Startups and Bitcoins in Azerbaijan

Azerbaijan gained its independence on August 1991, shortly after the collapse of the Soviet Union. Although officially democratic, Azerbaijan is ruled by one political dynasty - that of Aliyev's. The unicameral local Parliament - 125-members "Milli Majlis" - is dominated by "big-tent", statist "The New Azerbaijan Party" with 69 deputies. The rest of Parliamentary seats are mostly distributed among "independents". Opposition parties activities are closely monitored by the central government.

At the end of 19th century the large oil and gas reserves were discovered in Caspian sea region. That coincided with the start of the second technological revolution and came shortly after the Pennsylvania oil fields rush in USA. It also made Azerbaijan the second largest World's oil producers.

Today as 100 years ago, oil and gas account for the most of country's exports and government's revenues. However, Azerbaijani natural wealth hasn't been converted into high standards of living, which stay far below of the European average. That, together with gradually slowing economy, high administrative and legal barriers, shortage of seed and VC financing and rising unemployment, which causes brain-drain, have negatively affected the growth perspectives of the local startup ecosystem. On a positive side, the fast growing number of smart-phones users provides local tech founders with a number of niche business opportunities.

The situation with digital currencies regulation on the territory of Azerbaijan is uncertain. On the one hand, the Central Bank of the Republic of Azerbaijan doesn't recognize any other means of payment other than Azerbaijan Manat. On the other hand, the same Bank has developed the draft law named "On payment services", which creates the legal framework for use of e-money. Meanwhile, trading cryptocurrencies as well as organizing ICOs remain technically legal in this country.

Business Notes for Startups Founders:

political climate: not friendly;
economic climate: not friendly;
regions to focus: locally;
industries to focus: e-services, Fin Tech;
major limitations: shrinking economy (GDP growth rate has stayed in a negative zone for several years in a row), oil and gas industry accounts for 95% of exports and 75% of government budget, mid low-income population (per-capita around $4000), inflation rate is about 14%;
stimulus: large population of about 10 million inhabitants, fixed Internet penetration rate exceeds 60%;
opportunities: to build an e-business aimed at growing number of mobile Internet users;
Cryptocurrencies and ICOs (outlook): legal (marginally positive).
The author: Svyatoslav (Svet) Sedov

Angel investor and founder of The First International Incubator for Silicon Valley Companies (FirstInternational.In) in the Bay Area, CA, USA.

Twitter: https://twitter.com/SvjatoslavSedof