Startups: An Opportunity for Development or a Threat to the Government

Startups: An Opportunity for Development or a Threat to the Government

Startups: An Opportunity for Development or a Threat to the Government. According to Iran Gate, over the past 12 years, as internet businesses have become popular in Iran, restrictions have also increased day by day. From the filtering of Telegram, Instagram, and WhatsApp to the forced shutdown and suspension of businesses under the pretext of mandatory hijab.

These restrictions are an outward manifestation of the tightening space for entrepreneurs in the startup sector or those who have made the internet their platform for trade and business, a place where the government has no influence or, if it does, it is limited.

However, examining the resilience of internet-based commerce in Iran shows that conditions are far tougher than they appear from the outside. Orders to seal and halt the activities of platforms and startups like Takhfifan and Azki, or the closure of Digikala’s headquarters due to female employees not observing the mandatory hijab, with all the narratives of some of them being linked to government components, are not new actions to further restrict active internet-based businesses.

Previously, in the fall of last year, following widespread public protests after the death of Mahsa Amini in the morality police’s detention, the internet in Iran was cut off or disrupted, and many platforms on which internet businesses operated were filtered and blocked.

With about 11 months having passed since platforms like Instagram were filtered, the government’s efforts to migrate internet businesses to domestic networks and messengers have led nowhere. This defiance by the private sector of government orders has now taken a more serious form with the publication of images of startup employees appearing online without mandatory hijab.

From Filtering to Disruption and Cutoff

The first widespread and serious confrontation of the government with internet businesses began with the internet cutoff in November 2019 following public protests over the increase in gasoline prices.

Although the protests of internet business owners over the internet cutoff at that time did not yield results, in September 2021, when the internet in Iran was cut off for 11 days and disrupted in some areas, and subsequently, the government decided to widely filter platforms like Instagram, the extent of the government’s decisions’ impact on the life and death of internet businesses became more apparent.

According to a report published by NetBlocks after the widespread internet cutoff in Iran, it was revealed that the internet cutoff between September 19 and October 30, 2021, caused an economic loss of $1.5 million per hour, equivalent to 45 billion tomans to businesses. With the dollar rate at 29,000 tomans at that time, this was estimated to be about one trillion tomans per hour.

With this calculation, it can be said that the internet cutoff and disruption for those 11 days caused an 11 trillion toman loss to the country. Simultaneously, some reports also show that at least 10 million people have businesses on virtual platforms. In another research report, Iran’s Open Data website announced last February that internet disruptions from the beginning of October to the end of January caused losses ranging from 40 to 120 trillion tomans, which, considering the 40% inflation effect at that time, was estimated to increase to about 170 trillion tomans.

At the same time, the independent VPN service website Top10VPN.com estimated the deliberate internet cutoff damage by the government over four months to be close to $800 million and added that the total duration of deliberate internet cutoff in Iran in 2022 was 2,179 hours, affecting the lives of nearly 72 million Iranian citizens.

On the Eve of the Anniversary of Protests

These days, on the eve of the anniversary of the ‘Women, Life, Freedom’ protests, the internet once again stands as the first line of defense against the government by people protesting against imposed pressures and restrictions. Despite widespread filtering and pressure on businesses to operate on similar Iranian platforms created with huge costs, foreign examples like Instagram or Telegram and WhatsApp have maintained their popularity in Iran.

Datak, a knowledge-based company in the field of data mining and big data, which is active in data collection in the virtual space based on artificial intelligence, announced in a report published this June that despite being filtered, 54% of people in Iran are still present on various social networks like Telegram, Instagram, and Twitter. Nevertheless, the government continues its policy of imposing more restrictions through the internet.

Examining budget laws regarding virtual space restrictions after the events of November 2019 shows that the government has incurred heavy costs for what it calls virtual space security and actually for filtering. In the current year’s budget, 846 billion tomans have been allocated for virtual space security, and last year, 576 billion tomans were allocated for imposing more restrictions.

The Collapse of the Last Stronghold

For private sector startups in Iran, whose activities have grown alongside the global expansion of this new trade, more restrictions often equate to surrender and the decision to migrate. Since last September, when governmental pressures on internet businesses have increased both due to internet disruptions and security issues, many activists in this field are planning to migrate.

A look at the content published on LinkedIn is evidence of this claim. In the latest example, Nazanin Daneshvar, the founder of the successful Iranian startup Takhfifan, recently announced that she has transferred the company and migrated from Iran. The situation in other startups is more or less the same. After 12 years since the start of startup activities in Iran, their financial turnover has not yet reached that of neighboring countries.

Radman Rabiee, Deputy of Venture Capital Investments at Firoozeh Financial Group, estimates the market value of this sector to be around 80 trillion tomans. This is while several unicorn startups operate in neighboring countries like the United Arab Emirates, Turkey, and Saudi Arabia. Unicorn companies are those whose market value exceeds one billion dollars.

In addition to the limitations due to low internet speed in Iran and especially intentional disruptions in the infrastructure, interference by security and governmental bodies in startup activities is one of the major problems for these companies’ growth. Interferences such as obtaining contact information and customer addresses or demanding shares from high-customer companies, as has often been reported in the cases of Digikala or Snapp, where governmental bodies have managed to take control of significant portions of these startups, either openly or covertly.

The migration of startup specialists marks the end of the activities of young people who have started businesses with thousands of ideas in the toughest conditions. Although this migration carries heavy costs for Iran’s economy, the platforms they have prepared are ready to be exploited by the government, similar to what happened after the confiscations following the 1979 revolution.

Azari Jahromi: The filtering of Telegram was not a government decision but a judge’s ruling.