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American investors are reluctant toward IT startups from Central Asia due to the proximity of Russia, Iran and China

Why American investors are reluctant to put their money in IT startups from Central Asia / Photo: Shutterstock

Venture investment funds from the U.S. are reluctant to invest their money into IT startups from Central Asia, the Caucasus and Eastern Europe because of their proximity to Afghanistan, Russia, Iran and China, according to Anatoly Motkin, president of StrategEast, an organizer of The StrategEast State and IT Eurasian Forum.

Motkin believes that the weakness of the IT export and brain drain are some of the most acute problems for Central Asia, including Kazakhstan. He is calling for countries in the region to pay more attention to countries of the Persian Gulf as they are less conservative than the U.S. In addition, the speed of the digitalization process in Qatar and Saudi Arabia is much higher than in the U.S., the expert said.

«Unlike the U.S., these countries are in the same time zone and they desperately need digital expertise better than what they’ve been receiving from India. They aren’t happy with that. When promoting the region, we usually say the simple truth: what you are going to get is a digital expertise comparable to Silicon Valley but ten times cheaper and 20 times better than what you currently have. There are more than 10,000 startups in Central Asia, the Caucasus and Eastern Europe (Ukraine and Moldova) and many of them have passed through the selection of startup accelerators in Silicon Valley in the U.S.,» he emphasized.

In contrast to American investors, investors from the Gulf nations aren’t that concerned about threats associated with China, Russia, Afghanistan and Iran, Motkin noted. Moreover, there are more than 500 venture funds in the Gulf countries that still have an appetite for both local and other startups.

«We have organized presentations in Saudi Arabia for 15 startups and all of them are doing well now. This is why we are going to organize similar presentations for 50 startups next year. We have organized meetings of executives of all IT parks from Central Asia and the Caucasus with investors, businessmen and officials in Dubai. There is huge interest. In February 2024, we are going to travel to Doha along with representatives of leading IT companies from Central Asia,» the president of StrategEast said.

According to Motkin, Kazakhstan has great potential due to the traditionally high level of teaching in fundamental sciences like mathematics and physics. He has come to this conclusion after several months of work in the country.

«We see how many young, well-educated people are here. We organized many presentations for startups from Kazakhstan in Saudi Arabia and other countries of the Gulf region. Kazakhstanis were always good at networking; they spark interest and easily find investors and partners,» he noted.

Motkin also said that at least 20 startups are going to get investments from the Gulf countries, while five companies from Kazakhstan that specialize in digital services will obtain new customers from the region. If everything is done properly, the amount of IT export can reach tens of millions of dollars, he noted.

«Central Asia, the Caucasus and Eastern Europe can become a single digital region if countries of these regions will consider themselves as such a region due to their accumulated expertise and experience on the one hand and money and ambitions in the Gulf region on the other hand. I think the number of investments is going to grow in geometrical progression. This is going to be the third such region apart from the U.S. and China. And this will be the first time that the Muslim region is a global center of digital expertise,» Motkin underlined.

According to Azis Abakirov, head of the High Technology Park of the Kyrgyz Republic, the first such park in Central Asia (established in 2011), countries of the region are going to create a so-called digital brotherhood. The main goal of the initiative is to convey the idea that young people can live in Central Asia and support business relations with the entire world.

«This is our motto. We are implementing joint programs and actively cooperate with each other. About four to five times a year, we meet on different platforms and we are constantly in close touch. We already have such a brotherhood in the IT sector and now we are promoting it, working together to make it stronger and we often visit each other. I have no doubt that Central Asia will be a successful and prosperous region in the future,» Abakirov told Kursiv.

Kyrgyzstani High Technology Park is ready to share its experience in the sphere of IT export with any other technology parks within Central Asia. According to Abakirov, exports by High Technology Park last year amounted to $50 million and will reach around $100 million this year.

«About 97% to 99% of all digital products developed by the High Technology Park go for export in more than 50 countries all over the world. We feel confident in this sphere and we are ready to facilitate all of Central Asia in this field. Thousands of years ago, this region saw the Arabian Renaissance and the Great Silk Road stretched through here. Central Asia used to be an ancient Silicon Valley and now we want to contribute to this renaissance once again. I would call on all technology parks to seek this goal. I am totally convinced that we will see a boom of innovations here. We are going to witness it,» the head of the High Technology Park of Kyrgyzstan said.

The first StrategEast State and IT Eurasian Forum, which gathers participants from the government and the IT industry for open dialog, was in Kyiv; the fifth event was held in Almaty this year.

The conference was attended by representatives from Amazon Web Services, Google and Microsoft as well as venture investors from Silicon Valley and the Gulf nations and officials from public agencies in the U.S., the EU and Eurasia. This year, the event gathered more them 200 participants, 70 speakers and more than 40 global and regional institutional partners. StrategEast is a leading independent institution working to develop Eurasia’s digital economy, in collaboration with international financial institutions, development agencies, global tech companies, and Eurasian governments. This non-profit organization runs offices in the U.S., Ukraine, Georgia, Kyrgyzstan and Kazakhstan.