212 VC fund invests in growth-stage tech companies across Turkey, CEE, and MENA. Currently, the fund manages €75M committed capital and 20 investments. Their strategy focuses on investing in B2B tech solutions that have demonstrated traction, a clear product-market fit, and are ready to scale internationally as ‘test local, go global’ is 212’s guiding principle. In addition to investing in startups, the fund puts significant effort into mentoring, supporting, and advising its portfolio companies. 212 was founded in 2012 by Numan Numan and Ali Karabey who gained global investment experience among others in Credit Suisse, Goldman Sachs, Morgan Stanley Capital International and Deutsche Bank. The VC fund team is based out of Istanbul, Turkey, and the region.
Fund Strategy Overview
Geography: Turkey, CEE, MENA
Preferred industries: B2B tech solutions, sector agnostic
Investment ticket: €1-5M
Company stage: Early and growth-stage
Product Type: Ready to sell
Product stage: Beyond MVP
Revenues: N/A
Q&A with Ali Karabey, Managing Partner
What are the five main things you look for in a startup?
It is a standard list of things that VCs look for in a startup, so we follow suit. The first thing we look at is the team - besides having the relevant background and expertise, the team members should also complement each other. They should all be working towards a shared purpose while each team member plays to their unique strengths. Interestingly, while achieving group cohesiveness is a key to build long-lasting teams, we have noticed that having some go-getters in the unit can be a sure-fire pass to success. The second most important thing we look at - how big is a problem that the team is attempting to solve. We try to understand whether the startup accurately recognizes their customers’ pain points and adequately alleviates them, what is a key to customer stickiness. This brings us to the third area we look at i.e. the market potential. The growth trends and competition in the startup market help us estimate the business model's scalability. As a fourth area, we try to understand how the product differs from those of the competitors. Finally, we weigh the risks involved in investing in the startup versus the opportunity before giving the investment the green light.
What disqualifies a startup as your potential investment target?
There are some team-related red flags, which can be deal-breakers. The lack of a strong team that runs out of the clear vision and a good working relationship can be detrimental to a business's success. Due to the stage we invest in, we also expect to see some traction: startups need to show solid progress in moving from ideation to execution stage.
What in your opinion differentiates the best founders from the rest?
We have published a blog post about the critical ingredients of the best startup founders. In a nutshell, they are risk-takers, innovators, culture makers, fundraisers/sellers, resource optimizers, and hard workers, and they have a global mindset and empathy.
What startups should take into account before making a deal with a VC fund?
Factors like the decision-making power granted to them post-investment, collaboration efficiency, and communication are as important as the VC’s final percentage ownership. Startups should evaluate both quantitative and qualitative factors before making a deal. Besides, they should understand the different aspects of various VC's approaches.
What is your approach to startup valuation and preferable share in the company?
We generally advise deducting a valuation range based on the stage and the needs, and comparisons with other similar vertical/stage and geo companies. 212 strives to acquire a double-digit percentage of shares in the invested startups.
How do you support your portfolio companies?
We are a small team that likes to stay in close contact with our founders to support them in any possible way. This approach helps us create tailor-made support for every portfolio company, which generally includes measures that span across HR, Sales Development, UX, etc. In addition, we organize regular knowledge and experience-sharing events, both internally with well-known experts.
What are the best-performing companies in your portfolio?
In Fund I, $30M committed capital, we invested in 12 companies and created $400M value, from this bath we would like to single out Iyzico and Insider. Iyzico exited in 2019 with a $163M valuation, returning most of our total committed capital. Insider recently raised a $32M Series C Round from leading VCs including Riverwood, Sequoia and Wamda.
In Fund II, €49M committed capital, we invested €11 million in 8 companies since the first closing in October 2018, and we are about to finalize a couple of deals. Our portfolio companies clicked into high gear last year, on all fronts, each stepped it up. The second portfolio winner, Chooch AI, recently closed its €20M Series A round led by Vickers Venture Partners with additional institutional funding from notable investors after our first investment in December 2019. We have some excellent news concerning other portfolio companies, still in development, and we expect them to share soon.
What are your notable lessons learned from investments that didn’t work out as expected?
After a decade of experience in the startup ecosystem, we have noticed that success depends entirely on the team. A driven and solid founding team can even pivot the business model in rough times. Founders should have complementary skill sets, and they should focus the energy on one common vision.
The startup journey is like a marathon. As fund managers, our job is to find the most capable founders who have a passion for showing phenomenal performances and crossing the exit line.
What are the hottest markets you currently look at as a VC, and where do you see the biggest hype?
Over the past few months, people and businesses worldwide have been forced to embrace digital solutions for compliance, remote working, shopping, banking, health care, delivery, and more, accelerating the pace of digital change in many regions in a dramatic fashion. This trend will have a long-term impact on consumer and business behaviors, potentially influencing VC investments, particularly corporations that may lag on the innovation front and now recognize the very real imperative to pivot.
In your view, what are the key trends that will shape the European VC scene in the coming years?
Following the COVID-19 pandemic and its repercussions throughout 2020 and 2021, digital adoption has become unavoidable on enterprise and personal levels. Everything around remote will be fundamental, while virtual, scalable, and personalized solutions will be ever-present in the coming years.
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