Part 2: 4 Megatrends That Support Rising Tech Entrepreneurship in Iran
Economic platform and the chance to build for the long-term
In a previous post, I talked about the 4 megatrends that support rising tech entrepreneurship in or among Iranians. In the second of a series of upcoming posts, I’d like to explore how the economic megatrend will contribute to the National Innovation Capacity and invite a discussion around reasons why this can or cannot help us build globally successful technology companies.
Many policy discussions assume the existence of a sharp tradeoff between goals such as health, environment, safety, and short-term economic growth. However, a healthy rate of innovation increases the likelihood that new technologies will emerge that substantially temper or even eliminate such tradeoffs.
Adopting an abundance view of the world is a powerful lens especially for the collaborative early stage startup ecosystem. Innovation, and more specifically technology innovation, lies at the heart of turning an artificial scarcity to abundance.
One of the major characteristics of the Iranian economy has been the resource curse. Oil and gas industry has been an easy way of covering the basics so a knowledge economy cornered on talent and technology has not been a priority. On the other hand, policy has not always been optimised based on economic considerations. Recently, with the fundamental changes in the oil market and the subsequent price drop as well as opening of the economy, we have a good economic platform and the chance to build for the long-term.
We look at the economy of Iran in three phases after late 80s. Reconstruction, reformation and innovation. We’re slowly recovering from the economic shocks of the early 80s. The infrastructure building that happened during the reconstruction era set the other parts of the economy up for growth. The current broad industrial and services base are the direct beneficiaries of this era.
One of the main beneficiaries of this infrastructure rebuilding was the mobile telecom industry. Iran was one of the earliest adopters of the GSM standard for mobile telecom. This was one of the most innovative steps taken in the recent history with huge economic benefits that have given us hope in becoming a regional leader and global player in the related industries, namely internet enabled economy.
After the reconstruction period came the reformation era. Many policies had to be reformed. Private sector growth was encouraged by privatising public enterprises and expanding the role of market based forces. The financial industry, the stock exchange and establishing private banks were a direct focus. They have played an increasing role in the economy, however, their contribution to the innovation economy is yet to materialise.
We looked at the correlation between the GDP per capita (above) and the number of tertiary students abroad and found a correlation co-efficient of 0.79 between the two. Interestingly, this increases to 0.90 when you look at regions other than Western Europe and North America. (Data sheet here)
Combining this trend with the comprehensive strategy encompassing market-based reforms as reflected in the government’s 20-year vision document and the sixth five-year development plan (three pillars, namely, the development of a resilient economy, progress in science and technology, and the promotion of cultural excellence) provides the right ingredients and sends the right message to pursue technical degrees with the right mindset of providing the economic opportunities for building global companies in the country and beyond.
The January 2016 lifting of the nuclear-related sanctions has arguably provided a short-term boost to Iran’s economy. However, building innovation capacity in terms of engineering base, policy, environment and clustering effects will take shape slowly where patient capital and culture of abundance will play major roles.
It’s worth mentioning that we see these as secular trends unaffected by short term hype. We believe we have a good economic platform and the chance to build for the long-term.
In the next post, we’ll explore the third megatrend, technology, that supports rising tech entrepreneurship among Iranians.
This is the ninth in a series of posts about our investment criteria and ecosystem resources which was also posted on LinkedIn. We’d love to hear from teams with crazy (but commercial) startups.Get in touch or attend our breakfast series. Finally, don’t forget to get your IV Score or talk to our FundingBot to prepare for your next VC meeting.
