Caren Firouz / Reuters Inside an Internet service provider in Tehran, February 2011.

The Electronic Republic

How Sanctions Could Damage Iran's Startup Scene

Over the past two months, Iranian cyberactivities have moved up the list of grievances against the Islamic Republic. In October, U.S. President Donald Trump warned of Iranian cyberattacks in his speech decertifying the Joint Comprehensive Plan of Action. Less than a month before, the U.S. Treasury sanctioned 11 Iranian entities for “malicious cyber-enabled activity,” and the security company FireEye claimed that a hacker group known as APT33—likely working for the Iranian government—had been conducting cyberattacks against U.S. and Saudi aerospace firms since at least 2013. Likewise, over the course of two weeks between August and September, Apple and Google removed Iranian apps from their online stores, joining a host of other companies that deny services in compliance with U.S. sanctions regulations.

Iranian-sponsored cyberattacks are the sinister side of the tech scene. But there is another side as well, and the same policies that protect U.S. institutions from malicious attacks also prevent the Iranian public from taking advantage of such services as hailing taxis on their phones and ordering clothes and food online. That leaves a gap that Iranian firms are struggling to fill.

BALANCING ACT

The evolution of Iran’s tech startup scene—characterized by fluctuating levels of government support and investor interest—has been complicated. According to last year’s Science, Technology, and Policy Review published by the United Nations Conference on Trade and Development (UNCTAD), the Islamic Republic’s Science, Technology, and Innovation policy has undergone three waves since the 1990s. The first two, from 1990–2000 and 2000–2010, involved improvements in higher education and scientific publications, and an increase in the number of research labs and efforts to develop new technologies. The most recent wave, according to UNCTAD, is a “transition towards innovation and a knowledge-based economy” characterized by new regulations to support knowledge-based firms, increase competition, and protect intellectual property rights.

Iran’s shift to a “knowledge-based economy”—though still in its nascent stages—combined with a lack of competition resulting from international sanctions, has entrepreneurial activity to surge. Since 2010, Iran has created an Innovation and Prosperity Fund to help build urban technology complexes, inaugurated an Intellectual Property Market through which entrepreneurs can sell their patents, and ratified a law on the elimination of barriers to competitive production. These efforts have paid off. Last year, Iran’s Security and Exchange Organization granted licenses to five venture capital firms—Sarava Venture, Arman Development Fund, Partian Venture Capital Fund, Royan Persian Health Fund, and Yekom Arman Fund—which took Iran one step closer to Supreme Leader Ali Khamenei’s goal of earmarking 20 percent of government revenue for knowledge-based organizations by 2025.

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