Armenian startups lack ambition

ArmInfo.The international network of impact hubs (centers for social innovation,  entrepreneurship and coworking spaces) began to actively develop around the world in 2009. The opening of such a center in Armenia took place in 2016, which happened in parallel with their  establishment in many countries of Western Europe.

Today there are about 110 impact hubs in the world.  There are currently 3 impact  hubs operating in Armenia - in Yerevan, Syunik and Shirak regions.  The latter pursue the goal of promoting the development of social  innovations that are aimed at solving public problems, as well as the  development of a startup eco-system with a social orientation.  CEO  of the Impact Hub Yerevan,  Gevorg Poghosyan, in a conversation with  an ArmInfo correspondent, noted that the center unites people who  first of all want to solve social problems through business  solutions.

Yerevan Impact Hub today has around 160 dues-paying members, as well  as 80-90 contributors to develop innovative in the fields of  agriculture, the creative industry, as well as helping socially  vulnerable groups.  "When we first opened Impact Hub in Armenia,  there was no understanding of what social entrepreneurship is, what  coworking space means, etc. During this period they were just  starting to talk about it," Poghosyan noted. He said that the concept  of social entrepreneurship in Armenia was developed back in 2017, and  was repeatedly discussed at different levels - including at meetings  of standing parliamentary committees, and was even included on the  agenda of government meetings. However, at the state level no one is  in a hurry to accept it. That is, today social entrepreneurship in  our country is developing without government support and regulation.

Impact Hub as a platform for growth

In a conversation with an ArmInfo correspondent, the head of the  Yerevan Impact Hub noted that the center carries out incubation  programs at various levels with the involvement of the best experts  and mentors.  From applications submitted by startups with socially  oriented ideas, 10-12 projects are selected annually.  After which  the latter take part in trainings for a year, each is assigned  mentors who help them work on ideas correctly, conduct coaching  sessions, help develop skills and knowledge, and help increase  motivation and self-esteem. "And we managed to create such an  environment that startups, even if "the first pancake turned out to  be lumpy" and they failed, can try again and again," he emphasized.

In addition, Impact Hub allows startups to express themselves on the  international market. In particular, the Social Impact Award  competition is held for aspiring social entrepreneurs, for which  mentors help startups prepare to participate. The best ideas receive  small grant support for the implementation of the project, which was  provided by Araratbank this year. The bank is one of the few that  sees the need for the development of social entrepreneurship in  Armenia.  In addition, startups have the opportunity, together with  winners from other countries of the Social Impact Award, to take part  in a summit and trainings abroad with the participation of  international experts.  Impact Hub also runs an acceleration program,  but for those who have worked, have a stable income, but want to grow  and expand. The acceleration stage helps entrepreneurs improve their  weaknesses, and then apply to the investment fund established by the  Hub to finance social entrepreneurship (VIA Fund). He noted that the  Fund was established with the support of the EU with a capital of 300  thousand euros. By involving several other investors, we managed to  reach a volume of 450 thousand euros.

In parallel with this, the Hub is implementing a program for the  development of a closed-loop economy (circular economy). In this  regard, as Mr.  Poghosyan noted, Yerevan relies on the best practices  of Europe, mainly Amsterdam. He said that at this stage, Impact Hub  specialists in Yerevan are undergoing certification in the  Netherlands in order to become qualified trainers for small  businesses in the context of the transition to a circular economy.  "This will have a positive impact not only on the environment, but  also on the growth of their business," he noted.

Startups in Armenian market are growing slowly: myth or truth

According to international statistics, only about 20% of incubation  projects achieve success. In Armenia, this figure is slightly higher  - on average, 30-40% of startups are successful. "Therefore, it is  difficult to say how correct this assessment is, that startups are  growing slowly in Armenia," Mr.  Poghosyan noted.

But, on the other hand, Armenian startups mostly work on local  solutions. To be afraid of large ambitious programs, which in a  certain sense also creates difficulties. According to the head of the  Center, this is not a new problem; over the past decades, the belief  has been inculcated that we need to move forward in small steps.  Whereas the international startup ecosystem claims that you can start  with global ideas and also achieve success. <And today those startups  from Armenia that have achieved international success were simply not  afraid>, Mr.  Poghosyan said.

What are the expectations of venture investors in Armenia and what do  startups provide?  Of course, our startup ecosystem cannot compete  with the American or European ones. Startups in the Western ecosystem  face numerous investors, international companies, that is, we are  talking about several hundred million dollars, while in Armenia it is  about several thousand.  And here we must understand that venture  funds and investors in Armenia, which are created on the basis of  international models, according to the head of Impact Hub, do not  find startups that meet their level. <As a result, we see that one  venture fund in Armenia invested in only 1 or 2 businesses.  Therefore, I think that venture funds in Armenia should be created at  the level of our market, so that those startups that operate in our  reality can use the ecosystem and grow little by little," Mr.   Poghosyan noted. In this vein, he emphasized that sometimes the  minimum ticket for venture funds in Armenia ranges from 500 thousand  euros to 1 million euros, and in our country it is difficult to find  a project corresponding to these volumes.  A representative of Impact  Hub in this regard noted that to solve this problem it is necessary  to work both with startups - to help them think more broadly in the  context of ideas, and with venture funds - in terms of revising  expectations.

Lack of trust as a growth constraint

In addition, for effective work it is imperative that large  businesses start collaborating with startups. Mr.  Poghosyan said  that Impact Hub is trying to bring business to startups as part of  their corporate social responsibility programs.  "We tell businessmen  that you spend 15-20 million drams to solve social problems, but you  can talk about the existing problem and send these funds to a startup  that can present an appropriate solution. On the one hand, the  problem will be solved, and on the other hand, this is an excellent  motivation for startups to work, be innovative, and grow," he noted.

Mr.  Poghosyan noted that there are over 130 large business entities  in the country, and if each of them set a task for startups to solve  a specific problem, firstly, at least 2-3 startups would join in the  work to solve it, and this is already about 450 startups, about 50  good solutions, and 10-15 international solutions.  "But we have a  problem in our country - big business does not believe in startups,  especially socially oriented," he said.

Role of State

According to Gevorg Poghosyan, the startup ecosystem in Armenia is  very fragmented. That is, the links that form this system are not  interconnected. Very often, entities  working in the same area  duplicate the programs they implement, or do not complement each  other. In general, there is no overall coordination on the part of  the state in the system.

In this regard, he spoke about a recent meeting of representatives of  the field, at which the problems of the technology sector and the  startup ecosystem were discussed with the participation of the head  of the Ministry of High-Technological Industry. At the end of the  introductory part, when discussions of problems had already begun,  the minister left the hall, leaving the person in charge in his  place. However, the latter also hurried away, having listened to  representatives of the sector for just under an hour, without making  any notes for himself about what he heard. "For me, this is a more  than clear message that the state has no time for us, it is not  interested in our opinion, our problems," he noted.  No matter how  individual entities try to develop the field, in any case this will  not ensure the level of development that can be achieved by  coordinating all processes. According to Mr.  Poghosyan, no one  expects from the state that it should constantly guide, tell what to  do. The state just needs to coordinate our work. 

"When the work is left to chance and is not coordinated, then, for  example, people lay stones as they want, and as they know, but they  cannot build a single wall. But when the state has a construction  plan, and when it says that we need to build walls in a certain place  and they must be of a certain width and height, then we will be able  to achieve the necessary construction," he noted, emphasizing that  such "walls" are needed especially in the context of the challenges  our country faces.

In this regard, the head of the Impact Hub  noted that security  issues in Armenia are far from yesterday, and they cannot be resolved  only by military means - innovative, technological solutions are also  needed here.  "Therefore, it is impossible to look at acceleration,  incubation activities and the startup ecosystem without special  interest and with weak motivation," he concluded.