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Azerbaijan has roughly 160 startups, but only 22 of them raised funding in 2025, attracting a combined $2.62 million. Despite recent reforms, the country ranks 81st globally – well behind Armenia and Georgia.
Azerbaijan has declared information and communications technology a national priority, introduced generous tax incentives and established institutions designed to support startups. Yet technology remains a small part of the economy, while venture funding is still measured in single-digit millions of dollars.
The technology sector accounted for only 2.1% of Azerbaijan’s gross domestic product in 2025, up from 1.9% in 2024, Reuters reported.
The increase is real, but still too modest to significantly reduce the country’s dependence on oil and gas. At the height of Azerbaijan’s oil boom, hydrocarbons generated roughly three-quarters of economic output and 90% of exports, according to International Monetary Fund figures cited by Reuters.
Turning Baku into a technology and innovation hub on the Caspian Sea is therefore more than a branding exercise. It is part of Azerbaijan’s effort to build sources of growth that will remain viable beyond the oil era.
A Market Worth Only a Few Million Dollars
Economist Natig Jafarli says Azerbaijan has between 150 and 160 active startups, with the overall ecosystem valued at approximately $590 million.
The funding figures, however, paint a more restrained picture.
Only 22 Azerbaijani startups raised investment in 2025, attracting a combined $2.62 million.
The country has three main venture funds – Caucasus Ventures, INMerge Ventures and Tumar Ventures – with total disclosed capital of approximately $11 million.
By venture capital standards, this is a very small pool. A single early-stage round for a successful international technology company can exceed the combined capital available to all three Azerbaijani funds.
Jafarli also estimates that overall investment in Azerbaijan’s ICT sector reached $175 million in 2026. That figure should not be confused with venture funding.
ICT investment includes spending on telecommunications infrastructure, equipment, data centers, software systems and other large projects. Only a fraction of that money is available to young companies trying to develop products and enter foreign markets.
In other words, Azerbaijan is investing in technology infrastructure, but relatively little of that capital is reaching startups.
More Startups, Lower Ranking
The number of registered startups alone does not determine the strength of an ecosystem. What matters is whether companies can raise capital, find international customers, expand abroad and produce successful exits that return money and experience to the local market.
Azerbaijan ranks 81st in the StartupBlink Global Startup Ecosystem Index 2026. The platform tracks 160 startups in the country and estimates annual ecosystem growth at 7.3%.
Armenia ranks 55th, even though StartupBlink tracks 156 startups there – roughly the same number as in Azerbaijan. Armenia’s ecosystem grew by 16.2%.
Georgia ranks 66th with 130 startups, fewer than Azerbaijan. Its ecosystem, however, expanded by 78% over the year, allowing the country to climb five places in the global ranking.
The comparison suggests that Azerbaijan does not primarily suffer from a shortage of startup projects. Its weakness lies in the connections between founders, investors, international accelerators and foreign markets.
Armenia’s Diaspora Advantage
Armenia benefits from a large and well-connected technology diaspora. Armenian founders and executives working in the United States and Europe help local teams gain access to investors, expertise and potential customers.
Armenia’s small domestic market has also forced many founders to think internationally from the beginning. Promising companies often establish headquarters in the United States while keeping research and engineering teams in Armenia.
According to Dealroom, Armenian technology companies have a combined enterprise value of approximately $2.3 billion.
The platform also lists one active unicorn – a privately held company valued at more than $1 billion.
Picsart, ServiceTitan, Krisp, SoloLearn and SuperAnnotate are among the best-known companies associated with Armenia’s technology community. Not all are legally based in Armenia, but their founders, development teams and professional networks contribute to the country’s reputation as a source of engineering talent.
A 2025 study conducted by Civilta with support from the European Bank for Reconstruction and Development identified 144 active Armenian startups. Most were still at the pre-seed or seed stage, indicating that Armenia also faces a shortage of scale-up capital.
The difference is that Armenian founders already have stronger channels for seeking that capital abroad.
Georgia Links Grants to Global Accelerators
Georgia has pursued a somewhat different model, combining relatively simple business registration, favorable tax treatment for international technology companies, government grants and partnerships with foreign accelerators.
According to Startup Genome, more than 160 projects receive support annually through programs involving organizations such as 500 Global, Plug and Play, Founder Institute and Startupbootcamp.
The median seed round in Tbilisi between the second half of 2023 and the end of 2025 was approximately $330,000.
The Georgian Innovation and Technology Agency, known as GITA, has invested around $14 million in approximately 240 startup projects. Startup Genome previously estimated that every dollar in initial government support helped generate roughly $13 in private investment and revenue.
Under current acceleration programs, selected startups can receive GITA grants of up to 150,000 Georgian lari, or roughly $55,000, while gaining access to international mentors and investors.
Georgia’s startup sector remains small by European standards. Its advantage is that public funding is increasingly connected to a pathway leading from a local grant to an international accelerator and, eventually, a private investor.
Baku Begins Changing the Rules
It would be inaccurate to suggest that the Azerbaijani government is ignoring the problem.
Legislation adopted in July 2026 created a legal framework for new investment instruments. The changes are intended to allow startups and investors to structure deals inside Azerbaijan instead of establishing companies in foreign jurisdictions for each funding round.
Officials expect the framework to reduce costs and make subsequent investment rounds easier.
Deputy Digital Development Minister Rashad Hasanov told Reuters that foreign venture funds, corporations and institutional investors were expected to provide a significant share of future financing.
The government also plans to establish a fund combining Azerbaijani and international capital. Its size has not yet been determined. Hasanov said it would depend on the quality of the available startup pipeline and the partners involved. Officials studied the experiences of Singapore and Estonia while preparing the initiative.
A separate legal framework has been established for equity- and debt-based crowdfunding. The Central Bank of Azerbaijan has six months to adopt the necessary regulations.
Central Bank Governor Taleh Kazimov said the regulator was awaiting applications from potential market participants.
Tural Selimli, an entrepreneur with Azerbaijan-based technology company Sera AI, welcomed the new framework but warned that Azerbaijan must also build trust among foreign venture capital firms and angel investors.
Legislation can be adopted within months. Convincing investors that a jurisdiction offers predictable rules, reliable protection of ownership and a clear path for moving capital can take years.
One Funding Round Was 150 Times Larger
Jafarli pointed to Higgsfield, an artificial intelligence video platform frequently described as Kazakhstan’s first technology unicorn, as an example of the scale Azerbaijan has yet to achieve.
On Aug. 17, Higgsfield announced that it had raised $400 million at a valuation of $5.4 billion. The Series B round was led by DST Capital and included Goldman Sachs Alternatives, Tribe Capital and Intel Capital, according to Reuters.
That single round was approximately 150 times larger than the combined funding raised by Azerbaijan’s 22 funded startups in all of 2025.
Describing Higgsfield solely as a domestic Kazakh startup would not be entirely accurate. The company is headquartered in San Francisco and operates globally. However, it was founded by Alex Mashrabov and Yerzat Dulat, has recruited engineers from Kazakhstan and participates in the Astana Hub technology program.
This model is common among smaller technology ecosystems. A startup places its headquarters close to major customers and investors while maintaining engineering teams and professional links in its country of origin. Its international success then strengthens the reputation of the national technology community.
Tax Breaks Are Not Enough
Azerbaijan’s problem is not a lack of programmers, entrepreneurs or financial resources. The country has technical talent, a relatively large domestic market, state funding and the ability to support the sector over a long period.
A functioning venture ecosystem, however, requires more than tax incentives, conferences and government competitions.
It needs independent funds operating on commercial terms, reliable minority investor protections, clear rules for equity ownership, credible courts, accessible international payments and realistic opportunities to sell or list successful companies.
Successful exits are especially important. When founders sell a company or take it public, part of the proceeds and expertise usually returns to the ecosystem. Former founders become angel investors, establish new funds and finance the next generation of startups.
That cycle has not yet developed in Azerbaijan.
The reforms introduced in 2026 could remove some of the legal barriers. Their effectiveness, however, should be measured by private investment, international funding rounds and the number of Azerbaijani companies selling products abroad – not by the number of funds announced or agreements signed.
For now, the figures remain modest: around 160 startups, only $2.62 million raised in one year and 81st place in the global ranking.
Armenia and Georgia demonstrate that smaller countries with fewer financial resources can move faster when public support is combined with international networks, investor confidence and legal systems designed for global business.
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