the ground (sounds nicer than boots on the ground) and support the growth of portfolio companies. He also managed to get married to a Turkish lady in 2015. He lives in Istanbul but travels quite a lot. All deals go through his hands so that is a huge workload!
Gram Games is one of the latest successes, and the first investment he led in Turkey at Hummingbird. Hummingbird invested in the pre-seed round of the company for 100.000USD in a series A round and also led that round. The story is that with 25.000USD on the bank account Gram Games created like their last game of hope, 1010!, 2 prototypes before were not successful. 1010 was launched, a casual puzzle game, which became a global hit and they hit the jackpot passing today over 80 million installs, 3.5 million daily active users, who play the game for an average of 30 minutes a day. The total downloads in the portfolio: 100M+. BAM. Firat describes Mehmet Ecevit, one of the co-founders, as a very smart person who got there by self-education. A self-made story.
Gram Games was not the first Turkish gaming startup Hummingbird invested in. They also invested in Peak Games, the first global Turkish success story in social/mobile gaming from Turkiye led by serial entrepreneur Sidar Sahin. One of the co-founders, Rina Onur is today one of the leading figures of 500 Istanbul. In 2010 Hummingbird invested 1,5 million USD in a seed round in Peak Games and today sees an incredible potential, Toy Blast is now a global hit. As of today 18 million USD is already invested by several investors. Firat quoted Peter Thiel, not everybody’s favorite thanks to his assistance to the new US President :“What do you know, is something you believe that nearly no one agrees with you on? ”. Firat believes one of their bets have been on mobile and social gaming, and with success. Lots of VCs around the world stopped investing in gaming thinking it’s a “hit or miss” business but he thinks if you back the right team, be patient and supportive, it’s a “miss,miss,miss…., hit” business. And, when there is a hit, you can build a sizeable company. Firat gives as example Supercell, valued around $10 billion+ in 4 years after they started to emphasise the scope of where gaming can go to. So the radar is always on for finding exceptional gaming companies.
Given the gaming talent and interest in Turkey, it was one of the areas where they felt they could build global successes and create an impact in the local ecosystem. But it came down to use what you know in a wise way. After Peak Game Games and Gram Games, they are still interested in investments in gaming if they meet the right team again. Going for a 3rd success in the gaming area.
For Turkiye, he assumes we don’t have enough talent in the country for gaming. A reason why he goes into the international scene. The gaming industry is small anyway, even on an international level. Gram Games will enter the UK, opening a studio in London. You need to be on the international level, even geographically. And it is also there where you find good talent.
Hummingbird started their first fund in 2000 and went through the 6th funding round, with an average fund size of 40 million USD, investing in 10- 15 startups per fund. Ticket size ranging from 100.000 to 9 million USD with a sweet spot between 1 and 3 million dollars. Around 15% of the invested dollars goes to Turkiye, but it’s on track to be one of the top performing countries. Hummingbird expect $1bn+ in liquidity even from the current portfolio in Turkey. It was nice to understand that they also invested in Showpad, a Belgian startup that moved to the US and raised $60USD. I remember them pitching on an event I organised in Brussels, Apps Marathon, together with my friend in Mobile Monday Belgium. Those were the days. Hummingbird invests globally, their most recent investment was in a marketplace in Brazil.
It is one of Firat’s main challenges to find exceptional entrepreneurs in emerging markets. The 3 E’s. He approaches new ventures from a holistic point of view and looks for the level of detail the entrepreneurs showcase. Firat calls it pattern recognition of exceptional entrepreneurs. They believe that exceptional returns can only come from exceptional people and Hummingbird spends a lot of time defining what qualities an entrepreneur needs to have to build a successful and ambitious startup. Among them; resilience, leadership and many more. The team is crucial but they need to have market sense. Traction and market size help him decide to invest where the aim is Series A funding. Sometimes when they struggle with the concept, they let the numbers convince them. Next to funding he also actively supports in hiring critical employees, challenges the weaknesses and helps them for the next rounds. Nothing is a must for him though; it is the startup that asks, not Hummingbird who imposes. Firat is actively working on 7 investments and is very happy working with these founders, who proved to be talented people. For startups they look at how independent a team can function; is their traction ok, and did they do this before, being a founder, or working in the sector. They like startups that can operate with no help or hand holding. Hummingbird believes that entrepreneurs should build the company themselves and not let investors run their companies for them or “actively mentor” them especially on day to day operations.
Despite being a decently big country, scale up is a problem. Usually you have entrepreneurs attacking markets with small revenue/market with a potential market of 2 to 3 million dollar in 5 years. Most of the time bootstrapped and lacking the eagerness for expanding. Startups usually miss the right funding to go abroad, thinking bigger, thinking international. Most important is timing as well. Today most investors are only interested in copy cat models that were already proven in other international markets. So once you go out of your comfort zone, your Turkish market in Turkish language, and have enough resources/funding/knowhow to go international, you suddenly end up in the red ocean. Copycats are almost always (too) late in the international arena. Especially when you lack innovation in your product or service offering. He sees series B as one the biggest issues in Turkey, with very limited number of tech startups raising 5M+USD. On the Angels side there is too much friends with friends. Most of the time their own business goes better than the invested startup and they have no experience in scaling tech startups. So you come back to buyer platforms.
There is enough money present in Turkiye, but not enough high quality startups going after ambitious stories. He mentions the simple basics that are often not present: market size, team, Product Market Fit and scalability. Honestly, nothing that a business canvas with a good validation cannot solve. Of course the lack of language, English, is also a problem and the lack of curiosity. I like very much how Firat puts on the table, and we had no dessert by the way, that he didn’t need a mentor to get to get started in VC. Learned himself the very basics of VC with the help of the partners in Hummingbird (enough blog posts, articles, podcasts). He was curious enough to teach himself. Second BAM. We walk through some other deficiencies and storytelling is certainly one of them. If you can tell the story, articulate your vision (and an ambitious one), you can also sell it.
For Firat the ecosystem only started in 2010, this means very young and inexperienced. He is confident that the next exits will grow the market and get into a more professional gear.
Tracing startups is done by growing and maintaining the network.
The success questions pops up, although we could easily continue. Firat gives me a series of word strings that summarize success for him. He is after all an engineer, so analytic thinking is part of the game. Feeling enabled, helping exceptional entrepreneurs realise their dreams and becoming part of their journey, investing in successes startup dreams, going in as early as possible and supporting them along the way. Of course. Firat is a very factual man. Something I like a lot and what we need in the startup scene. The right attitude based on common sense and facts, facts, facts.
Here quickly a list of the invested companies: Amplidata, Armut, Awingu.com, Ciceksepeti, Clear2pay, Deliveroo, Eatup, Elder, Engagor, Eon, Garajyeri, Gram Games, MamHmall.ma, InstaCarro, Kraken, Markavip, Moda Cruz, Peak Games, Showpad, Shutl, Souqalmal and Taxibeat. That is a nice set. Next time we go for a good glass!
Patrick Bosteels, Stage-Co Co-Founder
patrick@stage-co.com
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