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The region of Central Asia includes five countries — Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. It could seem that there is a small chance of finding a technological project or a fully functional startup ecosystem, as on the global stage these countries are known for their conservative approaches to the economy, internal and external politics.
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However, there are both projects and ecosystems. It’s too early to talk about the “unicorns” as the infrastructure itself is just starting to develop. Nevertheless, it is a start already. It is time to see how startup ecosystems are being established in Eastern countries.
The countries of Central Asia significantly differ from each other both in socio-economic development in general and in terms of the startup ecosystem development in particular. This is caused by several factors: in some countries, for example, in Kazakhstan, the government is actively involved in creating an innovative environment, while in others, for example, Turkmenistan, it is not easy to become an entrepreneur — there are a number of bureaucratic obstacles. The development of the economy and innovations is directly related to the external policy of the country. If the state cooperates with foreign investors, international organizations, then this has a positive effect on the development of an innovative economy. If the county’s policy is closed as much as possible, then startups also suffer.
If we talk about numbers, then the share of Central Asian countries in the global economy is 0.3%. The peculiarity of the region lies in the availability of valuable natural resources. With this, the overall gross volume of oil is 7,2% of the world oil resources and the overall volume of gas is 7% of world resources. In addition, Central Asia takes 9th place in gold mining, 10th place in coal mining, and 19th place in generation of electrical energy. Another significant feature of the region is its geopolitical position: Central Asia is the centre of the Eurasian continent.
In this article, we are going to review how startups are developing in Kazakhstan. Kazakhstan is the leader of the region in all metrics, which relate to high-tech development. There is no fully-formed startup ecosystem, but there are all elements for its formation.
Incubators and accelerators are already working in Kazakhstan, along with venture investors and some of Kazakh startups managed to raise investments that are worth millions of dollars.
Initially, there were attempts to build a startup ecosystem in Kazakhstan following the example of the Silicon Valley. However, the course has changed in the past few years — the ecosystem is being formed considering the local market needs.
Such directions as business optimization, finances, medicine, transport and logistics are considered as the most prospective in the region.
Currently, there are some issues with attracting investors to the country. Local businessmen and organizations which have enough money to invest, do not take startups seriously and believe that they are just fashion influenced products and will be soon gone by.
Talking about ratings Kazakhstan is ranked 46th out of 206 countries, according to the GDP level. According to the rating of local venture market attractiveness created by Spanish IESE business-school, Kazakhstan takes 57th place out of 125.
International financial centre “Astana” was opened in July 2018. The founders expect that this project will allow Kazakhstan to become a financial centre, which could be compared to Singapore or Dubai. In September 2018, according to The Global Financial Centres Index, financial centre “Astana” took 61st place out of 100 biggest financial centres worldwide. “Astana” operates under English law and offers tax benefits to the residents. For instance, the income tax won’t be levied until 2066.
There are around 15 incubators and accelerators working in Kazakhstan. Here are the most famous platforms:
International technopark for IT-startups — Astana Hub. There is an accelerator, many trainings are held along with networking events. The Park was opened in November 2018 and since then it has already worked with more than 300 projects. At the moment, the community includes 2187 participants and 270 registered companies. During its existence, technopark residents have raised around $50 million investments.
Tech Garden is calling itself an autonomous cluster fund, that is working on creating a professional environment for developing innovations based on the mutually profitable cooperation of businesses, startups, investors. The main directions of the cluster are smart industry, new materials, new energy, clean technologies, fintech, e-commerce, new media.
Here we have two accelerators — Tech Garden (local) and StartUP Kazakhstan (international). An international acceleration program attracts local and foreign startups with high exporting potential and gives them a possibility to get $100 000 investment in the project.
MOST business incubator — the first-ever private business incubator in Kazakhstan, which supports entrepreneurs-beginners on all stages of business development — from development to its realisation. MOST opened in September 2015, the incubator’s network has 70 partners in Kazakhstan and connections in 150 foreign countries. The incubator has finished 10 accelerating programs, it has also helped more than 6000 entrepreneurs to get financial and non-financial support. MOST is an official partner of such international startup initiatives as Seedstars World, Startup Weekend and Get in the Ring. More than 90 participants who have gone through the MOST acceleration, raised investments to their projects.
NURIS - Innovation cluster of Nazarbayev University. It unites a commercialization office, a business incubator, tech and science parks. Business incubator has two acceleration programs for startup development: ABC incubation and ABC Quick Start Acceleration. In the framework of incubation and acceleration processes, they offer office spaces, consultations, help with raising investments, attracting investors as well as marketing expertise.
BI innovations — the largest corporate business incubator in the country, which is owned by BI Group. The startups that deal with creating tech-products for construction and real-estate industries can get a place in programs. Incubator participants offer such solutions like operational construction management, automatic design of new facilities, smart home systems, etc. The most promising projects receive investments from BeInTehc Ventures.
Still, there are no unicorns in Kazakhstan but as we can judge from the previous paragraph, there are prerequisites for their emergence. As for now, we have prepared a list of Kazakh startups, which already have some accomplishments.
It is the largest IT-company in Kazakhstan. The internet-holding unites six companies — services for buying plane and train tickets, food delivery and for searching for doctors, along with a service for collective purchases, a mobile benefits program “Rakhmet” and contact lenses internet- shop.
ChocoFamily company appeared in 2010 and since then it has grown by 345 times. In January 2011, the project raised its first $105 000 investments. Ramil Muhoriapov, the founder of the startup, has raised this money from family and friends. In 2013, the project raised another $400 000 from DEMUS Capital. In 2016, Murat Abdrakhamanov, the founder of Astel company, KazTransCom and Dent-Lux, invested another $1 000 000 in ChocoFamily. In 2019, ChocoFamily raised the fourth round of investments amounting to $5 000 000, and this time, the investor was Aidyn Rakhimbaev, the founder of BI Group construction holding. This sum is aimed to develop “Rakhmet” projects and “ChocoFood” service for food delivery.
In 2019, the overall money cycle of the companies, which are part of the holding, amounted to $212 million (more than 86 billion tenge). The company’s market valuation is more than $70 million.
The startup produces robot constructing sets for children. The product is available on Amazon, and on the startup’s website, the cost of the assembling components kit is 179 euros. The startup was launched in 2013 and raised $2,2 million from venture investors.
The startup works with VR-industry; it has developed a technology that can define how machines see and perceive a 3-Dimensional world and how digital objects can interact with the real ones. In June 2018, it was bought by Niantic — Pokemon Go and Ingress games developer.
A personal router, which you can use to connect to the Internet in 150 countries of the world, as well as charge your phone from it. It combines Wi-Fi technology, LTE and a virtual SIM-card. The cost of the basic setup is $150. The startup was launched in 2017 and raised $128 000 on a crowdfunding platform.
The product of the startup is video recording sunglasses. The gadget was developed using AI technology, along with virtual and augmented realities. The pro-order price is $399. In 2017, the project raised $3,5 million from Kenes Rakishev, a Kazakh venture investor and businessman.
It is a cloud HR-system for tracking employee’s work hours. It automatically tags employees by fingerprint, which allows you to determine how much time an employee spent at work. Apart from Kazakhstan, the project has been successfully operating in the Czech Republic, Azerbaijan, Russia, Great Britain, Armenia, Singapore and the Philippines. The project was launched in 2017, and since then, it has raised almost $400 thousand.
Kazakhstan is a Central Asia leader in terms of the amount of foreign capital raised to the economy. 70% of all foreign investments in the Central Asia region go to this country. The total venture capital volume in Kazakhstan is more than $260 million.
In the past few years, there has been an active increase in venture capital investments in local startups. In 2018, there was adopted the law to stimulate the venture capital market development.
There are a few famous Kazakh venture investors, which are worth mentioning:
AO QazTech Ventures. It is a part of “Baiterek”, a national holding structure. They collaborate with “500 Startups” — the leading US venture capital management company. They invest up to $250 000 in every project. Mainly, they specialize in IT-industry. QazTech Ventures is also searching and selecting Kazakh e-commerce startups, for “Quest Ventures” Singaporean fund. They invest up to $150 000 in perspective startups.
SingulariTeam Fund. The working capital fund is $100 million. They invest in projects which focus on artificial intelligence and robotics.
“Sentras” venture fund. The founders are “Sentras” finance group and National Innovation fund of Kazakhstan. Area of interest — fintech. It is one of the Kazakh venture market leaders, they have 15 projects in their portfolio.
ABC Venture Fund — I2BFSeed Fund. It was created in collaboration with Nazarbayev University innovation cluster and I2BF international venture fund. The biggest amount of investment in one project was $100 000. The fund has a wide industrial perspective and invests in very diverse projects connected to innovations in different fields.
QazAngels — a Kazakh business angels’ club that connects entrepreneurs and investors in their search of startups for cooperative investments.
Startup ecosystems in Central Asia are currently in the formation process. Kazakhstan has the most developed environment for launching startups. There are accelerators, incubators, and venture funds. There are no startups with a billion capitalisation yet, however, a number of projects have already managed to make themselves known both in Kazakhstan and international markets.