Armenia shot from relative obscurity to global prominence recently over tensions with neighboring Azerbaijan. But there is another reason to pay attention to this rugged, mountainous country: it’s fast evolving tech sector.
It has emerged as a tech powerhouse with the presence of global players and a vibrant startup ecosystem. And while the country remains politically close to Russia and Iran as a counterbalance to hostile neighbors on the west (Turkey) and the east (Azerbaijan), it’s private sector remains firmly fixed on the West, particularly the United States with its near million-strong Armenian diaspora.
“We consider ourselves a network nation,” said Rem Darbinyan, founder of a startup called Viral Mango, which matches brands to influencers around the world. “We have generations of Armenians living overseas.”
In October, Adobe CEO Shantanu Narayen was in the vibrant capital Yereven to speak at the country’s Silicon Mountains conference and open a new Adobe building. Across town, dozens of startups displayed their innovations at the annual Digitec expo. Already, the small, landlocked country has produced one unicorn (Picsart) with more on the way.
With the snowcapped summit of distant Mount Ararat – the Armenian national symbol that rises across the border in Turkey – visible on clear days, Yerevan is filled with sophisticated restaurants crowded with tables of young tech entrepreneurs drinking apricot brandy and eating platters of stuffed grape leaves as they discuss the latest innovations.
Various indexes show Armenia as the emerging tech powerhouse of the Southern Caucasus region, a legacy of its role as one of the Soviet Union’s top technology centers – the USSR’s first general-purpose computers were developed there in the early 1960s
That history faltered during the breakup of the Union and the subsequent war with Azerbaijan to define Armenia’s national borders – a conflict that continues to reverberate today. But, Armenia recovered and has drawn on the success of its diaspora in the United States to become one of the strongest economies in the region.
People like Noubar Afeyan, co-founder of biotechnology powerhouse Moderna, Alexis Ohanian, co-founder of Reddit and Avie Tevanian, former CTO of Apple and creator of the macOS operating system, have all remained connected to the country.
Following its independence in 1991, Armenia began developing as a behind-the-scenes builder of software for Western companies, many founded by Armenians. But gradually, it has climbed the value chain to produce products of its own.
That trend only accelerated with the outbreak of Russia’s war with Ukraine which drove companies from both countries to relocate to Yerevan. The subsequent influx of capital drove up the Armenian dram against the dollar, hurting the competitiveness of the country’s outsource industry. Meanwhile, a small venture capital industry coalesced to fund tech development and today startups can raise as much as $1 million domestically before turning to VCs abroad.
Consequently, the country’s economy is booming – with projected 7 percent growth this year, according to the International Monetary Fund, making it the fastest growing economy in the region.
Many places in the world have developed technology hubs and startup ecosystems, but for Armenia it’s a matter of survival.
“The future of Armenian economic development in science-based, high-margin products,” the country’s minister of high-tech industry, Robert Khachatryan, told Forbes. He explained that because the country is landlocked, logistics costs mean it cannot export physical goods at competitive prices.
The tech industry is now the country’s the fastest-growing sector, expanding by more than 30 percent in 2023, surpassing resource extraction and agriculture as the primary drivers of the economy. And it is drawing foreign investment. Besides Adobe, many of the world’s most powerful technology firms have set up shop there, including Microsoft, Google, IBM and Cisco.
Artificial intelligence, of course, is the hot technology on offer. Picsart, a photo and video editing platform launched in 2011, has a team of data scientists building the company’s own generative AI foundation model. Krisp, a more recent startup, uses artificial intelligence to change the accents of Filipino and Indian English speakers in real time into plain midwestern U.S. pronunciation – a product it markets to call centers serving North America.
At the DigiTec expo, dozens of startups displayed their AI wares, from Viral Mango with a platform that matches influencers to brands, to Orders.co whose AI software, at the touch of a button, creates interactive menus for restaurants who want to integrate with food delivery services.
Armenia was late getting on the AI bandwagon but is catching up fast. While the country’s university system was strong on math, there were few machine-learning faculty available to guide students in 2016, when machine learning was already sweeping computer-science departments in the west. Hrant Khachatrian, a young researcher, and four friends rented an apartment in the capital and huddled around a single GPU to start exploring on their own.
The community and number GPUs grew into one of Armenia’s first AI labs: YerevaNN. By 2019 YerevaNN was publishing papers in top AI conferences, including Computer Vision and Pattern Recognition Conference (CVPR).
Universities began catching up, establishing graduate programs in AI. Today, Khachatrian is working with Yerevan State University to fold YerevaNN into a new AI lab being set up by the university, finally giving students there a place to conduct research.
The AI research community in Armenia has grown to over 600 people. However, a lack of compute resources threatens its competitiveness. GPUs are hard to come by and expensive when they are available.
That’s where the private sector comes in. Venture capital and Western connections among the country’s entrepreneurs are helping startups build products despite the hardware constraints.
"We now have venture funds in Armenia,” said Narek Vardanyan, CEO of Prelaunch.com, a validation platform creators can use to gauge market demand for their products before developing them. “Previously, Armenian companies had to go to Silicon Valley, for early-stage funding, we can raise $2 million to $3 million with Armenian funds."
The community is also focused on building human capital with private initiatives such as Armath (a contraction of Armenia and Math), sponsored by the Union of Advanced Technology Enterprises (UATE), which runs engineering labs across Armenia for students as young as 10.
At a village school in the countryside north of Yerevan, bright-eyed middle-school students gather in a classroom to demonstrate their projects – one, a shoebox-sized ‘smart home,’ with a keypad lock, smoke detector and automated lighting cobbled together with sensors, LED lights and bits of wire. Along a windowsill, a row of potted plants are fed by a student-built automatic irrigation system. The students, meanwhile, work at monitors attached to pocket-sized Rasberry Pi computers.
“In Armath, everything is open source and it’s all project-based learning," explained Arevik Hovhannisyan, a teacher. "The goal is to have the kids understand the basics of engineering, and maybe decide to become an engineer."
Armath works as a public-private partnership – companies sponsor the labs, which are then donated to schools where local government pays for their operation. So far, UATE has established more than 650 labs across Armenia and exported the model to several other countries.
In the far north of the country, sandwiched between steep mountain slopes, students at another program gather in the evening for folk dances and to show off their projects. This is Real School, another UATE initiative, a four-year vocational program for high schoolers, giving them hands on experience building technology solutions.
Back in the capital, kids 12 to 18 can attend TUMO, an extracurricular bootcamp where they learn to program and build software. The interior feels more like a well-funded tech company than a school, with custom-designed workstations on wheels and a carpeted, amphitheater-style meeting place. “We show them that everything can be created by them on their own,” said Zara Budaghyan, a TUMO graduate herself.
Another initiative, AI Generation, hopes to embed machine-learning education in high schools across the country. Initially funded by Moderna cofounder Noubar Afeyan, AI Generation already has hundreds of students enrolled in high schools in 16 cities hoping to develop artificial intelligence researchers and engineers.
“We want to show Armenian tech ecosystem on the map of like world market,” said Sargis Karapetyan, a tech entrepreneur and UATE’s interim CEO, adding that the country needs more outside capital. “Another target are people who are looking to open branches in Armenia, to expand and find good talent.”
Craig S. Smith is a former correspondent and executive at The New York Times. He is host of the podcast Eye on A.I.
https://www.forbes.com/sites/craigsmith/2023/12/08/soviet-mainframes-to-silicon-mountains-armenia-as-a-tech-powerhouse/?sh=7082ce4734aa