Technology Startups Take Root in Tehran

Courtesy of the Wall Street Journal, a look at how Iranian versions of Amazon, Google Play, and Groupon are filling the void left by sanctions and censorship:

Decorated with a foosball table, brightly colored walls and videogame consoles, the offices of Café Bazaar look no different than many Internet startups in technology hubs like San Francisco, London or Berlin.

What’s unique about Café Bazaar, an Android software app store that mimics Google Inc. ’s Google Play, is its location: an upscale high rise in central Tehran.

The company is among dozens that have popped up in Iran, part of a technology scene that has developed amid—and some say because of—international sanctions and strict censorship laws that have scared off global tech companies, at least for now.

Facebook and Twitter, whose users include the offices of Ayatollah Ali Khamenei and President Hassan Rouhani, are particularly popular with Iran’s increasing tech-savvy population of 78 million people. But foreign companies, deterred by international sanctions or banned in Iran, have yet to launch Iranian versions of their content.

But those hurdles are fueling the rise of fast-growing local companies. Café Bazaar offers more 25,000 downloadable Iranian and international apps for gaming, social media, messaging and other uses, and it gets roughly 20 million visits a week within Iran. 

Adding to its popularity is the fact that Google Play and Apple Inc.’s Apple Store are difficult to use in Iran, largely because sanctions make international banking transactions a challenge for Iranians. Café Bazaar has stepped in to fill the void.

Other local startups have seized similar opportunities in fields like social media, e-commerce and online video, mimicking the services of companies like Amazon Inc.,Groupon Inc. and Google Inc.’s YouTube unit.

Iranian technology entrepreneurs say sanctions and restrictions on Western companies have helped them grow by reducing competition from established foreign players. American technology firms so far have had limited or no access to the market because of bans on their content or restrictions on foreign companies setting up in Iran.

YouTube, the online-video site, is banned in Iran. That has allowed Aparat, an Iranian video-sharing platform to build a following of millions. The website, which is owned by Saba Idea Technology Co., averages five million views a day and has 22,000 minutes of video uploaded daily. Takhfifan has created a successful group-buying website. Digikala, an e-commerce platform similar to Amazon, ships more than 4,000 daily orders.

“The restrictions have actually been in our favor,” said Ali Tehraninasr, Saba’s director of business development and international affairs. He said Aparat is mindful that the videos posted on its sites should show respect for Iranian culture, but that there is no direct censorship of its content. Music, clips of movies, animals and religious content are all popular.

But its success might not last. Foreign companies are beginning to explore ways to start tech companies in Iran or allow their services to become available in the country. 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 eventually are lifted.

That has fueled concerns about new competition. “The Iranian startups now have to beat these guys or be beaten,” said Said Rahmani, founder of Tehran-based venture-capital firm Sarava Pars and an early investor in Digikala.

Already some cracks have begun to show. The social-media website Cloob once had more than three million registered users, but the number has fallen by 40%, a decline Saba’s Mr. Tehraninasr attributes to Facebook’s growing popularity here.

International sanctions can hurt as well as help. Mr. Tehraninasr said Western companies stopped selling Saba servers five years ago because of the restrictions, and Saba now has to rely on Chinese equipment of lesser quality. In addition, the purchases are made more costly by Iran’s weak currency, which has lost half its value compared with China’s yuan in the past two years.

But there also is a sense of freedom in the startup universe in Iran that is missing in more traditional sectors of the economy. While the average Iranian state official typically wears in a dark gray suit and a collarless white shirt, Café Bazaar co-founder and Chief Executive Hessam Armandehi turns up to work sporting a polo shirt.

While many Iranian government offices feature pictures of staff “martyred” during the Iraq-Iran civil war, Café Bazaar has an oversize green fluorescent cushion on the floor topped with a sign that invites a “free hug.”

This entry was posted on Thursday, February 26th, 2015 at 2:19 am and is filed under Iran.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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