Recently, I represented the UATE (Union of Advanced Technology Enterprises) as we opened our 602nd Armath Engineering Laboratory, in the village of Baghramyan, just outside Etchmiadzin. The school principal, village mayor, newly-appointed Marzbed (regional governor), and Minister of Social Affairs all participated in the ceremony, but their presence was overshadowed by the parents of four alumni of the school who died fighting for their country in last year’s devastating war. The laboratory was opened and named in their sons’ honor, and each speaker struggled to find an acceptable balance between coming to terms with these parents’ loss (three of the four soldiers were 20 or younger), and the opportunity that the opening of the lab presented to the students eager to sign up for the after-school STEM program.
This dichotomy captures the essence of Armenian tech in the aftermath of the 44-day war. On the one hand, 2020 and 2021 were, and continue to be, a calamitous period in our history as a nation. We witnessed a near-total defeat, an unimaginable number of young men dead and wounded, repeated incursions into Armenian territory by a relentless adversary, an election where the majority of the electorate cast negative votes, and the extension in power of a government seemingly paralyzed and resigned to pursue an insecure peace at any cost. On the other hand, in the middle of this dystopian reality, Armenian tech enjoyed its most successful year, as measured by a number of milestones outlined below. How do we come to terms with these two realities?
The resurgence of Armenian technology is no secret to those who have followed the development of the Armenian economy for the past decade. Numbers such as 25%+ annual growth, thousands of well-paid skilled employees, and the recent emergence of not one, but two Armenian-led unicorns, are mostly common knowledge. The names PicsArt, Krisp and ServiceTitan have become part of our cultural lexicon. While these are all verifiable facts, the truth is at once deeper, broader, but also more nuanced.
First, the good news: the Armenian tech industry continues to grow across all fronts – number of companies, number of employees, multiple $20-million+ funding rounds, products featured on ProductHunt and companies covered in TechCrunch. This year’s DigiTec Expo was the largest ever, and the inaugural edition of DigiTec Summit, as well as a weeklong series of tech events under the DigiWeek umbrella in late October, featured founders, CEOs, senior executives with truly global impact and reach. What’s more, the depth of success, as measured by investment attracted, is far deeper and broader than the two existing, and one soon-to-be, unicorns mentioned above. In fact, if we define Armenian tech companies as companies led/founded by Armenians with R&D operations in Armenia, the top 10 companies have attracted more than $1.7 billion (yes, that’s billion with a “b”) dollars in investment (of which $572 million was invested in 2021 alone), and have a combined valuation of nearly $12 billion. While the lion’s share of these numbers is due to the incredible success of ServiceTitan (launched and led by two first-generation Armenian-Americans), the next nine companies have each raised at least $10 million each, and the pipeline for new deals continues to grow. What’s more, the first wave of successful start-ups is now acting as a breeding ground for the next generation: Podcastle, which helps consumers produce professional podcasts online, was founded at the beginning of the pandemic by Artavazd Yeritsyan, who spent seven years at Armenia’s other unicorn, PicsArt, before launching his own startup which has already raised $7 million within 18 months of launching. It’s also important to note that while several of these fundraising rounds have included Armenian angel and venture money, the vast majority comes from non-Armenia/ Armenian-affiliated investors. The joke among entrepreneurs in Armenia is that when they first mentioned that they were launched/located in Armenia, skeptical VCs would ask “Albania? Rumania?” Now, the Armenia moniker has its own cache in Silicon Valley and beyond.
There are several reasons for this incredible turn of fortune for Armenian tech. Part of the success is due to the global trend of vast amounts of capital flowing into riskier investment vehicles such as angel, seed and venture funding; in other words, it’s true that it’s easier to raise money as a start-up today than almost anytime since Web 1.0. However, there are minimum entry stakes into this game that Armenian start-ups have finally not only understood, but also acquired, by thinking bigger, spending the time to explore markets and opportunities, and mastering the cycle of create/market-test/improve/repeat to attain the right level of product-market fit to attract customers, and therefore investment.
Next, as mentioned above, the growing number of successes is convincing more engineers and product managers to “take the plunge” and launch their own ventures. Finally, the incredible competition for scarce tech resources in Armenia has led to soaring hiring and salary costs, which encourages young tech professionals to leave steady-income positions to launch their own venture, knowing full-well that should they fail, they can always “sell” their services to more mature companies desperately looking to fill ever-increasing open positions. It’s fair to say that this is fueling a salary “bubble”, which, when it eventually bursts, will have serious consequences on Armenia’s ability to compete globally as a [relatively] low-cost, high-value development center. As we head in 2022, however, this bull market continues to surge forward with no apparent end in sight.
As a result, CEOs of both mature and emerging Armenian tech companies, in addition to focusing on their typical, relentless pursuit of better products, more customers and higher revenue, are having to spend more time, energy and resources to hunt and attract talent, both in Armenia and beyond. While Armenia has always been a location to outsource to, Armenian companies are now seriously exploring options to open satellite offices in other countries, and recruiting both Armenian and non-Armenian talent to either work remotely, or relocate to Armenia. At the same time, many global tech companies, with no ties to Armenia, are conducting laser-focused recruiting campaigns to convince top engineers to join them and emigrate from Armenia to Western Europe and North America. This brings us back to the after-effects of the 2020 Artsakh War, as many young Armenian men and women from the tech industry are seeking more stable grounds for themselves and their families. The outflow is likely to accelerate as Covid-related restrictions on travel and migration eventually fade away.
In the face of these challenges, a new generation of tech leaders is coming into its own, many with significant experience studying, working or living abroad, whose commitment to funneling individual and collective achievements and experience to succeeding generations is both heartening and crucially necessary. In a global industry defined by capitalistic value creation and wealth accumulation, these young[er] CEOs balance their commitment to the success of their own enterprises with an explicit investment of time, money and energy into creating a stronger industry and society in Armenia. That’s a formula worth supporting and expanding.
So, back to our dichotomy. How can one reconcile the golden age of Armenian tech with the fractured society of post-war Armenia? Which reality should Armenians, especially those in the Diaspora whose perspectives on Armenia are shaped (some would say distorted) by the diffractions caused by ever-polarized and manipulated social media, adhere to? While each observer should take the responsibility to form their own opinion, objective and purpose do matter. Both realities exist – which one will each of us believe in? Which one will we invest ourselves to realize?