Angel Investors Focus on Promising Iranian Startup Scene

Now that the United Nations has lifted sanctions against Iran, many business professionals have turned their attention to the entrepreneurial potential of the nation. While Iran was once a leading producer of oil, many people have also begun paying attention to the Iranian tech industry. Recently, the Silicon Valley angel investment firm Angel Labs announced that it had recruited about 35 Iranian angel investors to launch the first network in the nation. The attention of such a prominent angel investment firm will likely assure a lot of Americans and Europeans of Iran’s potential. Investors around the world are constantly seeking out the best untapped markets and the lifting of sanctions now provides an opportunity to take advantage of the innovation occurring in Iran, which is recognized as one of the most entrepreneurial nations in the Middle East.

board roomThe Angel Labs network in Iran is called Ava Angels. At present, the network consists primarily of C-level executives at major banks. While the network claims to be the first to launch in the country, another organization called Karaya has already begun operations in Iran. Since the banking system in Iran is so dated, it is difficult for local entrepreneurs to secure funding from Iranian financiers. However, the emergence of angel networks could attract people from Turkey and other countries in Europe who want to invest or co-invest in the nation’s ecosystem. Americans continue to face some investment hurdles due to sanctions and travel restrictions, but it is not likely that these obstacles will be removed in the near future.

The Role of Angel Investors in Iran

Although Iran has a lot of potential, its entrepreneurial ecosystem remains nascent, and investors need to act cautiously and approach it with realistic expectations. The majority of local investors are looking for small exits through acquisitions. Foreign investors would be smart to team with reputable local institutions that are capable of completing due diligence, which is the promise of firms like Ava Angels and Karaya. In the beginning, these networks will look for smaller investments in the tens of thousands of dollars, but these figures could grow significantly in the near future.

career-544952_1280Angel investment networks also help protect entrepreneurs. At present, Iran does not require that angels be accredited to some companies that may be hesitant to accept a deal, especially if it seems too good to be true. By working with an angel investment firm, startups protect themselves from predatory investment practices. Moreover, Ava Angels plans to connect its entrepreneurs with mentors from Silicon Valley to give them a better idea of how to grow their ideas into successful ventures.

Iran boasts some of the best universities in the Middle East. These institutions have contributed a great deal to the country’s strong biotech and nanotech industries. The people behind these companies are eager to forge relationships with those outside the country who can help them realize their promising ideas and generate excitement about the future of startups in Iran. As foreign investors become interested in Iran, others will likely follow suit. Moreover, the sudden buzz of excitement about Iran could also have effects on the startup ecosystems elsewhere in the Middle East, as investment in this region becomes more mainstream. Despite the fact that incredible innovations are starting to come out of the region, the growth of the startup industry continues to be slower than in other emerging economies, such as Latin America and Southeast Asia.

The Future of Iranian Entrepreneurship

While Iran is lot lacking in talent or intelligence, many of the people with industry-changing ideas do not have the business knowledge they need to bring their ambitions to life. In addition, securing funding in the nascent ecosystem remains difficult. While the creation of angel investment firms shows a lot of promise, there are still only two organizations to serve the entire Iranian entrepreneurial system. Recognizing these challenges, Mohsen Malayeri teamed with other individuals to create the Iran Entrepreneurship Association (IEA), which helps to connect individuals with funding opportunities and educational initiatives that seek to instill the business sense needed to develop successful companies.

One of the biggest benefits of Ava Angels and the attention that it is bringing to Iran relates to the country’s image. For a long time, whenever Iran appeared in the news, it was associated with negative events. This fact may cause many potential investors to shy away from the nation or consider it unstable. With major international firms now paying attention to the country, people are more likely to question their perception of the country and examine its potential. Already, the nation has churned out a couple of widely successful companies, including the online retailer Digikala and app store Cafe Bazaar. Digikala, which has raised more than $10 million from European investors, is valued at $150 million. The founder of Cafe Bazaar, Hessam Armandehi, has emerged as a major proponent of the Iranian tech industry. Cafe Bazaar, which is already used by more than two thirds of the 30 million smartphone users in Iran, is growing at a rate of about 35 percent quarterly.