Fund Director Chides Iranian Startups for Copycat Attitude

EghtesadOnline: Director of a government-backed investment fund has called Iranian startups sheer copycats who just duplicate examples of successful foreign firms, unleashing a heated debate on social media platforms with many local entrepreneurs denouncing the official’s comments.

News ID: ۷۴۵۷۸۴

04 August 2018

NSFund Director Behzad Soltani criticized Iranian startups for lacking originality, saying innovative ideas in domestic business plans have become a rarity, as most entrepreneurs merely replicate international examples, reported ISNA.

Addressing domestic entrepreneurs, Soltani said, “This is the key question: Where is your innovation?” adding that while the Iranian startup ecosystem has observed a significant boom during recent years, many firms are carbon copies of foreign examples and application of innovative ideas has been limited to the marketing aspect in the sector.

“Our statistics indicate that merely one-third of startups have developed innovative products,” Financial Tribune quoted him as saying.

The fund’s director remarked that startups are expected to generate more creative ideas, underscoring the gross negligence in the development of innovative products, which according to him, to some extent is due to a yawning gap between businesses and the academia. He is of the opinion that firms should tap into universities vast potential.

Soltani, however, did not pile all the blame on Iranian startups and concluded by saying that officials have also failed to address the issues hindering the ecosystem’s progress.

Affiliated with the Vice Presidential Office for Science and Technology, the NSFund was established in 2013, after President Hassan Rouhani took office, to help curb country’s overreliance on oil revenues through utilizing startups and knowledge-based firms for generating wealth in the country.

This expression of disappointment with startups’ performance, especially by someone who by designation is expected be a stalwart supporter of them, caught many off guard.

Soltani’s comments gave rise to a blame game spat with several directors and founders of local startups turning the finger of accusation at state-backed entities like NSFund.

Massive Backlash

According to Shanbepress local startup news website, Soltani’s statement has stirred up a rather massive backlash by entrepreneurs.

Digital business strategist Adel Talebi talked about the Iranian startup ecosystem as a constrained “greenhouse-like” atmosphere, suffering from the constant intervention of the government.

He believes that under the prevailing circumstances and considering the suffocating limits imposed by the government over activities of startups, such firms must not be expected to generate innovative projects. He says, “Iranian startups consciously copy successful international business models,” since they do not have the required capital to risk all their funds over a novel idea.

Founder and director of Navaar, local producer and publisher of audio books, Hamid Assadi says, “In all startup ecosystems, when the sector is in its initial phases of growth, almost all entrepreneurs try to address the most manifest needs of the society, naturally toeing the line with tried and tested business models already proven workable. Afterwards, becoming able to handle more risks, they gradually come up with more genuine ideas.”

“Implementation of an innovative idea with proper business experience entails piling debt,” Assadi added.

He further stated that a strong business model leads to the production of innovative output.

Government Intervention

Government’s direct investment in startups has always been criticized by professionals.

Director of a food service startup, Mohammad Vaezinejad, says the NSFund should be granting loans to venture capitals, not to startups.

He further noted while loans seem the most convenient and fastest way to financially support startups in practice, offering loans poses the risk that firms can easily go bankrupt.

According to him, VCs are the most practical method to help boost the startup ecosystem, and establishing more venture capital funds considering their characteristics can yield more favorable results compared to government-backed investment funds.

Furthermore, he notes that “there is nothing inherently wrong with copying successful international business models,” since when something works, it works, “there’s no shame in copying it.”

Co-founder of Iran Web and Mobile Festival Milad Ehrampoosh says Soltani’s comments are true, many Iranian startups have replicated foreign business models; however, “there is nothing wrong with following in the footsteps of someone successful. Across the continents, many fledgling firms start out by localizing successful business models. That’s exactly what many Iranian firms have done.”

Ehrampoosh is of the opinion that the government should create an appropriate atmosphere for shaping competition among startups to promote growth in the ecosystem and push it toward innovation.

Unending Saga

Successful business models have always been copied by newcomers. Take Uber for an instance, dozens upon dozens of names come in mind around the globe which in recent years have started offering ride-hailing services. However, some may argue that Iranian startups have taken the copycat game to an extreme level.

For instance in addition to two major e-hailing services Snapp and Tap30, over two dozen other apps have been launched in Iran which are variations of the world-renowned peer-to-peer transportation company Uber as if these firms cannot grasp this simple idea that when a market has reached a point of saturation and two major competitors are fighting over a bigger market share, there remains no room for newcomers anymore.

Ride-hailing is not the only sector dominated by copycats, Sheypoor and Divar are two local clones of the American website Craigslist which categorizes classified advertisements with sections devoted to items for sale, jobs, housing, and many more.

E-commerce marketplaces such as Digikala and Bamilo are also modeled after Amazon and eBay.

In addition, the Iranian video on demand service provider Filimo is a carbon copy of Netflix.