New Era in Venture Capital Funds: Ministry Announces Procedures and Rules Governing Capital Allocations!

M. Özkan Özdoğan

Partner

Ezgi Saba Varol

Avukat

Previously, the Undersecretariat of the Treasury (“Undersecretariat”) had issued the Resolution on Resource Allocations to Venture Capital Funds (“Resolution”), which set out the framework for allocating resources from the Undersecretariat’s budget to venture capital investment funds and regulated the principles governing such allocations through December 31, 2023.

Now, with the Regulation on Participation in Venture Capital Funds and Venture Capital Practices (“Regulation”), prepared jointly by the Ministry of Industry and Technology (“Ministry”) and the Ministry of Treasury and Finance, the scope of resources to be allocated to venture capital funds and the rules governing participation in these funds are newly established. The Regulation entered into force on November 28, 2025.

Call and Application

Under the Regulation, the application process will commence upon the Ministry’s issuance of a call. Each call will specify certain matters such as the information and documents required for application, the qualifications expected of venture capital funds, and the maximum amount of resources that may be allocated to a given fund. The Regulation further provides that the Ministry may issue one or more calls throughout the year and may determine call-specific application requirements.

The Regulation’s purpose is to support technology, technological production, and innovation activities. Accordingly, venture capital funds with a particular focus on the technology sector are expected to have a higher likelihood of receiving allocations under the Regulation. However, the Regulation does not specify the platform through which applications must be submitted. Therefore, applicants will need to monitor the Ministry's official website for updates on the process.

Implementation of the Investment

Applications submitted by venture capital funds will be reviewed by the evaluation committee, and resources will be allocated to those funds that are approved. In addition, an investment agreement must be executed between the fund manager and the Ministry to govern the principles applicable to investments made using the allocated resources. In other words, the investment agreement sets out the procedures and rules for how the venture capital fund may deploy the Ministry-allocated capital.

For example, the Regulation provides that the agreement must include provisions regarding the establishment of an investment committee. Accordingly, before the venture capital fund makes any investment, the investment committee will be required to issue a corresponding decision. However, if the Ministry commits more than 50% of the fund’s total capital, the members of the investment committee must be appointed with the Ministry’s approval.

Furthermore, the Regulation expressly identifies the areas in which fund resources may not be invested. Accordingly, investments may not be made in companies operating in the following sectors or activities:

• Activities involving the production, trade, or provision of services in violation of applicable legislation,

• Areas contrary to law, public order, or general morality,

• Tobacco, alcohol, casinos, and betting activities,

• Exclusively real estate investments,

• Activities of a political or ethnic nature.

Reporting

The Regulation also establishes a monitoring and audit framework to enable oversight of the investments made by venture capital funds that receive allocations. In this context, the fund manager must submit quarterly reports to the Ministry, providing information on the current status of ongoing activities, progress, and associated risks concerning the implementation and fund investments.

At the end of each fiscal period, the investment committee will select an independent audit firm from among the options proposed by the fund manager, and the selected firm will prepare an annual audit report.

Sanctions

If the Ministry determines, directly or indirectly, that the resources allocated to the fund have been misused or utilized for purposes other than intended, it  may take any measures required under the circumstances pursuant to the powers set forth in the Regulation and the investment agreement. Such measures may include suspending its capital commitments to the fund, initiating the liquidation of the fund, notifying the relevant public authorities, and pursuing legal remedies.

Conclusion

The Regulation establishes the framework governing the public resources to be allocated to venture capital funds and the investment activities of these funds, thereby enabling a public legal entity to participate as an actor in the venture capital market. We will continue to monitor the Regulation’s implementation and its practical implications.

A summary of the key differences between the Resolution and the Regulation is provided below:

Subject	Resolution	Regulation
Resource Allocation Period/Amount	The total amount of resources to be committed to venture capital funds by 31 December 2023 was capped at TRY 2 billion, excluding expenses and fees payable to the funds, as well as any exchange rate differences arising from commitments denominated in foreign currency.	This time, no time or amount limit has been set with respect to the allocation of resources.
Ministry Commitment	It was regulated that the amount that the Ministry of Treasury and Finance could commit to a venture capital fund was limited to 30% of the total commitments made to that fund; for venture capital funds being established for the first time, this commitment amount could not exceed 50% of the total commitments. In addition, the Minister responsible for the Ministry of Treasury and Finance was authorized to increase these ratios.	No limitation has been introduced on the amount the Ministry may commit to a venture capital fund. However, for sponsors establishing a venture capital fund for the first time, the evaluation criteria set out in Article 6 of the Regulation will not apply, provided that at least 50% of the fund is committed by other investors.
Non-Eligible Companies for Investment	It was regulated that venture capital funds receiving public resources were prohibited from investing in companies operating in the following areas: Production of tobacco and alcoholic beverages, Manufacture and trade of weapons and ammunition, except for the defence industry, Areas whose principal activity is real estate, Infrastructure investments, Activities prohibited by law, Areas designated as prohibited activities under the protocol.	While the framework continued to prohibit investments in companies operating in these categories, it is notable that the scope of prohibited activities has been broadened under the Regulation.
Audit and Monitoring	The activities of venture capital funds receiving resources were subject to an annual audit conducted by an independent audit firm designated by the Ministry of Treasury and Finance.	In addition to the annual independent audit to be conducted by an independent audit firm designated by the Ministry, the monitoring frequency has been increased through the introduction of a quarterly reporting obligation. Accordingly, the fund manager must provide the Ministry with quarterly reports on the progress of the implementation and the fund’s investments.