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Building a Delivery Startup in Turkey with Epic Traffic, Scant Funding, and No Broadband

Pando Daily

Istanbul traffic can be unpredictable. As the hub of one of the world’s most rapidly growing countries, with a population nearly doubling to 14 million over the last two decades, the city was recently named the most congested in Europe in 2012. What should be a 10-minute cab ride can turn into gridlock with little warning. So you might guess starting an online delivery in Istanbul business might not be such a good idea. But you’d be wrong.

Food delivery startup Yemek Sepeti has experienced success in the online restaurant food delivery industry in Turkey, securing close relationships with more than 7,000 of the most popular restaurants across the country. The company has become the go-to destination and mobile app to order lunch or dinner, holding a 90 percent market share and delivering 150,000 meals a day. It has opened operations in Dubai as a gateway for the entire Middle East, and late last year General Atlantic, one of the world’s leading growth investors, invested $44 million to fund their expansion.

Yemek Sepeti is part of a startup ecosystem that has been rising in Istanbul for nearly a decade. Over the past two years alone, the Turkish shopping site markafoni was acquired by the global media company Naspers for over $200 million, and eBay bought the Turkish auction company Gittigidiyor. Silicon Valley juggernaut Kleiner Perkins invested in Turkey’s Gilt Group-like Trendyol. Blessed with a central geographic location between East and West, rapidly rising per-capital income, more universities than San Francisco, and the sixth most wired population in Europe, Istanbul’s cafes are filled with young startup aspirants.

While Yemek Sepeti has navigated unique market conditions, such as the country’s once slow broadband adoption, its story of battling for new consumer adoption to hyper growth is familiar to any entrepreneur or investor in the US. And its role in the growing startup ecosystem, suggests more opportunity to come.

I met 30-something founder Nevzat Aydin on a good traffic day. He picked me up at my hotel wearing a new beard, looking sleep deprived. He whisked me up the hills to his four-story headquarters overlooking the Bosporus. His team of over 200 employees, already there at 8:30 am, has the same buzz of economic enthusiasm that one senses in many corners of this rapidly growing city.

Nevzat studied computer science at the prestigious Bosporus University in the mid-90s and was accepted to a two-year graduate degree at the University of San Francisco. He was stunned by what he found visiting headquarters of the likes of eBay, Lucent, and Apple. “Technology and the Internet was everywhere there, and virtually nowhere yet in Turkey,” he told me over breakfast. “But I knew it would come. Turkey is a young and creative population. We are early adopters. We are great entrepreneurs, because living in our region we’re used to things going wrong, being inconvenienced, and working around it.”

When the tech bubble burst in 2000, he decided to leave his graduate program halfway through and return home to do a startup. “Culturally,” he says, “that just isn’t done. None of my family understood ‘startups’ or ‘risk’ in the Silicon Valley way.” He explored a number of ideas, but upon reflecting on how much he used delivery food services in San Francisco working around the clock there, he thought it could work inTurkey, too.

“My friends in Turkey loved the idea of delivery — as bread, groceries, and pharmaceuticals had been delivered for decades,” he said. “But they also told me a phone service would be good enough. I thought Internet ordering eventually would leap past the phone.” He soon found two partners who both left lucrative jobs — one in advertising, one at CitiBank — knowing any hope of success required full-time commitment. Yemek Sepeti was born.

At the company’s founding, Turkey had no broadband or DSL — all Internet was dial-up. They and their potential restaurant clients had only one phone line, requiring one to log off in order to make phone calls. “In 2001, we got our first 25 restaurants — friends of friends — and pretty much willed other friends to order. We were lucky to process four or five orders a day.”

With no marketing budget, no financing beyond their savings, compelled to live with their parents, and spending many days wondering if they were crazy, they discovered that orders slowly moved upward: 150 per day by the end of their first year, 450 their second, over 1,000 their third. Receiving some recognition in the press, they didn’t begin marketing until 2006 when Google AdSense was introduced in Turkey. Based on their extensive knowledge of customer history, they proved to be intuitive and outstanding search engine marketers, converting nearly half of people who visited their site.

2006 was also a significant inflection point for the startup ecosystem more broadly in Istanbul. In that year telecom was privatized, beginning a boom in mobile access, and a dramatic increase in adoption of home computing. “Before this, the orders we had were mostly lunch, people ordering from work computers,” Nevzat explains. “But now with people having lapstops with them at home, dinner orders have become over half our deliveries.”

2011 became a second inflection point as Turkish audiences went from email, browsing, and chat to becoming online buyers. “We are still in early days of people using credit cards online, so our transactions are mostly cash on delivery or mobile point of sale, but that is changing. Online banking is on the rise, and we believe 20 percent or more of our sales could be credit or debit card based in the next two years.”

Today Yemek Sepeti has expanded its services to 46 cities in Turkey, and now offering three new services: an eCommerce site to order regional delicacies; a Yelp-like crowd-sharing restaurant review site that will eventually offer online reservations; and a procurement website for restaurants to order supplies. Opening operations in Dubai last year was a clear next step.

Gabe Caillaux, Managing Director at General Atlantic’s London Office and who now sits on Yemek Sepeti’s board, agrees. “As growth investors, we have been studying Turkey for several years, given the amazing demographic growth drivers and size in the domestic market.” He said. “Nevzat has made sure Yemek Sepeti had the best technology, best people, and most importantly the best culture and spirit. While most companies in the digital media sector are ‘built to be sold,’ Nevzat has built a long term winner in Turkey with the ability to expand in new markets and across new models in the food vertical.”

Nevzat is joining a new generation of successful entrepreneurs equally committed to giving back to and thus building the growing startup community in Istanbul. He has become one of the go-to angel investors and mentors for young entrepreneurs. Pioneering regional venture capitalist and small shareholder in Yemek Sepeti, Cem Sertoglu told me, “Nevzat is a great example how founders of first generation success stories have been helping develop the Turkish Internet landscape. He has multiple personal investments, is active in a local angel network, and rarely turns down a request to share his experience and insight.”

As more tech startups are rising in Turkey and the Middle East, I asked Nevzat what worried him. “There is a lot of very early angel money now which is great, and long been private equity for companies over, say, $50 million in revenue,” he said. “The challenge is in the A round… I hope to help here as an investor with others, and as there are more exits and great returns, this will take care of itself with time.”

After talking to Nevzat, I returned to a cafe on the Bosporus, where I was surrounded by young men and women with their laptops open. I heard one young man, an apparent Duke MBA born in Turkey, who had just left a successful growth company in New York City. “I am so excited to be back,” he said. “Everything has changed in the past five years.”

 

Originally published by Pando Daily, March 26, 2013.

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