Why Angel Investment?
We had an interview with Istanbul Startup Angels Network’s Managing Director Emre Özbek. He worked in various positions including management for six years in strategy and business development, internal audit departments in Vodafone and before that in PwC ‘PricewaterhouseCoopers’ in risk management, internal audit, internal control departments.
What is Istanbul Startup Angels?
İstanbul Startup Angels is an angel investment network. It is an organization that Angel Investors come and act together using the network effect. We help investors to find startup projects, examine, and evaluate alternatives and act together even after the investments. In early 2013 with the regulation that T. C. Treasury commissioned ‘Equity of Individual Participation’ definition was introduced to Angel Investors. This type of investment is made by a wholly individual property assets.
What is the criteria of being an Angel Investor? Can a housewife get up in the morning and say ‘I want to be an Angel Investor?’
Absolutely! If she has her individual property, it is possible because this type of investment is completely personal. The presence of personal property shall be over TL 1 million (appr.333.333 $) or annual income of the last two years shall be above 200,000 TL. (appr.66.666 $)
A tax benefit has been provided by Treasury. The investment is deducted from the annual tax base and the income derived after is tax-exempted. Angel Investors shall apply to Treasury Undersecretary and get an Angel Investors’ certificate. This authority is transferred to networks. In this case investors need to connect to one of the accredited certification networks.
If you do not have such a financial power, the second way is to manage an Angel Investor network by using your experience. In that case, previous business know-how about this subject is a prerequisite.
How is the process after Angel Investors receive the certificate?
After receiving the certificate, investor can start to look for a project or they can get the certificate for a project that has already been introduced to them. Currently there are more than 300 certified Angel Investors in Turkey. A part of investors are the ones that has earned money from the internet projects before; they want to reinvest the money to internet. Another part of the investors are coming from old economy and want to invest in the new economy.
We got used to the idea of building a new e-business web site or using apps. Are there any futuristic start-up projects like Human 2.0 version or space mining?
Yes, there are and the number is increasing each day. If you check the numbers in Turkey only 10 million people are shopping from internet. Smart phone penetration is 100% and even more. Market is saturated. When you compare e-business is still very immature. E-business is growing because investment cost is very low, banking and logistic systems have evolved in time. Now, we see an app glut. That led to m- and s-business. ‘m’ stands for mobile , ‘s’ is used for social. In s-business for ex. you market in Instagram, sell with whatsapp. The store window is Instagram and the sales person is whatsapp.
There is also the concept of IoT (Internet of things). After internet connected computers, mobile phones and tablets, now TVs, refrigerators, scales and even cooking pots are being connected to internet. Technology is going beyond human-phone interaction.
You give consulting services. What do you advice to the investors not to get disappointed?
There is a formula for the Angel Investor. You invest 10% of your personal assets and divide this into ten to fifteen different projects. They need to build a portfolio. We are talking about a different investment instrument here. People have no influence on foreign currency, real estate or art. In Angel Investment they can take an active role by using their mind and experiences, they can be a part of the Board. There is a condition in the Investor- Entrepreneur contract. Angel Investor can not take more then 50% of the shares. If they want to use the tax exemption then they need to invest at least 20.000 TL (aprx.6.666$) and the max limit is 1 million TL (appr.333.333 $). They can invest 5.000 (appr.1.666 $) but cannot use the exemption. Treasury requests investors to stay in the company at least two years.
How does the investor make sure that one of the ten project is a rising star?
First of all, the team is very important. They have to consider whether the team consists of new graduates or have they worked any other place before. Project owners shall be aware of the business and the sector We do not tell the investor which project they shall invest. We select both sides and combine them.
Market is the second important aspect. Is there a need for the planned product in the market? How big is the market? What are the alternatives of the clients and who are the competitors? They are critical points.
Besides these there is this word ‘destructive’. New business model destroyes the existing business model. One of the barriers for destructive project is named as ‘this is not in accordance with regulations’. But it did not stop those projects to come to life. Projects that are in accordance with the regulations generally do not get a great success. One of them is Airbnb. It is not allowed in California but it changed the hotel sector dynamics drastically. Ideas that you think ‘Can it be done?’ are sometimes exactly the ones that you should do. If you have a great idea, you can even change the regulations
It looks like the timing is also playing a role in the projects.
Correct! For ex. Segway. It is a technological innovation but it could not be successful as expected. Why? Because the timing was not right. Personnel mobility of carbon emissions rates were not that critical. They have not thought whether the sidewalks are suitable, the user experience was not considered. Before you launch the product, you have to consider whether the people are ready to use it or not.
Is it the best time to be an Angel Investor?
Absolutely, we invite everybody to be an Angel Investor.
Thank you very much for this fruitful interview.
It is my pleasure.
İrem Sokullu – İstanbul Temmuz 2015