January 16, 2019
The past decade in Iran has witnessed a surge in the number of startups, larger Internet companies, and digital-service providers.
Owing to the impact of American sanctions, Iranians are often left to their own devices when it comes to Internet services. Amid the country’s rapid digitization and the fact that more than 62 percent of all households were connected to the Internet as of March 2017 — a staggering leap from 21 percent in 2013 — there is clearly increasing demand.
Like the development of large Internet companies such as Alibaba or Baidu in China, Iran has witnessed a mirroring of Western Internet services of sorts. Both Iran and China have witnessed the development of regional alternatives to established Western tech. As in China, Iran has witnessed the rise of platforms such as Digikala (Iran’s answer to Amazon) and Reyhoon (online food delivery services). Digikala is now Iran’s third most popular website.
A number of Iranian startups also offer services that specifically reflect Iranian culture and traditions. Food delivery startup Boghche highlights this modernization of traditional aspects of Iranian culture using smartphones, offering fresh bread delivery in the crowded streets of Tehran.
Other startups provide chances at entrepreneurship for particular groups who would normally be unable to do so due to social constraints. Maman Paz offers food delivery from housewives in an app user’s vicinity, allowing women to earn incomes through the gig economy in addition to taking care of their families.
The government’s rampant censorship has been a key factor in the growth of Iranian Internet startups.
In an attempt to control the use of social media platforms such as the messaging app Telegram and to filter Western content, the Iranian government continues to push for Internet censorship legislation.
Ninety-five members of the Iranian Parliament proposed on December 2 that the government should retain stronger power in controlling domestic and foreign messaging apps. Thus local alternatives to websites and services censored by the government have sprung up such as Aparat.com, a replacement for YouTube.
The success of Iranian startups can be partly attributed to the economic sanctions that prevent the expansion of Western tech companies and platforms. In some ways, this has proved helpful to local startups, which face little competition from established companies.
Despite their frequent use by Iranians with access to the Internet, companies such as Google remain wary of Iran both due to potential sanctions and censorship. In turn, some Iranian startups have sought to substitute some of Google’s less visible services, as with Anetwork, a domestic platform for online advertising, and Cafe Bazaar, the Iranian version of the Google app store.
In this sense, the return of U.S. sanctions marked the end of potential Western investment and competition entering Iran. While helpful to some businesses, the threat of sanctions diminishes the number of international opportunities for Iranian companies.
Iranian startups in need of angel investors and more capital have to rely on local businesses and investors rather than hoping for opportunities abroad. Local startup accelerators do exist, and they are nurturing the bourgeoning industry, as is the case with Avatech, an accelerator which paved the way for Reyhoon.
The continuing digitization of Iranian consumers offers hope for recent graduates in search of stable employment. The growth of the tech industry will prove essential in providing young college graduates with employment despite a highly unstable climate. However, while the digital industry may perhaps lessen the impact of Iranian brain drain, its opportunities are not limitless. So long as rampant censorship and sanctions remain a daily reality in Iran, startups will continue to face obstacles in growing their business, as ambitious and hopeful as they may be.