Covid-19 Taking Toll on 50% of Iranian Startups

EghtesadOnline: Around 50% of Iranian startups will most probably collapse due to the coronavirus pandemic and its economic impact, Iran's ICT Guild Organization declared in a report.

News ID: ۷۵۰۷۵۰

19 August 2020

According to the organization, only 12% of tech teams have benefited from business opportunities presented by the pandemic and life under lockdown. Data gathered by the organization paint a bleak perspective and indicate that following the viral outbreak, unemployment has grown significantly in the sector.

The report noted that after the US reimposed sanctions against Iran in the summer of 2018, Iran’s oil-based economy was strictly pressured. However, businesses and startups kept expanding. However, the Covid-19 outbreak has taken a harsh toll in Iran’s already ailing economy, exerting a damaging effect on the ICT sector.

The organization criticized the government for its ineffective approach toward the startup ecosystem.

“Following the viral outbreak, the government extended support to major online tourism agencies and food delivery services while ignoring the needs of other tech-based businesses,” it said.,

According to the report, demand for online services has sharply surged, as people rely on online platforms for almost everything from education to shopping. However, the country’s communication infrastructure was not prepared for the sudden surge in demand for services.

The issue has become more complicated since the government has banned the import of a wide range of ICT equipment and electronic devices, and limited the sector’s access to subsidized foreign currency for making the authorized purchases.

The organization says only an integrated and tactful management of the crisis can help ease the growing concerns.

Data offered by Iran’s Statistical Research and Training Center also support ICT Guild Organization’s narrative.

SRTC had recently released a report on the state of technology businesses and startups over the past several months, shedding light on the impact of Covid-19 on the sector.

According to the center’s website, Srtc.ac.ir, because of the virus spread and its consequences, 38% of businesses in Iran became totally inactive in the two months ending April 19.

About 22% of businesses continued to working at full capacity during the two months.

The data illustrate that the remaining 40% of firms operated at half their pre-virus capacity during the period.

Among the different aspects of business operations under review, the sales rate was affected, declining by 49.6% in the two months.

Liquidity, human resources and production rates respectively declined by 15.3%, 13.2% and 10.5%.

Government Rhetoric

The worrying figures fly in the face of repeated claims by Iranian tech authorities in the social media that the government is extending resources for the growth of the country’s technology ecosystem.

Officials believe that the nationwide support has already paid off and tech units have flourished in different fields.

Tech infrastructure projects have been launched regularly in Iranian provinces, expanding the national startup ecosystem and increasing its share in GDP and export revenues.

The government has played a big role in developing technical, legal and financial support centers and tech factories to provide startups with shared workspace and consultancy.

However, considering all the limiting factors facing Iran’s economy, the two reports reviewed in this article do not herald a bright future for the startup ecosystem in the short run.

The detrimental effects of Covid-19 have hit technology ecosystems all around the world and difficult times are not limited to Iran.

According to PWC.com, the website for PricewaterhouseCoopers, a multinational professional services network of firms headquartered in London, startups and tech businesses are facing challenges for business planning, for there is no clear picture of the future concerning the disease.

The website also reports that the cancellation of business events has resulted in a drastic decline in revenue. Production is challenged due to the crisis-hit global supply chain, hence smart initiatives are required to overcome liquidity deficit problems of tech businesses.

According to the International Data Corporation’s report on the global ICT industry after the coronavirus outbreak, the impact of Covid-19 will be different across industries, with some bright spots for the tech market such as collaborative applications, artificial intelligence and devices.

The neutral, slightly positive move in international ICT businesses, however, will not return their profitability until 2023. A simple comparison of management and efforts illustrates Iran’s status and future prospects in this sphere, NASR said in its report.