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The startup ecosystem of Armenia

The startup ecosystem of Armenia

14 Nov 2019

Armenia is a small country in a Caucasus region with an ancient history and incredible achievements today. Despite the problems in the economy, the government parlayed on entrepreneurship and high-tech, and it appears, that they did not miss the shot. In the last 10 years, dozens of successful projects orientated on a global market were launched in Armenia. Let’s see what a startup ecosystem of this country is like.

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General info

Surprisingly, there are several times more Armenian emigrants than there are Armenian residents. And one important moment, when they achieve success, they are striving to help not only to their relatives, who stay in the Motherland but also to the country in general. Thanks to the help of ex-pats, funds and accelerators are being created in Armenia, business projects are being launched and financed. The government is also trying not to stand aside.

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Education

Armenia pays great attention to education. Children do not only receive the necessary knowledge in general subjects but also, what is important, they learn how to think: starting from the fourth grade, chess is taught in Armenian schools. Armenia with a population of three million is one of the three world leaders in the number of chess grandmasters per capita.

Many of Armenian schoolers study robotechnics. An interesting fact: as of 2017, robotics laboratories were functioning in 15% of Armenian schools. As of September 2019, this figure was already approximately 25%. It is planned that thanks to a special program, by the end of this year, robotics in Armenia will be studied in 50% of schools.

In Yerevan, there is also The Armenian University of Armenia — the first educational institution accredited in the USA in the territory of the former Soviet Union. A degree from a university is recognized in the United States and has the same status as a degree from a university in the United States.

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Technologies

In Armenia, the technological industry shows rapid and sustainable growth: 20–25% a year. In 2016, Armenia demonstrated the growth of 38,5%!

World technological giants not only know about Armenia but have already opened their rep-offices and educational centers. Among them, one can mention Microsoft, IBM, Synopsys, National Instruments, Oracle, VMWare, Cisco, Mentor Graphics, Teamviewer and D-Link. They work more than efficiently: 100 VMWare engineers in the Yerevan office earn 30% of all company revenues, 3 researchers from the Yerevan office register 50% of the patents.

A few more facts: an Armenian company Shadowmatic won Apple Design Award 2015, and a page of artificial intelligence research laboratory YerevaNN A1 — is the most famous resource for deep learning in Google.

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Ratings

According to the World Bank Doing Business research, which is held in 190 countries, Armenia is ranked 10th in terms of ease of starting a business, and 13th in terms of speed, simplicity and cost of registering property.

In 2019, the country entered the rating of Foreign Direct Investment Regulatory Restrictiveness Index of Organization for Economic Cooperation and Development (OECD) and ranked 10 among 69 countries.

At Global Innovations Index 2019, hosted by the World Organization of Intellectual Property, Armenia took 64th place among 130 countries.

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Top famous startups

Even now for Armenia is characterized by high-tech and business culture both on the governmental and on the social levels. The government supports technological entrepreneurship: an income tax duty is 0% and a payroll tax is 10%.

Startups themselves are focused not just on success, but on success in the global market. This is due to the small size of the country and, accordingly, the market — in order to win customers and reach profit, the project is simply obliged to go beyond the borders of Armenia.

Let’s see how Armenian startups managed to do so.

PicsArt

A world-famed service for photo editing and the cognominal social network. The project was founded in 2012 by Hovhannes Avoyan. PicsArt audience is 120 million people, and 1 million pictures are created on the platform monthly. The headquarters of the company is located in Yerevan. Now service offers hundreds of tools for photo editing, a possibility to share works both on the platform itself and in other social networks. The project took the 5th place in Forbes Top 50 Startups of 2015.

Monitis

A platform that helps to monitor website performance. It helps to control websites, servers and applications. It shows the website’s operational time, response time, monitors the working efficiency of servers, network capacity, metrics of users. Project is set up in 2006 and now is used in 197 countries by 200 000 users.

Memoir Systems

Service in the field of semiconductor technology for increasing the performance of storage devices is actually an embedded memory technology. The project was launched in 2009. Now the owner of the startup is the American multinational company Cisco, which develops and sells network equipment for large organizations and telecommunication enterprises.

LiveLook

Cloud service for sharing the visual information in real-time. It presents users an opportunity to make the product presentations remotely, it also has a co-browsing feature. In June 2014, American corporation Oracle bought a startup but retained the project development office in Yerevan.

Joomag

A multifunctional platform for digital publishing. Includes a feature of creating interactive content and its distribution by many channels, a possibility of result tracking, monetization. The startup is positioning itself as a tool for content-marketing and corporate communications.

Teamable

A service for a quick search of highly qualified professionals for your team. Helps to automatically select suitable for the company employees with open positions.

SoloLearn

An application that allows learning programming from scratch. There are 1638 lessons posted and more than 34 million people studying.

Menu Group

A fast-food delivery service that is currently operating in Armenia, Georgia, Belarus and Ukraine. At one time, Menu Group became the first food delivery service in Armenia.

The project was founded in 2012, the staff is about 1,000 employees.

ggTaxi

A taxi startup that works on the territory of Armenia, Georgia and Russia. Besides ggTaxi, there is a cargo transportation service — ggTruck and auto evacuator — ggEvacuator.

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Funding of Armenian startups

Yet, there is no organization in the country, that would gather all the venture investors. It is so due to the small sizes of the state, the fact that there are not that many investors and their functions are usually performed by incubators, and funds for entrepreneurs, which hurl together founders with potential investors from abroad.

In recent years, together with other countries and funds, a range of projects were launched in the country, they aim to detect and support, especially financially, perspective startups.

One of such projects is Support to SME Development in Armenia or SMEDA — it has been working since 2016. It is financed by the European Union and the German Federal Ministry for Economic Cooperation and Development. The project aims to improve business and investment climate in Armenia, to support the creation of small and medium businesses. In the project’s framework, it is possible to win a grant up to 50 000 EUR for startup development. Armenia Startup Academy was created with the support of SMEDA, dozens of startups have already undergone it.

A non-formal network of business angels of Armenia in the industry of science and technology — Science and Technology Angels Network — STAN — was created in 2018. It united 18 investors and entrepreneurs from Armenia, Russia and the USA. At the moment of creation, STAN was planning to financially support from 3 to 5 startups a year. The industries of interest to business angels from this organization are microelectronics, data science and IT, biotechnologies, advanced materials.

An Armenian network of business angels and Angel Investor Club of Armenia, AICA emerged in Armenia last year.

The government of the country also supports startuppers. A cooperative program of the Ministry of Economy and the U.S. Civilian Research & Development Foundation, named STEP (Science & Technology Entrepreneurship Program), helps entrepreneurs and scientists to create innovative products and to promote them. Being sponsored by STEP, enterprises can not only receive consulting assistance but also financial help worth 6000$.

Talking about the venture funds, there are not many of them in Armenia. Usually, Armenian startups are created for the global market and from there they attract investments. Usually, these are the investments of the American venture funds. Below there is the information about the most famous venture funds in Armenia.

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Granatus Ventures

The first venture capital firm in Armenia. It was established in 2013, offices are located in Yerevan, London and Singapore. The company sees its mission in the transfer of knowledge from one generation of entrepreneurs to another. The fund invests in startups with innovative breakthrough value propositions, a real business model and, of course, a team, that is involved in the project and believes in its success. Granatus Ventures primarily invests in startups that are connected with the latest solutions in the sphere of social, mobile analytical and cloud technologies. They invest in startups around the world, but the product is to be developed in Armenia.

Among the most famous projects of the fund are Menu Group, ggTaxi, which I have mentioned already. An unusual startup, in which Granatus Ventures invested, was News Deeply. It is a new media- and technological company that offers its own approach to the news feed. News Deeply specializes in creating and maintaining websites, that are dedicated to one specific problem. The first website of this kind — Syria Deeply — appeared in 2012 and is dedicated to the civil war in Syria. Later on there were launched such websites as Malnutrition Deeply, Oceans Deeply, Refugees Deeply, Water Deeply, and Women’s Advancement Deeply, — all of then highlight very concrete problems of modern society. The company is now located in New York, though its journalists and editors are working around the world.

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HIVEVentures

This fund was established in 2014, in California, the US. HIVEVenture sees its mission in catalyzation of Armenian technological system through investments into startups, the founders of which are Armenians. It doesn’t matter in which country a project was launched. The fund does not only provide financing but also helps with mentoring from the lead professionals from Silicon Valley. You have to be a technological startup from Armenia to receive support from the fund.

Among the most interesting projects, which are financed by the fund are Gecko Robotics, which offers solutions for the industrial sphere; Discotech — an application, in which you can get information about all of the events and parties in the city, to book a table in a nightclub, to get a discount or even a free entrance to a party.

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SmartGateVC

A VC fund from Silicon Valley, that finances projects in the industries of AI, security, IoT, biotechnologies, quantum calculations and blockchain. The Armenian branch of the fund was created in 2017 on the initiative of Ashot Arzumanian, Hambardzum Kagkersian and Vasgen Khakobianian.

A so-called Hero House was opened by a spearhead of the fund, it is a co-working space, which promotes the Silicon Valley entrepreneurship culture in Armenia. The fund supported the creation of the blockchain-developers community yLedger, a quantum calculations hobbyist community, and also took the lead in the creation of the Catalyst Foundation accelerator.

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Incubators and accelerators in Armenia

Several large organizations work in Armenia and help startuppers to launch and skilfully develop their projects. Some of them support entrepreneurs in the role of mentors and coaches, others provide financial help or help to find financing.

1. Microsoft Innovation Center Armenia

This center initiates target projects and events that include educational programs for innovative startups. The team sees its aim in the formation of the key business competencies in the beginning entrepreneurs and teaching them how to work with technologies.

The center was co-founded in 2011 by USAID, Microsoft corporation and one of the major business incubators of Armenia — Enterprise Incubator Foundation. There is a program of startup acceleration for those who think about creating their own startups. Entrepreneurs are helped on how to form an idea and evaluate how viable it is; promote a product on the local and global markets; they are also given a possibility to find financing for a project — through venture capital funds and business angels.

2. Impact Aim

Impact Aim venture accelerator is created and works supported by the United Nations Development Programme. The accelerator is interested in projects in the sphere of agriculture and recycling food waste, in startups, whose final product will improve the quality of life in the region (both in cities and countryside), projects in the sphere of green economy, innovative startups in the spheres of govtech, edutech, fintech; projects that will help to the at-risk population groups.

3. Enterprise Incubator Foundation

An incubator was founded in 2012 within the World Bank Enterprise Incubator project. Projects of the incubator cover all the important IT-industry aspects. On the company level, the incubator strives to detect sustainable business ideas and turn them into functional startups. On the government level, the incubator promotes the idea of e-governance and helps to form the national brand of Armenia as an IT-state. The incubator is a partner of a range of international companies and organizations.

4. Entrepreneurship and Product Innovation Center (EPIC)

It is an incubator of American University in Armenia, helps students, graduates and other entrepreneurs to develop and promote their projects from an idea to a functional product. The Center offers a co-working space, specialized programs and events, communication with coaches, consultants and mentors.

EPIC acts as a sponsor of lectures, startup conferences and hackathons. The incubator has a sophisticated prototyping laboratory. It is unique in Armenia, here you can easily and qualitatively create a prototype of a product of your project. Among the equipment one can mention FARO EDGE 3D scanner, one of the most advanced measuring tools for today, 3D printers.

5. Catalyst Foundation

An organization that also sees its goal in supporting prospective projects, which are capable of making it out to the global markets. Its creation was supported by the already mentioned venture capital fund — SmartGateVC. It specializes in technological entrepreneurship. Armenia Startup Academy is one of the Catalyst Foundation’s initiatives.

The accelerator supervises the work of the Heroes House co-working space, as well as a large-scale event called Startup Boost Weekend — a kind of startup hackathon, which is organized from 2 to 4 times a year.

Catalyst Foundation has masterminded Al Incubator — a 12-week incubation program, in the framework of which, the representatives of technical companies work with students of leading universities. Projects are dedicated to such topics as cryptocurrency, robotechnics, marketing automation, cyber-security, quantum calculations, media and computational biology.

On the initiative of the organization, the School of Entrepreneurs was created and successfully operates, #landed project was launched, that helps talented people to unite and create their startups, and was opened Gate42 — a quantum computing research laboratory.

6. Beeline Startup Incubator

This incubator positions itself as an “inspiring environment for entrepreneurs”, it was created by the initiative of the largest TV-broadcasting company in the state — a Closed Joint-Stock Company (CJSC) “VEON Armenia” (Beeline trademark). It helps Armenian startups with trainers, mentors and investors, that work in the digital industry, hurls together startups and trainers, mentors and investors. plans specialized events for innovative entrepreneurs: workshops, learning courses and etc.

The incubator was created in April 2018. This spring, it was announced that the third phase of the program will be launched in conjunction with a network of business angels of Armenia, this will allow the best teams to attract investments to their projects.

7. Startup Grind Yerevan

A Yerevan branch of the world’s largest independent startup-community — Startup Grind, which unites 2 000 000 entrepreneurs. A global sponsor of the organization is Google for Startups.

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Conclusion

The Startup Ecosystem of Armenia is an example of how a post-soviet country with a checkered history of independence, is striving to build up a digital and innovative state. Armenia is not a rich country. However, thanks to the help of diaspora, government partnerships, and civil community with international funds and organizations, local startups manage to receive financial and consulting assistance.

There are only a few venture funds in Armenia, and even those were created relatively recently. The investment market is not large and local startups are already at the idea stage thinking how they can break into the global market and how to develop their product there.

A range of platforms is working in Armenia for startup development. Those are the educational centers for entrepreneurs, incubators and accelerators. They give entrepreneurs the possibility to gain useful knowledge and find financing opportunities.


The Armenian capital has joined this community in February 2017. The work of the Yerevan branch is supervised by Narine Kotiyan and Mari Barsegnyan. Usually, thematic events are held under the egis of Startup Grind Yerevan, and in the framework of these events, startuppers can meet the potential investors.

14 Nov 2019

 

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