Many foreign investors are finding Iran’s market newly-opening to the world as the modern day gold rush. Many countries and companies have already sent delegates, days after the nuclear deal agreement in Vienna.
Some call it the largest untouched emerging market with an economy of over 400B$. The majority of Iran’s native industries are witnessing interest. Many American, French and German car manufacturing companies are already on the move, trying the get back the market they once dominated before the introduction of several Chinese car manufacturers, that enjoyed the absence of the Europeans in the past couple of years. Iran’s aviation industry is attracting significant attention; the demand for Iranian oil and gas has seen a spike and a considerable amount of investment interest has been shown in enhancing Iran’s infrastructure in order to boost production. Other industries receiving similar treatment include pharmaceuticals, renewable energy and petrochemicals.
Wait! What about the Tech & Startup scene?
The question is, what does Middle East’s second largest economy has to offer in the technology & startup sector. Investing in telecom and internet infrastructure has always been very hot amongst investors in Iran thus far, with heavy investments made in the past 10 years and more following. Iran currently has 40 regional and national internet providers.
Under the shadows of sanctions, many startup companies thrived while the bigger international players were cut off from the market. This started the first wave of venture funds in the country in addition to Iranian angel investors taking small risks in early stage startups.
Before VCs and incubators started popping up in Iran, entrepreneurs relied on banks, friends & family for their seed funds, though not many startups were operating at the time. Startups like Digikala raised with their own funds, until one of the first VCs operating in Iran invested 10M$ in Digikala’s early stages in 2012. Digikala is valued at 300M$, and dominates 85% of the e-commerce market in Iran, making their investors happy for the risk they took.
Why is now the right time?
But what makes this untapped market so tempting to investors?
Iran’s market statistics shows promising numbers and stats. Currently, Iran’s population is around 80 million with 67% being under the age of 35 and 42% under 24 indicating a very young nation and a massive consumer population. Iran also holds one of the highest numbers of educated individuals in the Middle East and the Mena region. This 53M under 35 creates an extraordinary talent pool for various startups.
According to the statistics offered by the National Internet Management & Development Centre of Iran, the number of internet users to date is 55M. In addition to that, mobile penetration rate is 120% and about 38% of the population hold a smartphone in their hands according to the report from Iranian Ministry of Communications and Information Technology. Looking at these numbers and the country’s consumer behaviour, Iranians have a vast interest in technology and thirst for innovation. This makes Iran the perfect market in the region to launch tech startups and or to invest in them.
The entrepreneurial landscape is really young and growing at a rapid rate. Comparing the tech entrepreneurship activities in Iran with other countries in the region such as Turkey and UAE, Iran is moving in a higher pace though it may be behind. There are many seed stage and some early stage startups dominant in their markets which are ready to raise their next round of investment in order to expand.
Looking at the startup scene in Iran, there are still many untouched markets and customer segments. This calls on to entrepreneurs to seise these great opportunities. With this amount of market opportunity in a low competitive market with the proper funding, startups in Iran can thrive and expand much faster than in any other location within the region, indicating higher returns on investment and less risk for investors.
Startups in Iran are evaluated significantly lower than their counterparts in North America, Europe and even lower than the other countries in the region like Turkey. This may be due to the very low operation cost in Iran and the currency breakdown back in 2013. In many cases, the salary of a developer in Silicon Valley may be more than the salary of a team of 5 in Iran when converted to dollars. This is what makes Iran an amazing and a very low risk investment opportunity right now.
With the fast growing and vibrant startup community in Iran, many seed stage startups are popping up every week with highly talented teams. There are currently about a dozen startup accelerators/incubators, few VCs, a few dozen active angel investors and one official angel network in Iran. There are reports that 5 new startup accelerators and innovation centers will be opening by the end of the current Persian year. Accelerators are one of the best solutions for maturing the startups and getting them investment-ready. Angles would rather invest in derisked startups that have graduated from accelerators, making the role of accelerators very vital.
Almost all the money raised by startups in Iran was done by local funds. There are only a few startups that had foreign investors, and some known to have invested in startups in Iran were from Singapore, UAE, Sweden and Germany.
Now that a nuclear deal is signed and with the positive changes the deal brings for startups, foreign investors will have the opportunity to assess and dig into this untouched goldmine. There have already been European investors investing in startups in Iran with many obstacles and legal complications in their way. Now, the door will also open wider and will become safer for US investors to venture and play in the Iranian startup world.
Though we need more time for the sanctions to be fully lifted, many firms have initiated their due diligence processes on Iranian markets and startups and many investors are visiting to get a closer look at startup activities in Iran.
It is not far from imagination that Iran could become the startup hub of the region considering all the interest, especially from the investors side to invest in startups in Iran. More conferences and events are taking place, the government is supporting the growing startup movement and more international startup professionals are flying to the country, harnessing the potential the country has to offer.