Results of the Startup Central Eurasia Report: For the Development of Central Asia's Startup Ecosystem, It Is Necessary to Scale Successful Approaches

The Startup Central Eurasia Report, prepared by Startup Central Eurasia in cooperation with the International Telecommunication Union, gives an overview of both strengths and challenges in the region and provides recommendations on how to accelerate the development of innovation in Kazakhstan, Uzbekistan, Kyrgyzstan and Tajikistan.

Irakli Kashibadze , SCE platform founder, notes that the innovation ecosystem can only work effectively if each of its six elements is developed:

1) entrepreneurial interest

2) access to finance

3) access to infrastructure

4) productivity

5) development strategy

6) education and human development

The state remains the main driver of startup ecosystem development?

As Natalia Mochu , head of the regional office of ITU for CIS countries, notes, on the one hand, governments of Central Eurasia promote innovation, creating a favorable environment for human development and business startups. On the other hand, some state agencies duplicate each other and perform the same functions, which is inefficient.?

It is worth noting that this problem has been successfully solved in Kazakhstan: agencies similar in focus have been connected to the Astana Hub Technopark, and now their actions in the field of innovation are coordinated.?

Most startups in Central Asia are not ready to enter the international market?

The popularity of entrepreneurship in the region is increasing year by year. But there are still countries where society does not see a difference between a startup and a small or medium-sized business. There are still a large number of projects aimed at the local market, or their idea repeats already existing ones.

"Startups are afraid to grow globally, so we need to change the mindset from local to global. A very big focus of startups is on the local market and region. Startups lack a scaling strategy. It would be ideal if startups would get 80% of profit from international markets and 20% from the local one.? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? — Alim Khamitov PhD , the head of MOST Ventures

The problems of financing startups are hindered by an underdeveloped regulatory framework.?

There is no legislation for venture capital sphere in the countries analyzed, so interaction between startups and venture funds and business angels remains complicated. In Kyrgyzstan, for example, all growing startups have to register in Delaware (USA) to gain investor confidence.??

As Chubak Temirov, director of the High Tech Park in Kyrgyzstan, notes: "A foreign investor will not finance into the country's ecosystem if there is no domestic financing. Our entrepreneurs are used to investing in traditional business sectors — restaurants and real estate. They are accustomed to a 10 out of 10 return on investment, while startups are a high-risk business, although profitable.That's why we need to develop legislation and investment knowledge to solve this problem".

Kazakhstan is ahead of Uzbekistan, Kyrgyzstan and Tajikistan in the development of the startup industry

One of Kazakhstan's main advantages is the presence of a special legal zone protecting investors, namely the Astana International Financial Centre. MFCA was created similar to Dubai International Center, with English law and effective system for registration of venture capital funds.?

The main driver of startup development in Kazakhstan is the state-owned Astana Hub Technopark. In 2022, Astana Hub became the first Google partner for Startups in Central Asia and launched the Silkway Accelerator program for startups with two streams. According to experts, thanks to Astana Hub, Kazakhstan is approaching the point where the market starts to develop itself.

In order to develop Central Asia startup ecosystem it is necessary to combine resources of individual countries

• Uzbekistan showed the best results in education and human development, according to the report. The government began actively supporting the state's startup ecosystem in 2019 — that's when the IT Park Uzbekistan was founded.? IT-Park is a special economic zone with a tax for residents at the rate of one percent of total profitability. In addition, the IT Park teaches programming, conducts incubation and acceleration programs.?
• Of the positives in Kyrgyzstan is the work on legislation. Parliament is already discussing the law of the Kyrgyz Republic "On Innovation Activities," which was prepared together with experts from the industry. There are also plans to adopt legislation in the field of venture capital investment in order to provide startup founders, venture capital funds and single angel investors with guarantees of fair and transparent transactions.?
• At the same time, there are many potential business angels in Tajikistan, despite the nascent venture capital culture. As Ravshan Kurbonov, director of FIFTYFIVE GROUP and Tajikistan Venture Capital, explains, Tajikistan needs to show people with a high level of investment capital that you can invest 5% of your portfolio in startups, as it already works in Kazakhstan, Uzbekistan and Georgia.?

"It is important to understand that for state funds there should be a KPI not the number of projects invested but the number of private investors attracted, whether local or foreign." — Dilshod Zufarov, Managing Partner at UZCARD Ventures

In general, the Central Asian region has a great potential for development and achieving high results. However, this is possible only in case of active collaboration of ecosystems, joint use of existing resources, optimization of state institutions and orientation towards the global market.

To download report please use this?link.