Looking to Our Neighbors: The Georgian Start-up Ecosystem

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Large startup ecosystems like Silicon Valley, have traditionally been seen as the breeding grounds for great entrepreneurs, venture capitalists, and talented engineers. However, smaller ecosystems are also emerging around the world. These may be less developed, but they are still effective relative to the size of their local economies and the regional context. Armenia and Georgia are two examples of such burgeoning ecosystems. Yerevan and Tbilisi rank 221st and 359th respectively on StartupBlink’s global ecosystem index. While countries like the United States and the UK, with established ecosystems in cities such as San Francisco, New York, and London dominate these rankings, there is a new wave of competition.

Tech, by its nature, is a global market. But are there opportunities for smaller neighboring ecosystems to collaborate and synergize? How could the Armenian and Georgian startup ecosystems contribute to each other’s growth toward better ranking and stronger economies? 

To address this, we delve into the strengths of the Georgian startup ecosystem and compare it with its Armenian counterpart, identifying areas of excellence and potential shortcomings for both.

Overview of Georgia’s Startup Ecosystem 

Despite being young, the Georgian startup ecosystem, based in Tbilisi, is already showing promise. The primary areas of focus for the ecosystem are in the transportation, FinTech, and EdTech sectors, accounting for about 39% of startup activity in Georgia. Notable success stories include: 

• Theneo, an AI tool that generates high-quality, interactive API docs, raised $1.5 million in funding from Byld Ventures and the prestigious American startup accelerator, Y Combinator. 
• Humanode, a human-powered crypto-biometric network that places blockchain consensus mechanisms in the hands of individuals, was founded in 2020 and has since raised a total of $12.76M.
• Egeekowl, a digital content creator launched in 2015, received $1.2 million in funding in 2015 and an additional $1.7 million in seed funding last year.
• Bitnet, a crypto neobank for CIS countries founded in 2019, raised $500,000 in seed funding in 2022.
• TKT.GE, a ticketing platform established in 2015, secured $350,000 in seed funding from TBC Pay in 2017. 

However, the ecosystem still needs much more investment. Dachi Choladze, founder and CEO of Pulsar, the first Georgian tech startup to raise over $1 million in seed capital in Silicon Valley, identifies inadequate access to both domestic and foreign private capital as one of the main challenges for the Georgian startup ecosystem. A recent report by the Asian Development Bank agrees, citing limited private investment capital, a lack of experienced entrepreneurs, and a relatively small market (population of 3.7 million). Moreover, research and development activities remain limited, with gross expenditure on research falling far below the European Union’s target of 3% of gross domestic product (GDP). 

Several groups have emerged in recent years to build angel investor networks in Georgia. One example is Axel, the Georgian Business Angel Network, which boasts over 90 angel investors and has completed 25 investment deals since its inception. 

Along with angel investor networks, there is a growing number of venture capital firms and funds in the Georgian Venture Capital market. The government is also making efforts to boost investment activity in the startup ecosystem. 

The Ministry of Economy and Sustainable Development, through Georgia’s Innovation and Technology Agency (GITA), actively supports the ecosystem’s growth. In 2022, GITA signed a collaboration with Global 500, a venture capital firm, to foster the development of Georgian startups over four years in a $6.4 million deal. 

Georgian Economy Minister Levan Davitashvili told Agenda.ge, “this step will definitely cause interest of investors, [and] venture capital funds will be created.”  

Organizations like Startup Georgia, Impact Hub Tbilisi, Startup Grind Tbilisi, and the University of Georgia’s I-Corps program also contribute to the development of the ecosystem by offering funding opportunities, collaborations, and organizing events. 

Ani Kazarian, co-founder of Georgian startup Arrival, emphasized that the various initiatives launched to help develop the ecosystem are bearing fruit. “With the help of initiatives like GITA, Medialab, Impact Hub, AXEL, and numerous startup accelerators and incubators, Georgia’s startup ecosystem has grown significantly in recent years,” she said. Kazarian also underscored the support the ecosystem receives from the country’s nearly one million-strong diaspora: “These communities frequently have insightful contacts and knowledge of foreign markets, which can assist Georgian startups grow faster.” Furthermore, diplomatic missions like the Georgian Consulate General in San Francisco actively use their connections to attract investment, partnerships, and even brand recognition for Georgian startups.

A notable gap that diasporans are helping to fill in Georgia is senior talent, a challenge that many emerging ecosystems face. A recent podcast by Samuela Davidova featuring Mikheil Didebulidze, founder of DeGameFi and ArenaGames, discussed a previous challenge in Georgia’s startup ecosystem –– the limited senior roles and opportunities for advanced skill development. “The opportunity to become a senior professional in more niche areas was not available as these positions were not in demand,” Didebulidze explained. However, recent migration trends suggest a positive shift, indicating a maturing Georgian startup scene that may be overcoming its early limitations: “I’ve observed that the most significant influence on the ecosystem primarily comes from individuals who have returned with experience gained abroad.” 

Comparison With Armenia’s Startup Ecosystem

The Georgian ecosystem exhibits several trends that are also noticeable in the Armenian ecosystem. These include attracting venture capital from larger ecosystems, nurturing senior talent, and involving the diaspora. However, in some aspects, the Armenian ecosystem is a few strides ahead of Georgia. This can be attributed perhaps to its legacy and early development. 

This head start has given Armenia more time to build networks, secure venture capital investments, and even produce its own homegrown unicorn, when Picsart raised its last round in 2021. 

According to Sona Veziryan, Director of BANA Angels in Armenia, “the Armenian startup ecosystem has strong ties to the tech ecosystem in the United States.” As a result, Armenian startups have a higher chance of securing funds from the U.S. compared to their Georgian counterparts. “Armenia leads by a significant margin, being ten times ahead of Georgia,” Veziryan says and suggests that this gap could be due to the global orientation of Armenian startups, which brings us back to the diaspora’s impact.

The Armenian diaspora, with its much larger numbers, has played a significant role in bridging the Armenian startup ecosystem with more mature ecosystems worldwide, particularly Silicon Valley. This exposure fostered a global mindset among Armenian entrepreneurs from the beginning, encouraging them to develop solutions with international reach. “Armenian founders leverage the ‘Small Market Advantage,’ initiating international product development from inception,” Veziryan states. 

Ani Kazarian from Georgia has observed recent advancements in the Armenian startup ecosystem. She credits this progress to BANA and other venture capital funds, which have provided significant financial support. Kazarian also noted the many challenges Georgian startups face when venturing into foreign markets, including limited financial resources and inadequate exposure to international markets. However, she sees a positive shift. Recently, various American organizations and accelerator programs have extended opportunities for Georgian startups to “take part, gain access to the American network, and obtain further funding more easily.”

The Georgian government actively supports this ecosystem through GITA. They offer initiatives such as pre-acceleration programs, bootcamps, and community events. Similarly, Armenia’s government provides assistance through the National Center for Innovation and Entrepreneurship (NCIE), the Ministry of High Tech, and a range of tax incentives for startups. However, Armenia’s governmental support may not be on par with Georgia’s. Veziryan, who has attended multiple startup events in Georgia, has had the opportunity to compare the two ecosystems. “We’re somewhat behind in this aspect when comparing Georgia’s GITA to our Ministry of High Tech Industry,” said Veziryan. The Georgian government is “putting a lot of effort in bolstering their startup scene, particularly through their advanced innovation agency.” 

The key factor distinguishing Armenian and Georgian startup ecosystems is their respective stages of development. Armenia currently houses many home-grown companies that have raised Series A funding, including Krisp, SuperAnnotate, Activeloop, Zero Systems, Podcastle, Cognaize and Softr. It also hosts companies that have raised Series B funding, such as CodeSignal, Sololearn, and IntelinAir, and a Series C funded company, Picsart. In contrast, Georgian companies are at earlier stages. Veziryan highlights this, saying “The Armenian startup scene is transitioning from Seed funding to Series A, while Georgia’s ecosystem is still in the Pre-Seed stage, moving towards Seed.”

Opportunities for Collaboration

Global collaboration among startup ecosystems is prevalent, with Singapore and Bangalore being notable examples. Both ranking within the top 20 global ecosystems, India and Singapore have taken significant steps at both the governmental and non-governmental levels to establish entrepreneurial bridges between the two regions. For instance, in 2017, Singapore incorporated Bangalore into its Global Innovation Alliance (GIA) program. This connection allowed Singaporean tech companies and small to medium-sized enterprises (SMEs) to integrate with the Indian tech ecosystem. 

According to The Business Times, there are several examples of collaboration. One includes a business partnership with Anthill Ventures, an international speed scaling platform. This partnership helps Singapore-based startups enter the Indian market via Bangalore. Moreover, The Indus Entrepreneurs Global, a startup network founded in Silicon Valley, links Singapore startups with mentors and venture capitalists within the Indian startup ecosystem. Another instance of successful collaboration is the International Tech Park in Bangalore (ITPB), a joint venture between Singapore and India, operational since 1994. This large facility, comprising ten buildings, offers campus facilities for multinational corporations and houses data centers and business support services.

Singapore and Bangalore are not the only examples of successful collaborations. Other similar partnerships include Berlin-London in Europe and Shenzhen-Beijing in China. Given these success stories, it’s natural to question what opportunities exist for collaborative efforts between the Georgian and Armenian startup ecosystems. 

The Georgian ecosystem could benefit from such collaboration by gaining access to potential partners in the United States and potential funding sources. It could also learn from an ecosystem that has already navigated the path Georgia still needs to walk. Georgian entrepreneur Nato Chakvetadze agrees, stating that by “sharing knowledge from unicorn startups and a larger tech talent pool in Armenia,” Georgia could reap significant benefits from closer ties. 

“In comparing the Georgian and Armenian startup ecosystems, the Armenian one is more mature in my opinion,” she says. “This maturity is the result of bottom-up developments in Armenia, leading to more efficient and sustainable, creation of resilient and competitive startups. It is a fact that Armenia is the only South Caucasus country region so far to have a unicorn startup and has achieved great success on global crowdfunding platforms in attracting funding for innovative products.” 

The Armenian ecosystem could also benefit from having access to another startup ecosystem for seed investments, resource sharing, and learning from the success of the Georgian government through GITA in developing their ecosystem. “The Georgian tech and innovation ecosystem enjoys strong government support. Over the last 10 years, GITA has invested heavily in building necessary hard and soft skills, developing tech infrastructure, and most importantly, supporting startups with funding through complex grant scheme systems, from prototype to expansion money, which is equity free,” says Chakvetadze. 

A robust tech ecosystem in the Caucasus would also attract more attention from outside investors and companies –– something that both countries would undoubtedly benefit from. 

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