If you are engaged in the startup ecosystem, you have probably heard the term ‘unicorn.’ IDEA delves into the characteristics of unicorn startups and explores why they are absent in Iran.

What is ‘unicorn’?

A unicorn is a mythical creature and, in that sense, it is defined as unattainable. When it comes to startups, this term refers to businesses and brands that can reach a valuation of over one billion dollars. The term ‘unicorn’ was first coined by Aileen Lee in 2013.

Most unicorn startups not only invest in the first-mover advantage (FMA) but also constantly enhance their position through innovation. The first-mover advantage means that an innovation lies behind these startups, and they have been the first in their respective fields.

For instance, Snapp was the first startup to introduce ride-hailing services to Iran, and it was this innovation that propelled the startup toward the brink of becoming a unicorn. Snapp, therefore, reaped the rewards of being the first. 87% of unicorn startup products are in the software sector, 7% in hardware, and 6% in other product and service categories.

With the increasing importance of startup development, unicorns are on the rise worldwide. These startups are catalysts for industry transformation. Uber, Snapp, and others are considered part of the unicorn club. The fact that Iran has not produced a unicorn startup may be due to numerous challenges, including the high volatility of exchange rates and the issue of increasing emigration through startup visas.

Migration of Unicorn Builders

Between 2019 and the first half of 2022, Iranians received more than 2,000 startup, entrepreneurial, investment, and self-employment visas from Canada and the UK. With a quick calculation and an examination of the required investment amounts in these countries, one can extract figures regarding the capital leaving the country.

Iranian immigrant residents in the United States have created 8 unicorn startups in the country, ranking eighth among immigrants in terms of launching startups valued at over one billion dollars.

In 2021, Canada issued 80 visas, and the UK issued 30 visas for Iranian startups, with these numbers being 30 and 14 visas, respectively, in 2022. From 2010 to 2022, a total of 2,086 permanent visas were issued to Iranian immigrants. By combining various statistics of Iranian immigrants with startup visas, at least 65,000 individuals migrate from the country annually.

According to reports from the Innovation Economy Council, one-third of all startups in Canada are owned by immigrants or the children of immigrants. The success rate for startup visas is over 75%.

Seventy-eight percent of startups supported by commercial incubator investors, 80% of startups backed by angel investor networks, and 43% of startups supported by venture capital funds receive approval.

The Impact of Exchange Rates on Iranian Unicorns

In Ordibehesht (April-May) 2018, the CEO of Snapp claimed that the company’s valuation was between 1.4 to 1.7 billion dollars, which would mean that Snapp had become a unicorn company. However, after the significant increase in the exchange rate in the past year, it is no longer feasible to consider Snapp as part of the unicorn companies.

Similarly, Digikala, the titleholder of the most visited e-commerce website in the Middle East, was on the verge of becoming a unicorn but has distanced itself from this achievement due to exchange rate fluctuations.

Of course, from an economic perspective, there are numerous reasons to consider besides exchange rate fluctuations, which we will delve into below.

In this regard, Farzin Fardis, an entrepreneur and member of the Tehran Chamber of Commerce executive committee, stated: “When our economic system rewards other things, one cannot expect individuals to turn to innovation and value creation. When it’s easy to access cheap energy resources and create larger wealth in the country, no one can be expected to expose themselves to uncertainties and ambiguities. According to Fardis, the innovation space is an environment of uncertainty and ambiguity because entrepreneurs don’t know how the market will react to their ideas.”

Maisam Zargarpour, a startup consultant and host of the ’10 A.M.’ podcast, pointed out another issue: “Another reason is that while we are considered a highly populous country compared to many others globally, our market is either untouched or less developed in many sectors. However, as long as we don’t have access to international markets, as long as our startups and businesses cannot easily connect with the world and supply their products to other markets, I believe we won’t have unicorns.”