Creating a Persian Silicon Valley – Iran’s Emerging Innovation and Startup Eco-System

Entrepreneurship

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By: Athar Osama

Legend has it that that the seeds of what we know today as the Silicon Valley were laid at the Stanford University and the Stanford University Industrial Park when a Stanford Professor Frederick Terman who loaned a thousand dollars to two of his students – William Hewlett and David Packard – who ended up creating Hewlett and Packard Company. (1) Then came Fairchild Electronics and the rest is history.

Ever since, the Silicon Valley has been a part and parcel of the folklore of entrepreneurship, technology, and innovation. Governments and locations, from both developed and developing world, have tried to create Silicon Valley clones and the results have been rather mixed. Yet the dream of creating a technology cluster lives on, sometimes in the most unlikely-est of the places.

The world’s best kept secret

The newest aspirants to this global trend is none other than Tehran, the capital of Iran – a country that can easily be described the ‘world’s best kept secret’. Dr. Fereidoun Ghasemzadeh, CEO of Afranet and a professor of management and economics at Sharif University, recently described Iran as ‘the largest unconquered market in the world.’ (2) Not only is it home to potential immense wealth – the second largest discovered oil reserves after Saudi Arabia and the second largest gas reserves after Russia – but also a large and multi-talented population of over 130 million people.

With the promise that easily pales many of its neighbours, Iran is only undermined by its the traditional and archaic socio-economic structures, large (and inefficient) government, the oil-based economy and the dampening of economic incentive to venture that it creates, a lack of maturity of the market economy, and crippling sanctions by the West.

The latter has been both a challenge for entrepreneurs and businessmen since it significantly enhances the cost of doing business in Iran. But it also creates an opportunity for it has shielded them from intense international competition thus allowing them to develop basic technical capabilities. Though sometimes, if not always, only to be hampered again in the efforts to capitalize on this opportunity because of restricted market opportunities.

Entrepreneurs: people are the key

Nevertheless, Iran’s entrepreneurs are brimming with talent and energy to make a difference for their country and, in the process, money for themselves. They also feel that there is a narrow window of opportunity to use technology to transform Iranian society and this ultimately shall open doors to many more possibilities. Several demographic statistics are worth noting here:

40% of the Iran’s population – around 80 million people – are between the ages of 20-40 years. This generation of baby boomers – the generation that was born after the Revolution and the Iran-Iraq war – is both young and restless and pushing for rapid changes within the society.

60% of the university graduates are women. 40% of the students study engineering at the bachelors level, though up to 40% of university graduates are unemployed. This makes for perfect conditions for an entrepreneurship revolution in Iran. And there are already signs that this is beginning to happen. Many of these young people will, in the process, create the future for Iran, and for the World.

Three frontiers for Iranian entrepreneurs

A number of ‘me-too’ startups have used internationally successful business models to fill particular gaps within the local eco-system. Whether these are group buying (Khafifian.com), online ecommerce (Digikala.com), crowdfunding (Hamijoo.com), online video sharing (apparat.com), or online food delivery (mamanpaz.ir), these startups have begun to target gaps in local socio-economic structures as a starting point for a transformation that has to come. (3)

In doing so, they have avoided falling into the trap of expecting the government to catch-up. Techcrunch, the technology industry website, has called Iran the ‘latest country the internet economy is emerging in.” (4) There are also signs that the German Rocket Internet model is beginning to take hold in Iran. (5) This has been, and rightly so, the first frontier in Iran’s quest to use technology within its society.

The second frontier – something that many entrepreneurs have been silently pushing at for several years – is where technology meets the traditional sectors such as transportation, healthcare, logistics, and the like. Here, there are still considerable challenges because of the considerable inertia within the country’s socio-economic infrastructure. This will require going beyond the ‘me-too’ products to create solutions that will address typical Iranian problems.

Here, the government can use its procurement power to make a difference to create market opportunities for the entrepreneurs. But, like most other governments in the developing world, fall short of doing so. One could find entrepreneurs with decent products who would have readily found government support in another (developed) country complaining that there is no market for them within Iran.

The final frontier for Iranian entrepreneurs shall be to target global markets from Iran. There are riches to be had in selling to the world and there is no reason that why creative and entrepreneurial Iranians can’t have a fair share of the pie. However, doing so will require not the removal of Western sanctions – just leveling the playing field for them but also exposing Iranian entrepreneurs to global competition.

While there are some examples such as Parsa Ghaffari’s Artificial Intelligence Startup Ayelien, among others, creating the next Facebook, Google, Microsoft, WhatsApp, or the like does not often happen in a vacuum. It is no accident that a vast majority of these billion dollar companies were created in the free and laissez faire United States rather than the much more regulated Europe, Asia, or a developing country. While exceptions can happen, creating a system of innovation and venturing that repeatedly delivers shall require more than just luck and raw talent.

Incubators –>  Science Parks –> Accelerators –> VCs

Some help is on the way. In recent years, there has been a lot of focus on creating the necessary ingredients of an innovation and startup eco-system. Here is the government seems to have taken the first step.

Just over 20 years ago, the proposal to set up the country’s first technology incubator and science park was put forth before the Governor of the Isfahan Province and this evolved into the Isfahan Science and Technology Town (ISTT). Over the years, Iranians, through government involvement at various levels, have created 34 science and technology parks and more than 150 incubators. These investments, though managed in a semi-private sector fashion, laid the foundations of an emerging entrepreneurial culture within Iran.

Emboldened, the private sector is now jumping in the fray, particular when it comes to information technology startups. Plans are afoot to create Iran’s first private sector STPs. This shall not be encumbered by regulations and restrictions that hamper the usual public sector STPs and will be driven by incentives and flexibility of a true private sector player.

While there was hardly a startup eco-system in Iran in the early 2000s, since 2010-12 it has seen an explosive growth. More than 35 Startup Weekend events have been organized thus far (5). Recently, there have been a number of accelerators and semi-formal incubators that have come in.

Accelerators include DMOND Group (a brand of Plug & Play) and Avatech, though there are several other private sector initiatives in the works. Avatech is most well-known and it recently organized its demo day with 6-8 companies presenting their products. There is considerable angel and VC interest in some of these emerging startups.

Private ambitions, public aspirations

While these exciting developments represent the passion and ambition of private individuals seeking to make a killing at the frontiers of science, technology, and innovation in Iran, there is also patriotism and sense of being at the forefront of history being created for this nation of 130 million people. Young Iranian entrepreneurs believe it is in their grasp to fundamentally change Iran’s standing in the world by showing the tremendous raw talent and energy that this country embodies.

The Government is not very far behind in this for they too have public aspirations – of fully integrating with the rest of the world and – of using the immense power of technology to solve Iran’s (and the World’s) problems, most notably youth unemployment but also increasingly address the country’s economic competitiveness and its transition from an oil-based to a knowledge-based economy.

It is evident from the ongoing negotiations between Iran and P5+1 that Iranians and their Government want the crippling sanctions to be lifted and for Iranians to play a role – according to their weight – in the global eco-system through creation of new technology and knowledge. Many countries of the West, particularly, China and Europe are equally eager to embrace Iran when such a break through happens for they are dazzled and charmed by the raw talent and potential of this 5000+ year old civilization.

One indicator of this was organization of the iBridges Conference in Berlin where Iranians from around the world descended to have a fundamental conversation among themselves and with others from the around world about the opportunity that this country represents.

Perhaps this is a sign of things to come. Parsa Ghaffari, an Iranian Entrepreneur described the excitement in the following words:

“Iranians are, just like Israelis, very entrepreneurial. They don’t really like to work for a big company for 30 years. So I think that’s why this whole concept [of startups] became so popular so quickly in Iran.” (5)

If words had between the lines meanings, this sentence would say a lot about how Iranians see themselves and the future potential.

Iran is ready to take on the challenge of technology. Whether the world is willing, yet, to take a step forward is another story.

References:

1) http://www.netvalley.com/silicon_valley/Fred_Terman_Father_of_Silicon_Valley.html

2) Speech at iBridges Berlin Conference available at: http://www.ibridges.org/conference-2015

3) http://www.theguardian.com/technology/2015/may/31/amazon-iranian-style-digikala-other-startups-aparat-hamijoo-takhfifan

4) http://techcrunch.com/2014/09/02/the-next-tech-startup-ecosystem-to-emerge-iran/

5) http://www.geektime.com/2015/05/26/the-persian-dream-an-in-depth-look-at-the-iranian-startup-scene/

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