One of the last untouched emerging markets is opening its door to the world, and Iran’s startup scene has taken the spotlight in the past few years under the shadow of the crippling sanctions signed by the P5+1. After the last wave of sanctions, many Iranian industries faced operational difficulties and obstacles in collaborating with other nations.
When the sanctions hit the hardest, local startups took over the market while their competitors were banned from entering Iran. Companies like Digikala, which some call the amazon of Iran, has successfully dominated the Iranian e-commerce market. Here are some companies that thrived because of the sanctions
The golden question now is what will happen now that a nuclear deal has been signed?
Here are a few changes we can expect:
1. Foreign investment
Reviewing the U.S. Department of Treasury’s rules and regulations on investing in Iran, no company or person can directly invest in Iran. However the EU does allow Europeans to investment in Iran with some restrictions. Now that the sanctions are lifted, a significant number of Iranian investors currently in North America are anticipated to fund Iranian startups, certainly with other Iranian and foreign investors following. Investment models in startups in Iran are maturing specially with the stream of investment to Iran’s highly fertile market. Iran’s consumer savvy market will become one of the top interests for investors looking for emerging markets to invest in. In addition, large number of venture funds is expected to be seen in Iran’s startup ecosystem due to the same effect. Once a deal is signed, banking and trading regulations are the first to be lifted, making foreign investment one of the first factors on this list to be activated.
2. Online services unbanned
Almost every American online service provider is banned from servicing to Iranian companies. From the likes of Oracle, Cisco to various services from Google are banned. When the sanctions are lifted these services are expected to immediately get unbanned, adding a few million consumers to these companies in a matter of days. Additionally, this will result in an increase of technology complexity, knowledge sharing and higher rate of efficiency in startup teams.
3. Local startups will face serious competition
Many startups in Iran have been driving fast on an empty highway with their competitors looking from afar. However international competition is not necessary bad. Once the doors open many regional and international startups will try to take some piece of the pie by entering Iran’s consumer and enterprise markets. This will force Iranian entrepreneurs and startups to rapidly mature in order to be able to compete with their fierce rivals and ultimately will result in educating Iran’s startup talent.
4. Startup community getting more vibrant
Even though there is a healthy amount of engagement between the Iranian and international startup scenes thanks to an active community and conferences like iBridge, a higher engagement rate will result in more collaboration and partnerships. More international mentors and guests will visit to witness Iran’s startup scene and help in transferring knowledge and experience resulting in faster production of top talent. The international community will also obviously benefit from the Iranian talent thirsty for innovation.
5. Money transactions will be possible again
Perhaps one of the biggest problems for Iranian startups that is a direct result of the sanctions, is the blockage of funds transfer and lack of payment portals which are both results of being detached from international banks. Sanction prevented Iranian banks from collaborating with international banks and prohibited international banks from operating in Iran. This very much affects e-commerce providers in and out of Iran. When the sanctions on the banking systems and international transactions are finally lifted, we will see Iranian startups expanding seamlessly with numerous payment methods available at their disposal.
6. Iran’s technology assets will be available to foreign companies
No matter how it might look to the outside world, Iran has a thriving technology sector. The tech companies currently operating in Iran are using cutting-edge technology stacks from more prevalent ones like .NET and Java, to more modern ones such as Python (mainly Django), Ruby on Rails and LAMP. In addition, there are many hardware and hosting options internally providing world-class services. The raw resources aside, there thriving technology industries operating in Iran which can be integrated to the global networks providing value to entire ecosystem. This includes a thriving online advertising companies such as Saba Vision and Anetwork.
Keeping this in mind, the talent and infrastructure available in Iran will be available to companies interested in working in the region which will surely expand their strategic options.
7. Iran’s massive consumer market will be available to the outside world
Even with the restriction in the past years, Iranians have been consumers of products and services available in the global market. A case in point is there will be 40 million active smartphones in Iran with 1 million being active monthly. Considering Iran’s 80 million population, this is a 50% mobile penetration. Iranians have also found creative ways of getting around the restrictions by creating their own secondary marketplaces like Cafe Bazaar, an Iran-focused Android market having a significant number of active users and financial backing.
Once the doors are open, international startups will enjoy a huge tech and consumer savvy market. This lightly-tapped consumer market will be available to global product and services providers once the sanctions are lifted.
On July 14th a deal was struck stating all financial related sanctions to be lifted. Many investors and venture capitalists have already shown their profound interest in backing in Iranian startups before the Iran Deal. The Iranian entrepreneurial ecosystem has no choice but to lift itself up to global standards in order to compete with their international counterparts. With proper mentorship and guidance from experts (Iranian startup diaspora will play a major role), Iranian entrepreneurs can be empowered to compete with the rest of the world. This will mark a new era in the Iranian startup scene.
Photo credit: Mohammad Hassan Ettefagh