Can Iran be a Successful Startup Hub?

With major startup hubs like Dubai already creating thriving companies and emerging markets like Bahrain promising to continue the momentum, entrepreneurship is entering a golden era in the Middle East. A recent article in Forbes pointed to yet another emerging Middle Eastern startup market—Iran, where many of the indicators of entrepreneurial success already exist. It has a highly educated, technologically savvy population, and there is both government and private-sector support for startups.

tehran, iran

According to Iranian government figures, 45 million Iran citizens have access to the Internet with a 120 percent mobile phone penetration rate. The country is also home to the Sharif University of Science and Technology, a highly rated institution with a much lauded electrical engineering program. However, the country faces a major hurdle—emigration.

According to the International Monetary Fund, more than 150,000 educated Iranians leave the country each year. This costs the Iranian economy about $50 billion annually and could severely hamper entrepreneurial growth.

Another large obstacle to Iranian entrepreneurship is government censorship and bandwidth limitations. At present, the government maintains a monopoly on bandwidth and has exclusive rights to sell it to the Iranian people. As a result, Iranians have fairly slow connections and must often pay much higher rates for Internet access than those living in neighboring countries do. The government has also imposed sanctions that limit the ways in which startups can secure funding and grow their business. Having previously committed sanction violations for doing business in Iran, many Western companies have been afraid to make deals with promising startups and risk incurring such penalties again.

Despite these hurdles, many cities throughout Iran have seen rapid growth in entrepreneurship, especially since the announcement about lifting the international sanctions.

Iranian Entrepreneurs Look Forward to a New Age of Opportunity

In 2016, economic sanctions placed on Iran by the international community will be lifted in return for the country curbing its nuclear program, meaning that Iranian entrepreneurs will finally have a global marketplace in which to test their ideas. Due to the many hardships that Iranian startups struggle with on the home front, some investors think that entrepreneurs in the country are necessarily more crafty and wiser than they are in other parts of the Middle East. However, Iran has never had the opportunity to participate in the global marketplace. Many of the most successful entrepreneurial ventures in the country are merely copies of successful Western companies, such as Amazon, Zappos, and Groupon. As a result, the companies are not viable outside of Iran.

iranian men

Iran has many neighboring markets that its entrepreneurs can target, including Lebanon, Russia, Armenia, Azerbaijan, Georgia, and Turkey. The potential of these markets has driven the creation of several investment firms, which can support entrepreneurs now that international growth is possible.

Prior to the lifting of sanctions, Iran operated in an economic bubble. The SWIFT system that connects banks worldwide did not operate in Iran, nor did PayPal or any major Western credit cards. With this bubble gone, investment firms will more easily be able to move money, which could also begin to attract foreign investors who recognize the potential of such a highly educated and connected market.

The Future of Government Support for Iranian Startups

As the Iranian government recognizes the potential of its citizens to make a weighty impact on the global startup scene, it has already taken steps to improve business conditions in the country. In 2013, President Hassan Rouhani announced that the government had set aside $1 billion in an innovation fund for entrepreneurs. The following year, he called for an upgrade to Iran’s Internet and recognized the importance of reliable access for the future of the nation’s development.

Both government and semi-government organizations have pushed for improved business conditions in Iran. These organizations have largely looked outside the country for examples on how to encourage business growth as officials anticipated the end to economic sanctions. Now that Iranian entrepreneurs will have full access to global banking facilities, they have more potential for growth than ever before.

With sanctions lifted, copycat companies will become untenable, which will drive innovation in a way not before seen in the country. Considering the forms of support available to entrepreneurs—from Iran Startups, which has built a vibrant Iranian startup community, to Sharif University, which produces some of the most talented engineers in the Middle East—it is exciting to see what great innovations are poised to come out of Iran.