ArmInfo: Armenian startups lack ambition
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.