ONE MAN’S CHALLENGE, ANOTHER MAN’S OPPORTUNITY

Iran 2017 | TELECOMS & IT | FOCUS: START-UPS

As a result of international isolation, the tech start-up scene in Iran is incredibly vibrant, and a new ICT Minister paired with increased capital could push innovation even further.

In August 2017, the Iranian Parliament approved the appointment of Mohammad-Javad Azari Jahromi as the new Minister of Information and Communications Technology. At the remarkably young age of 36, he became the first Iranian minister born after the Islamic Revolution. And with his youth comes a forward-thinking mindset that might provide a great stimulus to the ICT sector and Iran's start-up scene in particular.

According to Techrasa, Iran's media source for all things at the crossroads between ICT and entrepreneurship, Minister Jahromi pioneered internet and information accessibility in his role as Deputy ICT Minister in a government that has historically tried to regulate cyberspace through censorship and filtering. One of his priorities as minister will be to support the development of start-ups, within and beyond the tech space. The young minister's vision emphasizes the important role that start-ups should play in shaping the main structures of Iran's economy.
The ingredients for a vibrant start-up community seem to be there. Most importantly, Iran's demographics are favorable to tech entrepreneurs. Youngsters that are typically early adopters of tech innovation are widely present. With a median age of 31.1 years, Iran's population is significantly younger than the US, with an average age of 37.9 years, and the EU, with 42.7 years.
In addition, Iran's population is urbanized and highly educated. The brain drain that severely affected Iran for many years is as good as gone. Ten years ago Iran still topped the list of countries that saw their academic elite exit, a worrying trend that consecutive governments have been keen to reverse. Between 2000 and 2016, Iran's net migration rate increased from -4.5 to -0.1 migrants per 1,000 people.
And finally, perhaps most importantly, Iran's population is mobile and tech savvy. The mobile phone penetration rate of 97%, and the number of mobile phones in use per 100 citizens is among the highest in the world. These are all factors that fuel Iran's potency to develop into a breeding ground for tech entrepreneurs.
Over the course of the last years, some start-ups have managed to become established names to millions of households. As a result of Iran's isolation, global tech names have not been able to access the 80-million strong Iranian population. In this vacuum, domestic start-ups have been battling for the attention, and wallet, of the e-consumer. Focusing exclusively on the needs of the local market and without competition from cash-rich international “tech unicorns," Iranian app-based taxi services and e-commerce companies have been free to capture market share. But they certainly are not merely temporary local alternatives, as they are determined to capitalize on their understanding of Iranian consumer preferences and their well-connectedness in the country.
Iran has an active community of start-ups, a dynamic ecosystem in which entrepreneurs support each other. In addition to 31 government-funded tech incubators, private sector incubators and accelerators will be the real drivers of technology innovation and start-ups. Sarava is the big name in Iranian venture capital, with a portfolio that includes Digikala, the most dominant venture in online retail with a 90% market share, and Cafe Bazaar, the largest Iranian android marketplace.
Yet, the lack of sufficient venture capital firms with enough know-how for scaling is an issue. After the initial seed funding, start-ups are forced to bootstrap, which may keep a lid on growth. With a new ICT minister keen on fostering a tech-friendly environment of entrepreneurship and supporting the role of SMEs in the economic fabric, an increase in venture capital could push innovation and ICT start-ups even further. Isolation may have proved beneficial in creating Iran's tech start-ups, but connectivity to the global market will scale the country's innovations.