Our Investment Process
INVESTMENT PROCESS OF HEDEF GİRİŞİM
Entrepreneurs in Turkey, as in the rest of the world, face great difficulties in accessing the financing resources necessary to materialize their business ideas. Entrepreneurs without experience, sufficient capital or collateral are unlikely to be able to raise the necessary seed and start-up capital at the beginning of the business or the additional capital needed to grow their business through traditional means using bank resources.
Currently, this gap is usually filled either by entrepreneurs themselves, through resources provided by friends and family, or through government support. However, in developed Western countries, this resource is provided by a class of business angels or venture capital funds, which are more professional and institutionalized structures that play an important role in transforming innovation into entrepreneurship by supporting innovative business ideas from the inception stage.
In addition to providing financing to the companies they invest in, venture capital funds and business angels also provide the necessary managerial and strategic support to help such companies grow faster.
Seeing this gap in our country, our company, with the goal of supporting entrepreneurship from the very beginning, has adopted as its mission to;
invest in innovative projects of visionary entrepreneurs who envision new markets with high growth potential, new technologies or products, a new form of production or service,
provide financing and managerial support to SMEs that suffer from capacity and financing constraints despite being in an advantageous position compared to their competitors in terms of products/services,
create the necessary infrastructure for the development of venture capital and business angels models in our country and to increase awareness on them.
HEDEF Girişim Sermayesi Yatırım Ortaklığı A.Ş. evaluates project applications in terms of their compliance with the following investment criteria:
The entrepreneurial company meets the definition of SME (based on the latest communiqué issued by the Ministry of Industry),
The project can provide a competitive advantage in the market by making a difference in the technological sense or offer a new product/service portfolio with development potential,
The entrepreneurial company does not have any outstanding tax, SSI premium, bank, etc. debts that cannot be settled with future cash flows,
The applicant has a good command of technical details and knowledge of the market, customers and business,
The applicant has a viable business plan,
The applicant and his/her team is visionary, experienced, reliable, hardworking and honest,
It is believed that the investment can be exited within 5-6 years on average.
HEDEF Girişim Sermayesi Yatırım Ortaklığı A.Ş. purchases a maximum of 49 percent of the shares. Considering the demands of the applicant companies, investments are made up to an average of USD 250 thousand for projects at the initial stage, at least USD 500 thousand for IT projects with established companies, at least USD 1 million and up to a maximum of USD 5 million for other sectors.
Our company carries out the project appraisal process in three stages. The completion time of this process varies between 3 and 6 months, depending on how fast the entrepreneur cooperates. These stages are:
1st Stage: The first stage is the preliminary evaluation stage. At this stage, the applicant who wants to partner with our company applies online by filling out the “Application Form”. The submited business idea is analyzed by the lead capitalist of
HEDEF Girişim Sermayesi Yatırım Ortaklığı A.Ş. in terms of investment strategy and investment criteria. The result of the preliminary evaluation is communicated to the entrepreneur as soon as possible, depending on the workload.
2nd Stage: The second stage is the “Business Plan Formulation and Financial Due Diligence” stage. A “Business Plan” is created with the applicants who have passed the preliminary evaluation stage. The business plan is then submitted to the board of directors of HEDEF Girişim Sermayesi Yatırım Ortaklığı A.Ş.
If the submitted “Business Plan” is deemed feasible, a “Letter of Intent for Partnership” is sent to the entrepreneur. (The text of this agreement indicates the conditions under which the partnership is intended to be concluded.)
After the Letter of Intent is agreed upon, the company is audited financially by an independent audit firm and legally by lawyers. Simultaneously with this audit, a feasibility report may be prepared by Hedef Girişim Sermayesi Yatırım Ortaklığı A.Ş. or, if deemed necessary, by a professional consulting organization. Expenses related to the financial and legal audit shall be borne by the start-ups.
HEDEF Girişim Sermayesi Yatırım Ortaklığı A.Ş. reviews the company and the value of the company determined with the feasibility study in the board of directors within the framework of the company evaluation reports. In the event that the board of directors decides to invest, the amount of participation of HEDEF Girişim Sermayesi Yatırım Ortaklığı A.Ş. and the share ratio it will receive in return are determined.
3rd Stage: The third stage is the investment stage. At this stage, the investment proposal from the board of directors is presented to the entrepreneur. If an agreement is reached following the negotiations with the entrepreneur, HEDEF Girişim Sermayesi Yatırım Ortaklığı A.Ş. conducts a pre-partnership audit of the company. Upon the completion of the transformation of the company into a “Joint Stock Company”, the partnership officially starts with the signing of the “Partnership Participation Agreements”.
HEDEF Girişim Sermayesi Yatırım Ortaklığı A.Ş.’s portfolio management style is not in any way to interfere in the day-to-day business and management of the companies in which it invests, but to ensure the growth of these companies by playing a guiding role at every stage of their lifespan thanks to certain rights and experience it will have.
In this sense, the investee company may appoint a board member who is an expert in his/her field or send a representative to the board meetings. The method to be applied is specified in the shareholders’ agreement. The company’s board of directors meets regularly and all managerial, financial and strategic decisions regarding the company are taken at board meetings.
In addition, HEDEF Girişim Sermayesi Yatırım Ortaklığı A.Ş. may request the appointment of an independent auditor if deemed necessary to ensure the audit of the companies in which it invests. In case the company is found to have deficiencies in financial management, a financial manager is appointed by HEDEF Girişim Sermayesi Yatırım Ortaklığı A.Ş.
Companies are audited by us every 6 months and by independent auditors annually.
While determining exit alternatives, the continuity and profitability of the investment is also taken into consideration and an exit within an average of 5 years is aimed. One or more of the following methods can be used in the exit strategy:
Public offering is one of the most preferred exit methods in venture capital investments. When the company reaches the desired size, profitability and performance, a public offering can be a very favorable exit opportunity.
Selling to a Strategic Partner:
Selling to a strategic partner is the most common method after public offering. A suitable strategic partner can acquire the company at a premium to its value, taking into account the synergy that the company will create. It provides investors with a 100 percent exit and is much simpler and less costly than a public offering.
Selling to a Financial Partner (Another Venture Capital Fund/Investment Trust): Venture Capital Funds/Investment Trusts (VCFs/VCITs) may wish to sell the company to another VCF/VCIT or a financial institution. It may be preferred especially in an environment where a public offering would not be possible and in the absence of a strategic partner.
The entrepreneur is much more likely to stay with the company. A financial partner can also better guide the company and make it ready for a public offering.
Resale to Company Shareholders:
This exit method is a priority for VCFs/VCITs. Although this method is less profitable than other exit alternatives, HEDEF GSYO A.Ş. may prefer to exit the investment by this method if deemed necessary.