Courtesy of the Wall Street Journal, an interesting look at Iran’s tech sector:

In the week following the framework nuclear deal between world powers and Iran, Tehran-based Internet entrepreneur Faty Amir Soleimani pitched every day to Western investors for funding.

“We started getting a lot interest from foreigners,” said Ms. Soleimani, who runs an e-commerce site for baby products called Koodakoo. “When I say a lot, it was really a lot.”

Amid a global glut of investment into Internet companies, Ms. Soleimani’s experience suggests that Western investors are eyeing perhaps their most risky bet yet: Iranian startups.

Several U.S. and European venture capital funds and angel investors have begun talking to Iranian entrepreneurs ahead of a potential final nuclear deal later this month. Attracted to Iran’s increasingly tech-inclined population of 80 million people in an economy that is expected to thrive if sanctions are lifted, these investors are assessing how and when they can buy into tech startups.

“There is potential unlike anything I’ve seen to date in emerging markets,” says Chris Schroeder, U.S.-based angel investor who has visited Iran twice recently and written a book about startups in the Middle East.

Roughly 40 million people have access to the Internet in Iran, while about 15% of the population has access to the web on mobile, according to the Iranian Ministry of Communications and Information Technology. And the number of Iranians with access to the Internet is forecast to grow as telecoms operators began rolling out 3G and 4G networks last year.

Challenges remain, not least the uncertainty of investing in a country that has been openly hostile to the West for more than 30 years.

U.S. firms and individuals are currently banned from dealing in Iran. But Europeans can invest if they structure a deal that avoids sanctions on financial transactions, something few are willing to do, lawyers and bankers said. Even if a nuclear deal is agreed, some investors are considering setting up offshore vehicles to invest, rather than risking directly holding stakes in Internet companies in Iran.

Still, given the growth prospects for e-commerce in post-sanctions Iran, investors remain keen.

“The population and widespread use of smartphones make it an attractive market for Internet companies,” says Dave McClure, founding partner of Silicon Valley-based venture capital fund 500 Startups. If U.S. laws change and sanctions ease, Mr. McClure says he’ll invest up to $100,000 in each Iranian Internet startup, having met a handful at an Internet conference in Berlin last week.

The chairman of Palo Alto-based Global Catalyst Partners, Kamran Elahian, said his venture capital fund also wants to invest in Iran once it is permitted. “We are hoping that the sanctions will be reduced or go away,” said Mr. Elahian, who had co-founded chip company Cirrus Logic Inc. and several other firms.

While global Internet giants have largely shunned Iran or had no access to the market in recent years, local startups have flourished in fields such as social media, e-commerce and online video.

“In Iran, startups are land-grabbing because the global dominant players aren’t there yet,” said Xanyar Kamangar, co-founder of Griffon Capital, a corporate finance advisory and asset management firm.

Koodakoo mirrors U.S.-based site Diapers.com that was sold to Amazon Inc. in 2010. Other entrepreneurs have set up services similar to Groupon Inc., Google Inc.’s Play and YouTube units.

The Iranian government has so far been hands off in regulating the tech sector, Iranian entrepreneurs and investors said.

A former investment banker at Deutsche Bank AG, Mr. Kamangar advised Digikala, an Internet retail platform similar to Amazon.com Inc., last year when it sold a stake to an undisclosed Swedish investment fund in a transaction that valued the Iranian company at $150 million.

Tehran-based VC fund Sarava Pars, which was an early investor in Digikala and last year bought into Iranian app store CafeBazaar, is now looking to raise up to $100 million from European and Asian investors. The fund will buy into Iranian startups, with up to $300,000 per deal.

“Most Europeans can get permission from their authorities to invest in this sector,” said Said Rahmani, the founder of Sarava Pars. “Transfer of money is currently the issue.”

Nazanin Daneshvar founded a Groupon Inc.-like daily deal website four years ago that now has more than one million subscribers and about 60 employees. Takhfifan so far doesn’t have any outside investors, but Ms. Daneshvar is now looking for venture capital to fund further growth.

Foreign investors have shown interest but are still reluctant to sign a deal, she says. Uncertainty about the possibilities to repatriate funds after a divestiture is a worry for investors.

“These companies, especially the big ones, are scared because of the sanctions, that it could affect their other investments, such as in American companies,” she said.

Some American companies are also waiting in the wings. The Wall Street Journal reported last year that gadget giant Apple was in talks with Iranian distributors to sell its products in Iran when the sanctions are eventually lifted.

Koodakoo’s Ms. Soleimani says she is about to close $1 million in funding from European angel investors, but won’t disclose their names. The investment will be used for marketing and to help grow Koodakoo’s product range over the next 18 months, Ms. Soleimani said. The framework nuclear agreement was the catalyst for talks with investors. “Up until that moment they weren’t touching Iran,” she added.