Israeli expert upbeat about Azerbaijan's innovation & startup ecosystem, development potential

In an interview with Azernews, StartupBlink CEO and Founder Eli David spoke about Azerbaijan's startup and innovation ecosystem, its potential to develop, the country's ranking in the StartupBlink startup ecosystems ranking report, as well as insights and trends of the country's ecosystem development over the years.

The world is changing rapidly, and innovations and startups have become crucial for both local businesses and governments. Nowadays, in order to lead the market and achieve economic development it is important to build a healthy innovative ecosystem where ideas take an expedited path to realization. The formation and development of an innovative startup ecosystem will benefit the country's economic development.

Innovation Summit 2022 kicked off in Baku on December 13. The purpose of the event was to discuss innovations, create opportunities for participants to exchange ideas and experiences, gain fresh knowledge from global experts that will enable them to make a difference, and have a unique opportunity to meet interesting startups having industryspecific solutions that may bring both commercial and strategic value.

Q: Can you, please, tell us more about the Innovation Summit, its objectives, and the company you represent?

A:

Azerbaijan is doing a lot of activities now to improve the ecosystem, startup ecosystem. There are very active efforts, usually by the government mostly, to make sure that the country is now transitioning into more of a digital nation, and also to have more success in the creation of innovation - more startups, precisely more successful startups, become a very important regional player, and in the future also hopefully global player. I think, there are a lot of efforts that are being done here, and we are also seeing the results of those efforts, so that’s good.

My company is called StartupBlink, it is a global startup ecosystem map and research center. We are basically mapping the global ecosystems and also ranking all the cities and countries. So, one of the things that we have been noticing recently is the increase in Azerbaijan’s startup ecosystem.

Q: Startup Blink publishes annual reports ranking the startup ecosystems of almost 100 countries, including Azerbaijan. Could you please provide us with information about this report and also on Azerbaijan’s ranking in this report? And how do you get information about Azerbaijani startups when compiling your annual report?

A:

We do about 40 different parameters to rank your ecosystem, and we rank all the ecosystems - all over the world, all the cities, all the countries. Many of those parameters have to do with, let’s say, how much activity is there, how many startups, how many co-working spaces, how many accelerators, and so on. So, that would be a good way of checking the quantity. We also check the quality, and the quality would be mostly about the total number of investments, the amount of traffic websites have, the total number of employees, and so on. So we are trying to look at the parameters that are the most important for startup ecosystems and for their growth in terms of results, like what results are producing. We are doing it across many different parameters, currently, as I said, 40 different parameters.

I have to say that there are many organizations also at the international level that are doing a lot of work here, one of them is Asian Development Bank. They are doing a lot. It is not only the government itself but also international organizations, regional alliances, and partnerships. One of those projects is the CAREC (Central Asia Regional Economic Cooperation), and they are also doing a lot of activities in mapping the region. That has been very helpful for us when we are trying to track your ecosystem. We are also working with ASAN on that, so that’s a good effort.

Generally, the results are that the ecosystem of Azerbaijan is improving. By the way, we are doing those ranking for a quiet of few years, and Azerbaijan has been increasing historically, there is good momentum here. This year, you have actually increased by four spots, and you ranked number 85 in the world, which is actually a very nice jump. Usually, the countries are advancing every year by about one or two, so that’s a good jump. We also have a jump of twelve spots in Baku, it is now ranked 443 in the world. So you are in the top 500 ecosystems globally and momentum is good for both the country and the capital city. Currently, we only rank Baku. We still are noting if there are here strong ecosystems outside of the capital, which is good, because we need to start with a strong ecosystem and then slowly in time get more ecosystems to give us backup and allow the startup ecosystem to grow nationwide. But in the beginning, we do think that it makes sense to focus more efforts on the capital city. So in terms of Central Asia, you are doing relatively well, you are pretty close to having a great ecosystem of Georgia and it seems like you are constantly improving.

There is also a very deep understanding from the government about how important it is to develop the startup ecosystem, and how the future economic engine of the future economy would be actually the startups themselves. So we are happy about what is going on here. And also a little bit about the efforts and how serious the public sector is about advancing the ecosystem. There are many governments in the world that still don’t understand the importance of startup ecosystems in general; they don’t understand the importance of the startup economy, and it is very clear that over here the situation is very rapidly changing. That’s good to know.

Q: You already answered the next question that I wanted to ask about how would you assess the startups & innovations ecosystem in Azerbaijan? So maybe you can tell us about certain trends in the ecosystem, how Azerbaijan developed over the years, and what were the insights and trends for this development?

A:

The trend is positive because a few years ago the startup ecosystem was in a very scene stage, with almost not that much activity and so on. Now we are in a situation where we constantly see good momentum. We constantly see an increase in the ranking, like this year you jumped over four other countries in this case. So we do see good momentum. I am very optimistic about the future as well because there is so much that is happening here, that I think we are going to have good trends over here. Currently, there are a lot of talents here, and there is a lot of support from the government. The ecosystem is still in a scene stage, it is still not a leader of innovation, but it definitely has the potential of getting closer to becoming a regional leader as well, and hopefully in the future also be a global leader.

If we want to keep our most ambitious talents here we need to be in a situation where Azerbaijan is really being granted as a startup nation, at least for Central Asia. And there are a lot of countries in the region that are doing a lot of efforts on this, like Kazakhstan and Georgia, and so on. So the efforts of Azerbaijan are very solid, they are at a good level, compared to the most active Central Asian startup ecosystems players. And I think that the future looks good.

The idea is how do we get to the level that we have an ecosystem that is almost on the level of a European and then hopefully also a US startup ecosystem. That’s of course the big challenge, but the steps that are being taken here, according to our formula, have been constantly increasing your ranking. So I think these are good news generally. It is relatively easy to increase when you are ranked relatively low. The real fears find, let’s say, in the top 30 countries in the world, or the top 200 cities in the world, and that’s going to be really the challenge of Azerbaijan and also other Central Asian countries to arrive at those very competitive top quality startup ecosystems. But the initial phase is going well in closing the gaps in those ecosystems.

Q: What will be your advice or thoughts on how Azerbaijan can boost innovations and startup development in the country?

A:

We need to constantly talk about startups so that more people understand that startups are a thing and that this could actually be their path to financial growth. So I think that it is very important that. You know that usually, our national heroes are people who play sports, and so on, and I think that celebrating the success of our startup founders, is also very very important, to encourage more and more people to become startup founders, to know about this topic. Just like what happened in Israel. You know, in Israel, 30 years ago nobody talked about startups, and then suddenly you see a few small success stories and then everyone wants to build their startup. So the most important thing would be to convince potential entrepreneurs to become startup owners.

Startups are very difficult. Most of them are failing all over the world, also in the US and Israel. So, of course, we need to encourage people to take more risks, we need to be very respectful also when they fail, make sure that our society is rewarding people that are taking risks on innovation, and innovative solutions, and encourage our youth to basically be in a situation that they are taking risks. And a lot of it is coming also from the support of family and friends that are encouraging people that are doing things that are not maybe a 9 to 5 secure job. This would be an addition to what the government is doing now, supporting the local startup ecosystem developers, accelerators, incubators, and so on, giving grants, giving more space for co-working, all those things, just to make sure that our ecosystem is connecting, that people don’t feel isolated, for entrepreneurs to not feel that they are the only ones doing it, but they have actually a very big community around them.

There are quite a few steps, but nothing beats success. Basically, if you have success stories, then we are ready for the next stage. The next stage is of course big investment. But we can’t reach this stage without securing initial success. Another thing would be of course to prevent [word inaudible]. Currently, we are in a situation where maybe some of the entrepreneurs are ambitious and are thinking that they can only be successful outside of Azerbaijan because Azerbaijan is still in the scene ecosystem phase. One of our, maybe good items to do, is to mark the ecosystem, brand the ecosystem, make people that are here understand that this is becoming the regional startup hub, and if this is happening then more people will stay. In many cases, we can’t really avoid people from leaving when they want to build massive companies, but we want to make sure that they leave only after they build the roots here, they have a little bit of development team, staff, and so on. And then even if they go to San Francisco and London, they will still keep operations here, because it is much more cost-effective than in London and San Francisco. So we want to avoid people from leaving before they are building their initial operations here, which is a big challenge for all the companies in the world

Q: In your opinion, should startups rely on state support during their fledgling years or be only backed by the private sector?

A:

It really depends. Generally, a healthy ecosystem is relying on the private sector. However, in the initial phases of the ecosystem, there is no return on investment for the private sector. So that’s where the government and the public sector should step in to support the initial growth of the ecosystem when it doesn’t make a lot of sense for the investors to go in, or for accelerators and coworking spaces to build and invest.

I think now we are in an interesting phase of a mix of public sector support while also hoping that the private sector becomes more and more active in the development of the startup ecosystem. Of course, the public sector should also focus on elements that have to do more with the macro approach, which is the promotion of the ecosystem, the branding of the startup ecosystem, and making sure that outside of Azerbaijan people are aware of us becoming a great innovation scene, and also on the strategy, to understand what is missing here, what are maybe the problems on the legislation or reforms side, and so on. That will help facilitate the growth of startups in Azerbaijan. Every country has a lot of reforms, legislation, and adjustments that have to be done. And all those things are really helping startups to grow.

So generally we like the government to focus more on those elements that have to do with promotion, branding, and strategy and less on micro-managing the ecosystem. That’s a recommendation we give to many governments.

Q: How would you access Azerbaijan’s potential to develop the innovation and startup ecosystem, as well as the private sector?

A:

I think there is amazing potential over here. There are some resources already, so it is a country that has resources, and it also seems like the public sector understands the importance of startups. That’s very important because many countries don’t understand the importance of startups. And over here we are starting relatively early in this phase, which is good. Of course, there are many countries that have started much earlier in the US or in Europe, but in Central Asia, we are really in a good situation.

I think there is a lot of potential here, and the goal would be to build things that are not only on the national level, which is an initial phase of the ecosystem, it makes sense to build local solutions, but also on the regional level, and hopefully on some point also on the global level. So what we really need to do is to create a situation where people feel like it is worth becoming entrepreneurs. That’s a very difficult task everyone is dealing with, all over the world, and of course, it is something that Azerbaijan will have to deal with as well. But I think the initial signs are very encouraging.

To note: StartupBlink is the world’s most comprehensive startup ecosystem map and research center, working with more than 50 municipalities and governments worldwide. Its global startup ecosystem map has tens of thousands of registered startups, coworking spaces, and accelerators, creating a robust sample of innovation globally.