Regional Post talked to Mariam Babayan, Project Advisor for Entrepreneurship Ecosystem Development and Tech Ventures at GIZ about the startup ecosystem in Armenia and the newly established SAP Startup Factory by BANA (Business Angel Network of Armenia).
Interview : Gayane Harutyunyan Photo : Mariam Babayan’s Archive
Why is startup field development important for the GIZ?
- In 2020 GIZ started implementing the EU-funded Innovative Tourism and Technology Development project. Within the technology component of the project, the EU-ITTD program has a specific focus on startup development. GIZ also supports the Horizon Europe project, which is one of the key funding programs of the EU for research and innovation, with around a 100-billion-euro overall budget. Armenia is a partner of this project and can benefit from its financing opportunities.
Startup development has intensified during recent years and GIZ has been involved right from the beginning, supporting relevant initiatives. We believe that startups/future SMEs (small and medium-sized enterprises) are very important and promising elements of the Armenian economy. Having in mind the technological heritage of our Soviet past, Armenia is rightfully considered as a tech country, that has a tech society. In the previous decades, our engineers, startups, and developers have succeeded not only in Armenia but also abroad. Silicon Valley is full of Armenian IT people. I say all this to emphasize that our country was initially a tech country, then there was a very harmful break, but now we are back on track.
How is GIZ involved in the field?
- The startup lifecycle has three major stages. Starting from talents and idea generation, developing the startup, and then getting the knowledge and skills to develop into an SME. Within the ITTD project, I can proudly say that we cover all the cells of this cycle, supporting the Armenian startup ecosystem with a holistic approach. For the first phase, we organize startup bust weekends, hackathons, and work with universities, to ensure the involvement of students. Last October, we had two parallelly running hackathons, one in Vanadzor and the other one in Gyumri. The participants went through various coachings on relevant need-based topics. In the end, six very promising local startups received prizes. As to the second phase of developing the ideas, we are supporting several acceleration projects. Groups come with initial ideas, participate in training, and turn their ideas into a startup. GIZ puts an emphasis on entrepreneurial education and also has allocated funds for the startups that successfully graduate from the pre-acceleration and acceleration programs supported by us. For developing ideas for startups there are up to 10,000 EUR grants (for 6 months) available and the already existing startups getting a new level of development are eligible for our 50,000 EUR grants (for one year). Of course, these grants have co-financing elements, which means that the startup should be able to contribute 5 percent of the amount in the case of 10,000, and 50,000 startup needs to contribute another 50,000. So far we have distributed 17 grants and we have another cycle to go.
But is the Armenian market ready for such a bust of startups?
- The Armenian market is too small and closed for the Armenian potential. If we are tackling technological startups, their approach is broader and they need a broader market. The local market is not enough for big startups to develop. Our goal is to position Armenia in the international market as a startup developing country.
Thus we started looking around, thinking about how to support local startups. Eventually, we start cooperating with a big German multinational company SAP. According to the agreement, GIZ supports the development of startups here in Armenia. The latter creates a final product, which is then sold on the SAP worldwide platform. The selection process is very competitive, because not any product is appropriate for the SAP platform.
But how did you manage to get the attention of a company of this caliber?
- Several years ago, an SAP team visited Armenia to meet their clients. They were impressed how the technology development in Armenia was growing and were negotiating cooperation with BANA. GIZ and EU decided to bundle all this into one package and take the cooperation from the zero point to the establishment of a new unit – SAP Startup Factory by BANA.
We already knew how to develop startups and would make our contribution to this part and BANA was responsible for the development of the knowledge base. A Cooperation Memorandum was signed in the summer of 2021. For the first cohort of the Factory, 10 local startups and 5 incubation period groups were selected by an independent jury. 8 out of the 10 graduated from the program and 7 out of these 8 received a chance to integrate their products on SAP platforms. This result is very encouraging, taking into account that in the beginning, we thought that it would be a success if we manage to have at least 2 products on the SAP platform. We are now engaged in the selection for the second cohort.
On the practical level, how does it work? How is the program designed?
- First, the program organizes an open call for applicants, then the jury selects the ones that are eligible to proceed to the next level. The selected companies undergo an in-depth needs assessment to identify what their product needs to develop and become suitable for the SAP platform. Finally, a specific capacity development program is designed based on the results. For one company it can be a marketing promotion course, while another would need more technical assistance. The courses are implemented by BANA, SAP and international mentors from Germany and Netherlands hired by GIZ.
What are the further steps in the cooperation with SAP?
- We have a very ambitious goal: which is to transfer the SAP Startup Factory by BANA to a regional hub for Eastern Europe and CIS countries. In this regard, we have to ensure the sustainability of the Factory running. BANA is the only place in CIS countries, where SAP has put its logo and wants to have a representation. Thus we think to develop this Factory into a regional hub, that not only Armenian startups could come to get training and be incorporated into SAP platforms, but that startups from Eastern Europe and other CIS countries could also join the Factory. They would not need to travel here; they could even take those courses online. This will enrich the portfolio of the SAP Startup Factory by BANA and put it on the international map of the startup-producing countries.
The initiative to open an SAP Startup Factory in Armen belongs to the Business Angels Network of Armenia. BANA team, led by Director Grigor Hovhannisyan, was introduced to the SAP delegation during an event at TUMO. At that time, SAP had its program integrated only into five countries: Germany, the US, Japan, Singapore, and Israel. And now Armenia got a chance to join this community.
For half a year, BANA with the support of GIZ was negotiating to make this project a reality. Now, when SAP Startup Factory is already operating, BANA also manages the whole process. The opening of the factory brought with it a number of benefits for the local market. First of all, Armenian startups received resources that would be harder to get otherwise. The SAP provided its specialists and knowledge-base to the local teams for them to have a better understanding of the international market and create connections. The local startups also got a chance to become a partner of the SAP international platform and work with the already existing customer base of the latter.
“Today, when the only SAP accelerator is located in Armenia and we’re planning to open another one on a regional level, Armenia itself will soon become a regional center for innovative technologies, which, in its turn will have a huge effect on our startup ecosystem, showing its huge potential,” says Mr. Hovhannisyan.
