JOIN USIran startups thrive despite sanctions
Low on cash but high on hope, Iran’s technology entrepreneurs are learning to live with revived hostility in the United States and growing suspicion - or worse - from hardliners at home.
Their startups and ecommerce apps are flourishing, driven by government infrastructure support and young Iranians educated both in the country and abroad. Some are even drawing foreign investment in a way that Iran’s dominant oil industry has yet to achieve since most international sanctions were lifted early last year under a nuclear deal with world powers.
Life remains tough despite the easing of Iran’s international isolation. The atmosphere in Washington has soured again, with President Donald Trump signing legislation tightening domestic US sanctions on Iran and threatening to pull out of the nuclear accord.
On top of this, Google and Apple have withdrawn some services temporarily or indefinitely for Iranian users in recent months for reasons including the US sanctions. Still, the absence of US giants such as Amazon and Uber has allowed their Iranian equivalents Digikala and Snapp to grow rapidly. Many other local internet firms are following suit.
Ramin Rabii, chief executive of Turquoise Partners, which facilitates foreign investment in Iran, said Trump’s rhetoric could paradoxically help the tech sector. “If he keeps talking about sanctions, that would increase the risk of investment in Iran, but at the same time it will keep a lot of competition out,” he told Reuters in a telephone interview from Tehran. “Major global players are not here.”
No figures are available on foreign investment in Iranian tech firms. Rabii, however, estimated it at hundreds of millions of dollars since the nuclear deal came into force.
By contrast, an expected rush into Iran’s huge energy reserves has yet to materialise. French group Total is investing in a gas project but Tehran has yet to seal any major oil deals with international partners.
Foreign investment in Iranian tech remains modest compared with regional mega-deals such as Amazon’s purchase in March of Dubai-based retailer souq.com. Amazon did not reveal the price but beat off a rival offer worth $800 million.
Still, Rabii sees a bright future. “Many foreign investors ask me what is the best performing sector in Iran for the next decade. I always name ecommerce and the tech sector,” he said.
Local incarnations
After the relative isolation of the international sanctions era, the tech sector has attracted many young Iranians back from the US, Canada and Europe. They hope to marry their experience of the startup scene with locally-educated talent.
Reza Arbabian left Canada, where he went as a teenager, to join his family textile business in Iran. But in 2012 he launched Sheypoor, the Iranian answer to Craigslist, a US classified advertisements website.
Sheypoor now employs 200 and recently marked its fifth anniversary. Cash, however, remains tight. “Many foreign companies are still hesitant and Iranian investors don’t understand the value in ecommerce. They cannot accept that they need to wait for five years for a startup to make profits,” said Arbabian.
Some outside Iran, especially in Europe where the sanctions net is not quite so tight, are nevertheless willing to take the plunge. Swedish-based Pomegranate Investment, for instance, has taken a 43% stake in Sheypoor.
Iran came late to mass internet access but has invested heavily under President Hassan Rouhani, hoping to attract foreign cash and create more jobs. Smartphone ownership has also rocketed. Such developments encouraged Kamran Adle, an Iranian born and raised in London, to move to Tehran last year.
“Iranian infastructure has dramatically improved in recent of years. 3G and 4G is much more commonplace than it was a couple of years ago,” said Adle, whose firm Ctrl+Tech invests in early stage startups and helps them to develop apps. The Revolutionary Guards, a military force that runs an industrial empire, largely control telecommunications in Iran. However, tech entrepreneurs say the environment is generally supportive. “We haven’t come across any of those governmental push-backs,” Adle said.
Eddie Kerman, of London-based Indigo Holdings which links retail investors to Iranian tech firms, is optimistic.“American companies like Amazon might not be able to enter the Iranian market, but there is a significant possibility that European or Asian companies buy the larger Iranian players,” he said.
Reuters