Significant Changes in Venture Capital Investment Funds with the New Communiqué by the Capital Markets Board of Türkiye

Venture Capital Investment Funds (VCIFs) are financial instruments known for contributing to the economy by investing in early-stage and high-growth companies. In Türkiye, these funds are regulated and supervised by the Capital Markets Board of Türkiye (CMB). From time to time, the CMB makes amendments to the Communiqué on Venture Capital Investment Funds (III-52.4) to protect investor rights, ensure market stability, and improve fund efficiency. The latest comprehensive changes were made on September 21, 2024, through an update to the Communiqué on the Principles Regarding Venture Capital Investment Funds.

Key Amendments

Changes in Definitions:
The definition of “informative documents” has been simplified, with some clauses repealed. The definition of “investor agreement” has been revised and made optional. However, before selling fund participation shares to qualified investors, it is now mandatory to sign a “fund issuance agreement” that includes minimum required elements.

Umbrella Fund Structure:
An umbrella fund structure has been introduced, allowing multiple venture capital funds to be grouped under a single umbrella. This structure aims to reduce management costs, shorten bureaucratic processes, and offer a wider range of investment options to investors.

Fund of Funds Structure:
A new fund structure has been established where at least 80% of the total fund value is invested in other VCIFs.

Governance and Authority:
A majority of investment committee members, as specified in Article 11, must be present for valid meetings. The committee is now responsible for managing the VC portfolio within the limits of their decisions, promoting a more disciplined investment management approach.

Capital Commitment Period:
The capital commitment collection period has been reduced from two years to one year following the initial sale of participation shares to qualified investors.

Investment Restrictions

• The requirement for a foreign investment to qualify as a VC investment has been eased: The minimum percentage of the target company’s assets held in Türkiye (through subsidiaries or affiliates) has been lowered from 80% to 51%.
• Except for specific exceptions, companies with at least 40% of their total assets in real estate or real estate-backed assets, and companies primarily engaged in contracting, are now excluded from being eligible VC investments.
• A VCIF may invest a maximum of 25% of its total value in other VCIFs.
• Investments in non-traded shares of publicly listed companies are limited to 20% of the fund’s total value.
• Investments in companies controlled by fund investors or related parties cannot exceed 20% of the fund’s total value.
• For capital market instruments other than VC investments, compliance with issuer limits defined by the CMB and with the fund’s own investment strategy and limits as stated in its issuance agreement is now required.

Foreign VC Investments Based on Shareholding Structure:

• If foreign investors hold 20–30% of the fund’s participation units: up to 30% of the fund may be invested abroad.
• If they hold 30–50%: up to 50%.
• 50–80%: up to 80%.
• Over 80%: up to 100% of the fund may be invested in venture companies established abroad.

Contract Types:
The use of SAFE (Simple Agreement for Future Equity) contracts has been permitted for both convertible debt and foreign investments. These contracts must now include provisions for interest and conversion terms.

A More Efficient and Dynamic VC Ecosystem in Türkiye

These updates aim to create a more efficient structure for venture capital funds in Türkiye, expand access to investment opportunities, and establish a more dynamic fund management environment.

We at Boğaziçi Ventures and BV Portföy would like to emphasize that investing in VCIFs should not be viewed merely as a regulatory obligation. These funds not only fulfill compliance requirements but also offer significant financial return potential.

Moreover, becoming part of the unique investment ecosystem of Boğaziçi Ventures and BV Portföy provides a substantial opportunity for growth and development—especially for companies within the startup and innovation landscape. This opportunity delivers unique value that goes well beyond what traditional asset management companies can offer.

To avoid the end-of-year rush and time pressure, we recommend that all companies with investment obligations make their decisions no later than early November, even if cash inflows are scheduled for later in the year. This will allow for timely account setup with the relevant portfolio management firm.

For more detailed information, please refer to our article: "BV Portföy VCIF Options for R&D Companies' Regulatory Obligations."

To diversify your portfolio effectively, gain insights into BV Portföy’s venture capital investment funds, and determine which options are most suitable for you, feel free to get in touch with us.

Managing your investments with confidence, diversifying wisely, and minimizing risks is all possible—through the expertise of BV Portföy.