Of all the former Soviet satellites, Armenia, a tiny, landlocked nation of under three million people, blockaded by its neighbors and ravaged by exoduses, genocide and a recent war, might not seem an obvious candidate for tech supremacy.
A quick glance through the history books, however, and it becomes increasingly clear how the country has been able to build, quickly, an I.T. sector that is the envy of the Caucasus – and far beyond. Tech now caters for around 15,000 jobs in Armenia and it even has its own tablet device. Things are looking up. And it’s been a long time coming.
Modern Armenian history is dominated by the genocide which befell its people in 1915. Around 1.5 million Armenians were killed or deported by the Ottoman Empire – an event which Turkey’s modern leadership still refuses to acknowledge fully. Recognition, according to PM Recep Tayyip Erdogan, would go “in one ear and out the other”.
Armenia fell under Soviet rule in 1920 and, following the Second World War, became one of its premier knowledge centers. Math, engineering and physics ranked highest in education. A third of all Soviet military equipment was produced in the state.
The country knocked out chess Grandmasters like few others: 40 have called Armenia home, compared to 22 in Azerbaijan, home to 9.6 million, and Georgia’s 35 from its 3.7 million population. Armenia was known as the ‘Silicon Valley’ of the Soviet Union.
That highly-skilled legacy has remained despite more recent troubles. In 1988 Armenia fought a six-year war against neighbor Azerbaijan for the Nagorno-Karabakh region, home to around 150,000 people. Despite a precarious victory – violence on the border is still common – the conflict drained Armenia’s coffers. The country is still blockaded by the Azeris and Turks, leaving little room for logistics or trade.
By then, many of the factories which sprung up under Soviet rule were shuttered, a fact which sticks in the craw of locals. “There are so many factories and machinery lying idle it makes people cry,” says Pierre Hennes, a Singapore-based investor and co-founder and partner of Granatus Ventures, a fund trying to bring tech’s glory days back to the republic.
Those days, says Hennes, are returning. Today’s Armenia boasts around 400 tech companies – a 25% increase on last year. They produce a combined $475 million per annum – around 5% of the country’s GDP. In 2000 the country got its first official technopark, Viasphere, in the capital city Yerevan. In 2012 a second park was opened in the second-largest city of Gyumri.
In 2019 the country will host the World Tech Forum. “For us it is very important that such a conference is to be held in Armenia,” says Hayk Chobanyan, deputy executive director of Armenia’s Union of Information Technology Enterprises (UITE). “It is very important from the point of view of increasing the technological rating of the country.”
Armenia owes no small part of this recent success to its huge diaspora. It even has a Diaspora Ministry, which caters to 8 million-or-so people in the 85-country ‘Spyurk’ (spread). Tech stars such as Reddit founder Alexis Ohanian and Raffia Krikorian, once Twitter’s VP of engineering, now at Uber, have raised the sector’s profile for Armenians looking to invest back home.
“People from the diaspora contributed to the odd church or housing development, but now a new generation is coming back to start businesses,” Hennes tells me. “The diaspora not only comprises the older generation but younger, more connected Armenians with access. They’ve seen their parents do something for the country, and now they want to too.”
Hennes, who has been coming to the country of his grandparents for over a decade, has funded a glut of young local firms with Granatus Ventures since its 2013 inception. Investments include GG Taxi, an Uber facsimile, and FlatClub, a security firm.
Elsewhere photo editor Picsart recently won a $10 million funding round, while Minno, the hardware firm creating ArmTab, has put in $6.5 million over three years.
Armenia is still closely linked to the Kremlin: Yerevan split from its EU Association Agreement to enter Moscow’s Eurasian Economic Community. But many Armenians are polyglots; English proficiency is common. And ties with Europe, the U.S. and Canada are on the rise.
“FlatClub had a dev centre in China but they wanted somewhere nearer to them, culturally and geographically,” adds Hennes. “But the most important factor is that FlatClub doesn’t have a single Armenian founder. This was done purely on an economic rationale, and not an emotional one.”
“Armenia has limited opportunities to succeed,” adds tech expert Sassoon Grigorian. “In tech there are no boundaries, no borders – and startups succeed on being able to implement a very good idea, a problem they can solve. And that levels the playing field for a small country like Armenia.”
Microsoft also has a research center in Armenia, and Taiwanese networker D-Link has a considerable presence. It’s all part of a mindful migration from I.T. outsourcing – which worked well with skilled wages of as little as $700 per month (“$1,500 gets you very good talent,” says Hennes) – to services. “In developed countries people are asking us why we even have partners, because they see our work is creative and high quality,” says Chobanyan.
Bagrat Yengibaryan is director of Yerevan’s Enterprise Incubator Foundation (EIF), which has lobbied the government for greater incentives for entrepreneurs. Recently it acquiesced, offering I.T. startups 0% tax on profits for three years, and a fixed income tax of 10%.
“The real innovation is in the borders between different sectors,” he tells me. “And with such a small geographical location things are moving fast.”
That is helping. But Armenia’s greatest weapon is surely the TUMO Center for Creative Technologies, an after-hours schooling centre. It offers locals from age 12 the chance to study creative and digital courses for nothing other than a $25 deposit. Since 2011 TUMO has grown to accommodate 6,500 members, who are taught subjects in four key elements: animation; digital media; web design and game development. There are no exams, and six absences results in the loss of one’s place.
TUMO was founded with $50 million from Dallas-based diaspora members Sylva and Sam Simonian. “We want students to be aligned with the western world, to know all the new technologies, the management skills, to manage deadlines,” says Marie Lou Papazian, its director.
“The Asian Development Bank is giving us a grant for an evaluation system that will track the kids for 5-10 years, to see what the process has been and how TUMO changed their lives,” she adds. “We want to see if TUMO can be a blueprint for developing countries.”
It certainly looks that way. TUMO graduates have created some striking content, including video game Polygon and Yelling Animation’s ‘Musaler’, an homage to those who died in the Armenian Genocide.
Education, a highly-skilled workforce and public-private initiatives are laying the foundations for success in Armenia. But it is ArmTab, announced last year and unveiled this, which has understandably won the most significant attention. Minno hopes to produce 100,000 devices each year, which will be distributed to schools and universities.
The general consensus is that for Armenia to realize its full tech potential, those shuttered factories have to get moving again. Hennes, however, isn’t sure a tablet computer is the best direction: “It’s such a volatile consumer good – they go out of date every two years. So unless they have next-generation R&D they can’t compete with the velocity of the market.”
Yerevan’s government, too, is no model of efficiency. Corruption and inequality are endemic. Oligarchs regularly swoop for hard assets. Moscow’s recent economic woes hit the local currency, the dram, hard. The state is known, wryly, as a ‘half-democracy.’
That may soon change. Last month thousands took to the capital’s main thoroughfare, Marshal Bagramian Avenue, to voice their anger over electricity rate hikes. The ’No To Plunder’ campaign was organized on Facebook, and coordinated via social media. Many of Armenia’s tech professionals were closely involved.
Grigorian prefers to see the positive side of the unrest: “What you’re seeing is a maturing of the democratic process. The younger generation are demanding more transparency, and with social media it’s much easier to mobilize people much more quickly.
“Anyone in tech is someone who supports transparency, openness – there are certain values in the tech sector which the young generation are quick to adopt,” he adds.
“People are succeeding despite the government, not because of it,” Hennes tells me. He’s under no illusions as to Armenia’s drawbacks. Infrastructure is not at western standards and the cost of living, as the marches suggest, are rising.
But above all, he says, Armenia is “a beautiful place.” Tech is set to continue its quick rise in the republic. And if those factories can be dusted off, some decades-old tears will soon be wiped dry.