The tech revolution in Armenia, which has been gaining momentum for the past couple of years, involving several generations, from millennials to Gen Z, has witnessed remarkable growth, thus earning its already common nickname of “new IT hub.”
To understand where Armenia’s tech sector is in the global picture, let’s talk serious stuff with dry statistics, starting with technological developments in 2023.
2023, as a banner year for Armenian tech
A short recap of major events in Armenia’s financial market for 2023 is the following:
- The first initial public offering of Team Telecom Armenia’s shares.
- The Nasdaq stock exchange presented Krisp in New York Times Square.
- Armenia became a top country in Central Asia and the South Caucasus in terms of attracting venture capital investments.
According to the Global Startup Ecosystem Report by StartupBlink, Armenia secures the leading position in the Caucasus region, boasting a score that is twice as substantial as its closest competitor, Georgia. This metric encompasses three key components: quality, quantity, and the business environment. In the year 2023, Armenia’s startup ecosystem experienced a three-position ascent, achieving the 15th rank in Eastern Europe and the 57th position globally.
Going deeper into the 2023 tech events and what ground they have prepared for 2024.
Investment soaring
Investment in the Armenian tech industry continues to soar, demonstrating the confidence and interest of both local and international investors. 2022 was more favorable for investments, fueled by fresh faces in the VC game. BigStory and FormulaVC invested in early-stage startups like Zoomerang and Mythrill. Venture funding in Armenian startups was $200 million.
Unfortunately, this pace slowed down a little because companies started playing carefully amid instability in the region and globally. And even with this slow pace, venture capital and private equity investments in the tech sector reached $265 million in the first half of 2023 alone, a staggering 83% increase compared to the same period in 2022. This influx of capital fuels the sector’s growth and the entrepreneurial spirit within.
Startups scaling up
Armenian startups are making their mark on the global stage, gaining millions of dollars in investments. Thus, in three months, the total investment volume in the top new Armenian tech startups reached an impressive $47 million in total in 2023. This upward trend showcases the recognition and potential of Armenian tech companies in the global market.
- The Fastex Web3 ecosystem company Fasttoken, incubated by SoftConstruct, has successfully raised $23.2 million.
- Prelaunch announced its $1.5 million seed round from Big Story VC, Formula VC, Granatus Ventures, and BANA.
- SmartGate’s Britive portfolio company raised $20.5 million in Series B funding.
- The virality potential of ViralMango has brought them $250,000 in funding to support their journey.
- Modicus Prime: SmartGate VC, Techstars, and other strategic investors took note of Modicus Prime’s potential, contributing $1.1 million in pre-seed funding to their innovative venture.
Global connections
Armenia’s tech scene, which has been steadily rising over the past decade, has attracted established players like Microsoft, Cisco, VMware, and Synopsys. But 2023 witnessed a significant surge in major IT companies choosing Armenia as their new home.
In March 2023, Russian tech giant Yandex, best known for its search engine and online services, surprised many by moving a large number of its employees to Armenia. This move wasn’t just about finding a new location; it was a strategic decision to tap into Armenia’s rapidly growing tech industry and skilled workforce.
Yandex plans to further expand its team in Armenia, focusing on software development and product management.
Another notable arrival in Armenia is TeamWork, which again signifies the international company’s confidence in Armenia’s tech-friendly environment.
Where is Armenia’s IT sector going?
In Armenia, tech enthusiasts engaging in active dialogue with government officials advocate for the fiscal advantages of implementing a 5% income tax rate over the current 15%. Their proposition underscores the potential for heightened revenue influx into the budget, driven by increased company attractiveness to skilled personnel and amplified competitiveness, thereby fostering accelerated business expansion.
In 2023, the number of IT companies registered in Armenia doubled compared to 2022, reports the minister of high-tech industry. The number of employees, respectively, increased by 30%. To support the stable growth and interest of local and foreign businessmen, the government initiated a new “From idea to business” program, providing funding for startups to commercialize their projects. Another support program, Neruzh, is aimed at supporting professionals to invest their knowledge and skills in various sectors of Armenia’s economy.
The law “On State Support of the IT Sector” is still valid, providing tax relief to startups. Still, the law has many regulations that create challenges for industry players. In this light, by the end of the year, there may be some decrease in the tendency to relocate international companies that have come to Armenia in search of favorable conditions. The tech community members in Armenia closely communicating with the government want to show that a 5% income tax could bring more money into the budget than 15%: companies will attract more employees, and businesses will become more competitive and grow faster.
At this very moment, at the beginning of 2024, the industry is still stable, but the government should think of new (beneficial) conditions for the IT sector so as not to lose the interest of relocated businesses.
Conclusion
Armenia is at the crossroads… yes, yes, we know—at the crossroads of technologies. Armenia is the new IT hub of Eastern Europe… Yes, we know that too. But what we don’t know is that Armenia’s new generation, the youngsters and kids learning right now, are the brightest minds with a unique sparkle in their eyes, already shaping Armenia’s tech industry. The future of the IT industry is pretty stable and predictable, at least for 2024, compared to other local and global industries that constantly face shakes. If the community acts wisely in presenting its talents and the government continues supporting the sector, it will be possible to secure a strong presence globally.
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