The First Impression

The first week of my trip was eye opening. I walked into Avatech & at a first glance saw a Lean Canvas per team on the walls. The teams walked me through their businesses,  product roadmaps & go-to-market strategies. They were fully aware of the startup lingo & I felt right at home. In the days after, I met up with a few more entrepreneurs, Angels & VCs. I vividly remember that none of this was there in 2010 when I paid Iran a visit. We’re all very proud of what Iran’s startup ecosystem has achieved in the past few years. So much has been built & the movement is strong. There are also a few dozen passionate & experienced folks that are helping to guide the Iranian startup ecosystem & we all thank you!

 

The Community

Like any new or established startup community, you have the enablers, community builders, entrepreneurs & service providers. There are folks who are active in all these areas & other gaps are getting filled as the community grows.

There are numerous recurring events happening around the Tehran to bring like-minded folks together to have an open dialog. Here are some of those events:

  • Hamfekr: an open weekly event every Wednesday evening with the purpose of bringing in various locations around Tehran
  • Haka Tehran: a mini hackathon happening regularly focused on finding tech solutions to simple problems
  • Digital Pixel: a monthly event focused around application UI & UX design
  • Startup Grind Tehran: a monthly event that includes a fireside chat with a successful local entrepreneur
  • Want more? Look here!

I’m definite there are more events missing so please list them in the comment section.

It’s unfair to not mention the Iranian Entrepreneur Association (IEA) & all the efforts they’ve put in Iran’s startup ecosystem. IEA has enabled inspiringly passionate & active individuals to enter the ecosystem & has helped in nurturing the community with the many initiatives they are spearheading.

 

Did Somebody Say Talent?

Considering the high percentage of university graduates in the Iranian population, there are loads of candidates for any open position. This doesn’t mean that they are all qualified. At this point in time the idea of working at startups is still not entirely accepted. You’d still hear about a person’s parents not understanding &, even worse, not supporting their children in their startup endeavours. Thankfully that negative attitude is on a decline. There are more & more folks flocking to startup events everyday which is a great sign. There is a mix of university students, recent graduates & employees of not so cool companies that show interest in startups. Most of the founders I’ve met that show promise, are in the early 20s.

One Iran-specific issue that exists is the mandatory military service. All men in the country need to at some point attend the service which usually takes 2 years. One common way to avoid the service is to continue post-graduate studies which will only postpone the attendance. The second common way is to ‘buy’ it out. At any given time, there are various legislations that will allow people with certain conditions to pay a set amount of money to the government to not have to attend the military service in exchange. There are several socio-cultural issues that this introduces but the main one affecting startups is that most of the male talent need to maintain their student status to avoid having to dedicate a significant amount of time to their military service. IEA has been active in pushing for change in this matter to allow entrepreneurs to be exempt from the service with several active initiatives. Some have already been put in effect.

This is worth mentioning that there are noticeably more female entrepreneurs in Iran than other ecosystems. The military service issue for men can be an influencing factor but it’s not all since the female founders aren’t there to fill a gap. They are inspiringly passionate & hardworking! It’s amazing to witness so many women actively starting companies, hustling & growing their startups!

Another talent-related problem that is common with new startup ecosystems is the lack or role models. There are a handful of companies that have reached scale already & those are the top players, however, we haven’t had an exit, a recent tech IPO or even a high profile failure yet. I don’t want to be unfair to the entrepreneurs kicking ass in their markets already. There are many of them that are doing an amazing job like DigikalaSaba IdeaCafe BazaarAnetwork & Netbarg to name a few. That said, the shortage of high profile successful entrepreneurs that can act as a role model for the newcomers is significantly felt. I find young entrepreneurs not knowing exactly where to start, how to manage their day’s worth of work & what level of output they should expect of themselves or their teams.

Overall I have to say, there is an upward trend in new qualified talent entering the scene. I’m optimistic and excited about it!

 

Where Is the Money At?

One of my favourite subjects! I want to start by saying there is an ample amount of funds in Iran that can be put in various startups. There are various firms like SaravaFanap & Rahnema that are the usual suspects when it comes to tech investments with the terms we’re used to in North America. You will find a few dozen angel & super angels that would come into a round. There are also a few angel groups like AvaAngels & Karaya that have been doing great work. The investment scene is considerably much better than even a few years ago. The introduction of a whole bunch of accelerators like Avatech & ones focused on social entrepreneurship like TehranHub (officially launching soon) have helped immensely. So over all, funds are available for deserving startups.

Also like any other emerging startup ecosystem, the terms provided are not exactly what I’m used to. They aren’t jaw-droppingly out to lunch. They aren’t. But there is room to improve & that’s natural. If anything, this is one of the areas I’m the least worried about. As the ecosystem improves with better startups, higher caliber founders & more fund raising rounds, we will witness the market improving itself.

There are two areas that I find we are lacking in the investment scene in Iran though.

One is the disregard for the talent factor. Entrepreneurs with a considerable track record will usually get better terms when raising since their experiences & history will reduce the investment risk. This on one hand is due to the lack of exits & successful local founders going for seconds, & on the other hand due to the fact that it’s generally not recognized. When this topic comes up, I always mention “if Zuck was to launch a fresh new startup, he’ll most probably get an initial valuation in billions.”

The second issue is one that most of us are aware of & it’s the sanctions making it difficult for foreign funds to enter the local scene. Many none-Iranian folks have personally indicated their interest in entering the scene as investors & are awaiting for the resolutions to be put in place. It’s going to be very interesting to watch what happens when this does take place.

 

Let’s Talk About the Lawyers

This is the area that I find we need the most movement in. As it stands so many of the legal definitions were used to like options & NDA that don’t have a defined legal definition in Iran. I do love how the smart Iranian founders & investors have found creative legal ways to define & enforce them. This is still a problem though. Creative legal maneuvers can also be creatively outmanoeuvred. Unsettling!

A short while ago, I also heard that venture capital also doesn’t have legal definition. So all the investment firms currently active are considered investment holding companies. I’m happy to know Sarava is working hard in getting this issue resolved. I tip my hat to you!

As legal issues can significantly affect the wellbeing of a company, I see it as a self-correcting problem & one that the movement & the growth of the startup ecosystem will correct.

 

Now, What Iran’s Startup Ecosystem Needs to Learn & Fast!

This is my favourite part! Opportunities to improve are the most exciting part of any endeavour! The Iranian startup ecosystem is young & in it’s infancy. I’d like to call the present “the Iranian startup renaissance.” Here are a few points, I believe we need to work on:

1.  Talent Is Everything!

Every investor will publicly & proudly state that their mainly invest in talent. The obvious reason is talent is the life blood of any venture. We’ve done great so far but we need to train the next wave of our talent. We need to practically teach them what it takes to build a successful global company. How their work ethics should be. How to create, follow & improve processes. We need to celebrate successes & identify reasons for failures proudly. And ultimately remember that “It takes a village to raise a child.”

2. Think Bigger

A smart friend once told me “whether you build something small & conservative or something huge & scalable, you would the same amount of effort.” I’ve been lucky enough to meet so many talented entrepreneurs working on amazing companies in the past few months of my trip. Yet, most of them don’t fully realize the value of what they are working on once it reaches scale. It’s amazing to see the light bulbs light up once you explain their opportunity’s potential to them. I tie this back to not having enough examples of entrepreneurs & startups who’ve successfully reached scale.

3. Build Infrastructure

One can’t build the next best lightweight track racing rims if there is no high-performance car manufacturer. There are still many markets that are bare & not many are active in them. I’ve mainly spent time with companies who launch platforms & those guys enable many other startups. Payment gateways, CRMs, data platforms, market places, etc. I would love to see more infrastructural startups being built at scale. Kudos to ZarinPalSaba Idea, Cortado & the many others who are setting examples.

4. The Feedback Loop

This is the main indicator of a self-sustaining startup ecosystem. When exited or failed, founders & startup talent pour right back to the scene to try again & create more value. I find this to be the largest gap at the moment. We need to empower failed founders to get back on the horse & the talent that have experience working at these ventures to start their own gigs. Then the good get better & great become leaders. That’s what we need!

 

Where is All This Going?

I’ve witnessed the rate of growth in the local scene. Specially with the scarcity of resources. Folks have showed up from unassuming places & have conquered great feats. They’ve inspired many others. Demonstrated how easy it is to jump in the deep end & thrive. So what do I see in the future for our startup ecosystem? I can confidently say that I’m excited, pumped & optimistic. One thing I know that we definitely need more of is more amazing startups lead by resourceful founders. The more activity, success & even failures we have, the more mature we get as a community & everything else will follow. I can’t wait to witness the growth we’re going to achieve & I invite all of you readers to join the party.

I’d love to hear your views in the comment section, specially if you believe I misrepresented something.
Credits: Photo by Ali Taheri from Tedxkish2015

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3 Comments on "Iran’s Startup Ecosystem: The first impression from Toronto to Tehran"

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Mohsen M Khali
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What a beautiful translation:

Angel investor = سرمایه گذار نیک اندیش

Vahid Jozi
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Hah! That is pretty awesome!

I prefer the term: سرمایه گذار ارزش آفرین