Azerbaijan’s first generation of startups paves the way for technological lift-off

Azerbaijan’s first generation of startups paves the way for technological lift-off
Azerbaijan wants to become a regional leader in digital excellence and innovation and the first startups are starting to appear. / bne IntelliNews
By Adrien Henni in Baku June 6, 2024

Could Azerbaijan, whose economy remains highly dependent on oil and gas exports, become a regional technology hub one day?

A number of government officials, business leaders, and a first generation of technology entrepreneurs are sharing this vision. “Azerbaijan is now going through a transformational period, creating an environment for startups to access funding, markets, infrastructure, talent and promoting  a certain culture,” says Igor Ovcharenko, Head of Innovations at the state-owned Innovation and Digital Development Agency (IDDA).

“Combined with state and social involvement, local incubation and acceleration programs have led to the emergence of approximately 400 startup companies or projects over the past few years,” concurs Mammad Karim, General Partner at Caucasus Ventures.

Startups are indeed burgeoning in Baku. But with fewer than 30 venture deals per year reported in recent years and an average deal amount of $163,000 in 2023, according to IDDA, the numbers are still modest. Azerbaijan lags behind Georgia and Kazakhstan, which embarked on the path to tech innovation nearly a decade ago, but is ahead of some other post-Soviet countries in the region, where startup development has barely begun.

First startup successes

Push30 stands out as one of Azerbaijan’s largest startups. Its award-winning fitness club membership app generates over $6 million in annual recurring revenue, according to co-founder and CEO Adil Gasimov. After Azerbaijan and Uzbekistan, the company is now expanding to Kazakhstan and eyeing Middle Eastern markets. Push30 is currently in the process of raising a $3 million Series A round, “embarking on the road to becoming a unicorn,” says Gasimov.

Many Azerbaijani startups develop enterprise software, edtech and fintech solutions. One of them is Recepta, which has developed a digital receipt automation app, garnering support from Visa and the EBRD. 

Designed as a haven for entrepreneurs from Russia, Ukraine and Belarus amidst war and political repression, New Zeon hosts a variety of creative and technology projects. Internationally-oriented startups based there include Fibrum, a gaming software developer, and e-gree, an app that enables users to draft and sign binding contracts outside any jurisdiction.

Yet the most advanced startups operate far from Baku. Founded in Azerbaijan but now established in the UK, WeTravel – a pre-departure app for trip organisers – has raised $29 million since its inception in 2016, according to CrunchBase. GuavaPay, a global payments enabler with more than 300 employees, and HalalBooking, “the world's No1 search website for halal-conscious travellers,” also have Azerbaijani founders and London headquarters. Berkm, MagicPort and Turan operate from the USA, Singapore and Türkiye, respectively.  

Cheap startups for pioneering investors

Azerbaijan’s inaugural classic venture fund, Caucasus Ventures, was created in 2023 by IDDA and Pasha Holding. With $6.6 million to invest across the region, from Central Asia to Türkiye, it already boasts a portfolio of a dozen startups.

The launch of another regional fund of up to $30 million, with support from an international finance institution, will be announced in the upcoming months, tells us a market insider.

Foreign investors in Azerbaijani startups include accelerators 500 Global and Startup Wise Guys. Some other players, like Turkish Domino Ventures, are exploring the market but have not completed any deal yet. 

Azerbaijan’s appeal partially lies in its low costs. "You can create an MVP in three months with just $15,000. This creates strong investment opportunities in terms of valuation when the startup goes abroad," says Mubariz Shahbazli.

Heading a startup incubator at UNEC, a leading economics university in Baku, Shahbazli plans to launch a venture studio and an angel club, supplementing the two existing ones.

"In the US, a pre-seed round can amount to $1 million. Here, with the same amount, you can buy stakes in 30 pre-seed startups," concurs Anar Alizamanli, Program Advisor at LTC, an affiliate of AGA Group. With interests in finance, real estate, agriculture, and manufacturing, this major holding is now launching a venture studio. 

Corporations in the game

Since the late 2010s, several major corporations have entered the innovation arena. One of the largest banks in the region, ABB has established an in-house ‘Tech Academy’ to address the local IT workforce shortage. It has also launched several startup support programs, tells us Elnul Isazade of ABB Innovation Center.

While its traditional assets span banking, insurance, real estate, hospitality, agriculture and retail, Pasha Holding has developed a data centre, an online retail ecosystem, and a popular e-wallet business called Pasha Pay. The holding also sponsors hackathons, educational programs and an international tech conference called InMerge.

Sabah.hub, an incubator and accelerator backed by a consortium of local corporations, has funded and supported a dozen startups since 2022, including Push30. It has also held several educational programs and established a venture studio. Sabah.hub organises Baku ID, one of the country’s premier industry events, with its next edition on June 27-28.

“Rather than aim for unicorns, our goal is to grow ten $100 million companies with a significant impact on the ecosystem,” says Sabah.hub board member Orkhan Abbasov.


ABB’s Innovation Centre on the shore of the Caspian Sea

Far from the Valley

Azerbaijan's journey to becoming "a regional leader in digital excellence and innovation," as IDDA puts it, is just beginning. The agency sees potential in several emerging sectors, including cybersecurity, defence tech, agritech, travel tech and greentech, which align with the country's current needs and opportunities. 

However, for tech entrepreneurship to truly take off, "the startup mindset has yet to reach larger population groups, including among the youth," says Eljan Guluyev, a 17-year-old tech entrepreneur who is an exception rather than the rule. His latest venture, OpenConnect, helps startups connect with investors and industry professionals.

Another obstacle to industry development is the limited size of the domestic market. “Only a minority of startup founders have the knowledge, self-confidence and resources to develop abroad,” notes an industry insider. 

These internationally-minded entrepreneurs often turn to countries of Central Asia, the Middle East and North Africa. Geographically and culturally close to Azerbaijan, these markets are less saturated with competition than large Western tech hubs, and may offer more accessible opportunities.

Adrien Henni is the founder of International Digital News