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After the Protests: What It Takes to Start Up in Turkey

After the Protests: What It Takes to Start Up in Turkey
Elena Pallotta is has opened three MUA' Gelatieri d'Italia shops in Istanbul since 2011. She says the vibrant Turkish economy helped attract her to the country.
Downtown Project
Progress and Potential

Want to know how a society -- in the developing world especially -- really ticks? Ask the women.

From Nairobi to New Guinea, women have long served as the family's primary caretaker -- cooking, cleaning and supplies gathering. They're also increasingly the family's breadwinner. It's a sad fact that in war-torn or impoverished parts of the world, men are often forced to either pick up arms or earn money in remote locations, away from their families -- leaving women to look after children and the household.

Last year, entrepreneurship activity among men and women was almost equal in most sub-Saharan Africa economies, according to the latest Global Entrepreneurship Monitor survey. In Ecuador, Panama, Ghana, Nigeria and Thailand, the rate of entrepreneurship among females was higher than that for males.

Women entrepreneurs have benefited, in part, by the rise of microfinance. That access to capital -- even at high rates of interest -- is credited with helping women either start or expand a microenterprise and, by extension, more sustainably provide for their families.

In time, these businesses may grow beyond their "micro" label. They may scale up and create thousands, if not millions, of jobs. The potential is thrilling.

Next: Cautious Optimism: A Look at Women Entrepreneurs in the Developing World

While Turkish protests have captured the world's attention in recent weeks, talk of business opportunities in the developing nation has been picking up for some time.

Not only did an entire delegation from the Turkish government, including high-profile diplomats, travel to the U.S. Small Business Administration's National Small Business Week event in Washington, D.C., last year; tech giant Dell chose to host its Women's Entrepreneur Network event in the nation's most populous city, Istanbul, this month. Economists and investors are now referring to the country as "the Turkish opportunity."

For small-business owners looking to expand their operations or set up shop in a growing market, here's a look at the attractions and disadvantages of starting up in Turkey.

The country boasts a nearly double-digit growth rate, youthful demographics -- as 70 percent of its 80 million population is under 35 -- low trade barriers and a corporate-tax rate of 20 percent. What's more, Turkey's proximity to both Europe and the Middle East is attractive for businesses looking to expand into nearby markets.

Tack on a rising household wealth and 37 million active internet users, and it's little wonder why the venture community is beginning to plant its flag in Turkey. The Menlo Park, Calif.-based Kleiner Perkins Caufield & Byers and New York City's Tiger Global invested a combined $26 million in Turkish e-commerce company Trendyol in 2011. And Berlin's EarlyBird Ventures expects to open an office in the country.

"There are at least 50 active funds in Turkey looking at investments," says A. Mete Cakmakci, a member of the Istanbul Venture Capital Initiative, a Turkish investment fund, at a panel discussion at the Dell women's event earlier this month. "It has created a big awareness of the Turkish opportunity."

Elena Pallotta, an Italian engineer with an MBA from France's INSEAD, who formerly worked for the Boston Consulting Group, chose Istanbul as her new gelato venture's base of operations.

"On paper, Turkey seemed the most promising country," says Pallotta. Although the country dealt with a series of financial crises and rampant inflation from 1993 to 2002, she says "the last ten years were more stable."

Since launching her first MUA' Gelatieri d'Italia location in 2011 and two more shops in 2012, Pallotta is now looking to expand further into Turkey. She's also considering franchising and possibly setting up shop in Latin America.

Despite her success, Pallotta says doing business in Turkey isn't all peaches-and-cream gelato. She notes, for instance, that raising startup capital from Turkish angel investors was a challenge. "Turkish people are used to fast and high returns," she says. "They do not like the idea to grow a retail chain over multiple years."

Petty, or small-scale, corruption can be a problem, Pallotta says. "I had a very bad experience when opening the third shop. I refused to play their game, and the construction and opening got delayed for several months…Imagine the disaster for a seasonal business."

But you live and you learn, says Ken Weimar, the owner of Denizen Coffee in Istanbul, which is located just off the Hippodrome, now called Sultanahmet Square, where locals and tourists flock to visit the Blue Mosque. "Corruption is not as bad as you think," says Weimar, who formerly worked at the Claremont, Calif.-based nonprofit KickStart as a senior development officer.

Of course, Weimar has a strategy for dealing with would-be swindlers. "If two Turkish people in suits walk through the door and they're not smiling, talk as much English as possible," he says. "They get frustrated and leave."

Overall, Turkey welcomes foreign entrepreneurs doing business within its borders. The country ranked as the world's 13th most hospitable destination for foreign direct investment in 2012, according to the A.T. Kearney FDI Confidence Index, a regular survey of global executives conducted by consulting firm A.T. Kearney.

Now on her second foray in business in Turkey, Jennifer Gaudet, who owns the artisan textiles shop Jennifer's Hamam, can attest to Turkey's welcoming nature. A residence permit grants the Canadian-native permission to both live in Turkey and own a business. Gaudet says she's able to own up to 99.5 percent of her company, since by Turkish law, a company must have two owners. One person can't own less than 0.5 percent or more than 99.5 percent of a business.

"I think that's amazing. In Thailand, my previous home before Turkey, you can only own 49 percent and can only get residency if you have a retirement income, which is why I chose to open a business here," says Gaudet, who now operates three woven-textile shops in Istanbul's Arasta Bazaar. "On top of that, you can also buy property here as a foreigner, which I have also done."

Still, Gaudet notes that to truly make it work as an entrepreneur or business owner in Turkey, you might need to sacrifice some of your independence. For example, when working with local weavers, who use old-style shuttle looms, she must go through an intermediary to communicate, as Turkish is their native tongue.

"Being a very headstrong, independent woman has been positive and negative," says Gaudet. While Turkey welcomes business owners no matter their gender or nationality, to truly succeed, you'll need to know when to step back, even from your own business, she says. "I'm very much an 'I can do it all' kind of person, so to relinquish this control was difficult at the beginning, but I see the results now."

Diana Ransom is deputy editor of Entrepreneur.com.
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