Startups promise bright future in Azerbaijan

By Nigar Hasanova

Awareness of startup ecosystems is crucial not just for startups, investors and the entrepreneurial community but also for governments and large corporations. Understanding startup ecosystems benefits decision-makers and puts them in a position so that can grow their business environment. A thriving startup ecosystem boosts the economy, creates a talent pool and generates jobs locally.

The Azerbaijani startup ecosystem took shape in the early 2010s with the country’s first major startup event, Startup Azerbaijan, held in 2012. That same year, two of the country’s largest telecommunication operators jointly launched Applab, an incubator for tech startups dedicated to developing new mobile apps. Later that year, the government established The Pirallahi High Tech Park, the country’s first tech-oriented business park.

Azerbaijan pays special attention to the startups and funds them to develop. The government is soliciting domestic and international private and corporate venture capital, and banks are encouraged to lend to startups.

Even foreign investors confirm and appreciate the startup potential of the country. Alastair Lukies, Chairman of the FinTech Alliance, told journalists on the sidelines of the InMerge Innovation Summit held in 2023, in Baku, that Azerbaijan has the potential to become a leader in innovation in the region.

"It is absolutely clear to me that Azerbaijan has all the necessary conditions to create a successful innovation environment. We have heard from ministers, senior leaders, and innovators that everyone wants to work together to make this possible. Only when people work together do they have a chance of success," he emphasized.

Farid Ismayilzade, the founder of the US company Technovate Investments also confirmed it at a meeting with representatives of the innovation ecosystem. He noted that despite there are many wealthy people in Azerbaijan, few of them invests in startups.

According to Farid Ismayilzade, their Angel Club has invested in startups from Azerbaijan, Georgia, and Central Asia.

"So far, we have invested $ 250,000 in startups. But the value of the startups we sponsor now has reached $ 23 million."

This year there has been significant progress on this issue. The first Azerbaijani venture fund – Caucasus Ventures has announced its plans to invest $6.6 million in 50 projects in the next five years. The fund will mainly invest in local – Azerbaijani startups that have global growth potential and investments in regional start-up is also a possibility.

The amount of investments will be between USD50,000 – USD250,000 depending on the development stage of a startup. Some of the verticals that the fund will mainly focus on are travel tech, SaaS solutions and fintech in mainly seed and growth stages while some follow-up investments to an early stage will also be possible.

Recent changes aren’t limited to venture funds to revive startup deserts it also includes cultivating angel investors. Angel investor school has been opened in Azerbaijan. "Technovate - Sabah Angel Investors Club" with the support of Azerbaijan’s Innovation and Digital Development Agency announced the opening of the Angel Investor School in Azerbaijan. Technovate - Sabah Angel Investors Club has introduced the Angel Investor School, marking a groundbreaking initiative in Azerbaijan, said Economy Minister Mikayil Jabbarov.

"This program is designed for individuals aspiring to become angel investors, offering them a unique opportunity to gain theoretical knowledge and practical experience from renowned trainers from the US. Upon completing the program, graduates will be granted the privilege to invest in startups from advanced nations, particularly the US. This initiative is poised to make a significant contribution to the innovative development of our country's startup ecosystem, while also enhancing investment activity and fostering a more conducive business environment," he said on X.

The purpose of the school is to provide angel investors in the country with theoretical knowledge first, and then by making them club members. Participants who graduate from the program will have the opportunity to invest their money in startups.

The founder of the school, Farid Ismayilzadeh, says that this is a mind-blowing concept in the investment sphere.

"We're witnessing how relatively small investments can make a difference by becoming major stakeholders in American companies. This event is an extraordinary opportunity to challenge preconceived notions about angel investing."

As a result of the Azerbaijani government's open support, private firms and investors are gradually growing their investments in Azerbaijan's startup ecosystem. The Opening of Angel Investor School in the country could be considered as a first step in the process. Due to such positive approaches, Azerbaijan’s business environment is expected to rise in global rankings and to be home to several forward-thinking founders and innovative startup teams eager to discover novel approaches to achieving a strong product-market fit and finding a solution to the world's problem.