Home More News Struggling Armenia seeks new role as high-tech ‘Silicon Mountain’ hub

Struggling Armenia seeks new role as high-tech ‘Silicon Mountain’ hub

Struggling Armenia seeks new role as high-tech ‘Silicon Mountain’ hub
Patriotic caps and woolen hats for sale at an outdoor crafts market in Yerevan, Armenia. (Photo by Larry Luxner)

YEREVAN, Armenia — For most of his career, political consultant Eric Hacopian helped prominent California Democrats—including Reps. Adam Schiff and Brad Sherman of Los Angeles—win elections.

For the past five years, however, Hacopian has focused on the Caucasus. Ever since returning to his ethnic roots in Armenia in 2017, he’s become one of the country’s most widely respected political commentators.

His show on CivilNet TV routinely discusses Armenia’s tense relations with arch-enemy Azerbaijan, its numerous political scandals and—more recently—Russia’s invasion of Ukraine, which has divided this mountainous, Maryland-sized nation of 3.5 million.

Right now, the major issues of the day are border security and the struggling post-COVID economy. This year, according to the World Bank, Armenia’s GDP is expected to grow by only 1.2%; prior to Vladimir Putin’s war in Ukraine, GDP growth had been forecast at 4.1%.

More than one-third of Armenia’s trade is with Russia, and Russia has been the chief source of tourism to this tiny former Soviet republic ever since the pandemic began.

Eric Hacopian, a regular commentator on Armenia’s CivilNet TV, is a former political consultant for prominent California Democrats. (Photo by Larry Luxner)

And now with their own country at war, at least 50,000 young Russian professionals—including software programmers, artists, activists, journalists and engineers—have fled Moscow and other cities for the relative safety of Yerevan, bringing their skills with them.

“Many of these people are being hired by IT firms in Armenia. They’re quite capable and talented,” Hacopian said. “We have great shortages and needs, so they’re immediately getting jobs.”

A dozen unicorns on the way

In fact, information technology could turn Armenia’s stagnant economy around, he said. “During Soviet times, a lot of the computer programming for weapons used to get done here. Obviously, Soviet technology was always behind the West. If Soviet Armenia had been an independent country, it would have been among the top 15 or 20 in the world when it came to IT.”

Hacopian noted that ServiceTitan, a US-Armenian business software “unicorn,” plans an IPO next year. Its valuation is already at $10.5 billion; Armenia’s total GDP is around $13 billion.

“If these guys go public and their stock rises by 20%, they’ll be worth more than the GDP of this country,” he said, adding that “at least two more unicorns are coming, and one of them, SADA Systems, is the number-one Google subcontractor for cloud systems.”

Bilingual street sign at a busy intersection in Yerevan, Armenia. (Photo by Larry Luxner)

Hovhannes Toroyan is chief strategy and analytics at AmeriaBank, which has a 22% market share and assets of $1.8 billion, making it Armenia’s largest financial institution.

“For sure, nobody knows what’s going happen,” said Toroyan, predicting that anti-Kremlin sanctions will be severe and long-lasting.

“Russia is our major trading partner, and frankly speaking, it’s never very positive when your biggest trade partner is having difficulties,” he said. “On the other hand, we already see lots of opportunities opening up. The Ministry of Economy says already more than a dozen Russian IT firms have registered in Armenia. They’re moving away from Russia.”

Effect of anti-Russia sanctions on Armenia still unclear

Within hours of the EU’s Feb. 27 closure of its airspace to Russian traffic, several European carriers including Air France and Lufthansa announced they would start daily flights to Yerevan.

“A huge number of Russian citizens have multi-entry EU visas, so they they’re flying to Europe via Yerevan. That’s what happened when Russia had a war with Georgia,” Toroyan said. “Obviously it’s going to be like this for some time. Even in the most regulated industries, like banking, there’s still huge uncertainty how severe the sanctions will be.”

Lilit Makunts, Armenia’s ambassador to the United States, declined through her spokeswoman to be interviewed for this article despite numerous attempts to reach her.

But Armen Kherlopian, a trained biophysicist and professor at the American University of Armenia, is enthusiastic and optimistic about the future.

Hrazdan, a small city 45 km northeast of Yerevan. Armenia’s GDP will grow only 1.2% this year. (Photo by Larry Luxner)

An ethnic Armenian who grew up in upstate New York, Kherlopian is a founding partner of BAJ Accelerator, which is hosted at the Jacobs-Technion Cornell Institute. He also sits on the advisory board of NASA-backed Translational Research Institute for Space Health (TRISH), a Houston-based collaboration involving the Baylor College of Medicine, CalTech and MIT.

“Armenia’s economy is only $12 billion, so a single startup unicorn represents $1 billion in value. For a country like ours, this is a viable economic strategy,” said Kherlopian, interviewed over an Ararat apricot brandy at Yerevan’s trendy Compot restaurant. “It’s particularly advantageous for small countries, because a few of these entities can make outsize impact.”

The idea is to create 10 unicorn startups employing at least 1,000 people within five years. Of particular interest are companies in the fields of security, robotics, financial technology, healthcare and biotech.

Following Skype’s example

Kherlopian noted that the GDP of another tiny former Soviet republic, Estonia, jumped from $12 billion in 2012 to $30 billion within six years. The annual per-capita income of Estonia—home of Skype—now exceeds $23,000; that compares to only $3,300 for Armenia.

“When Skype was sold to Microsoft, it cascaded this effect whereby the original teams at Skype founded other companies, becoming angel investors. The tech scene understood that in a matter of a few years, you could make another one.”

One of Armenia’s strongest assets is its highly educated diaspora. An estimated seven million people of Armenian descent live abroad, and they tend to have a strong foundations in mathematics and science.

Sevan Kabakian, country director of Birthright Armenia. (Photo by Larry Luxner)

To that end, Armenia’s “Silicon Mountain” strategy involves capital, content and customers. The idea, said Kherlopian, is to raise unicorns that need capital through a network of angel investors, while the Armenian diaspora provides the scientists. Estonia and Israel, the original “startup nation,” are the best examples to follow, he said.

“Countries can learn from each other. Founders can be introduced by investors, and embassies can play a role. So can universities,” Kherlopian said. “Myself and our co-founders say we must learn from Estonia, which now has eight startup unicorns despite having a population of only 2.5 million, including its diaspora.”

Kherlopian noted the prominence of three US-based Armenian companies: robotics and AI company Embodied; real-time threat detection firm Scylla; and Cognaize, a company specializing in AI-based processing of financial information. Yan Tallinn, co-founder of Skype, is also an investor in Cognaize.

“Unicorns are typically registered in Delaware, London or Singapore,” said Kherlopian. “For us, the question is not where it’s registered, but what percentage of the company is owned by local Armenians, and whether they orient their ecosystems around capital, content and customers.”

HyeTech network links Armenians everywhere

Another Armenian who returned to his roots is Sevan Kabakian. He was born in Beirut and came to the United States in the 1970s, living most of that time in the Los Angeles suburb of Glendale, which is more than half Armenian. An aerospace engineer for Boeing, Kabakian joined the nonprofit program Birthright Armenia in 2006—the second year of its existence—and has been here ever since.

Since its inception, the nonprofit organization has brought 2,300 participants to Armenia from 51 countries. Last year, 40% of its volunteers came from the United States, with the rest mainly from Russia, Lebanon, Canada, France, various Latin American nations such as Argentina and Brazil, and other ex-Soviet republics.

Nerses Ohamyan runs HyeTech, a global network of 400 enterpreneurs of Armenian descent. (Photo by Larry Luxner)

“The concept is that the more you’re immersed, the more you get to understand the reality of the country,” said Kabakian, country director for Birthright Armenia. “Every aspect of the program is meant to enhance their connection with the people of this country. For instance, we invite volunteers to live with host families. We pay for and we encourage it, though of course, this is optional.”

Armenia’s economic future may very well depend on ambitious entrepreneurs like Nerses Ohanyan, who was born in Yerevan, left at the age of 14, attended college and the University of Southern California and got a degree in mechanical engineering from Stanford.

“We’re hitting an inflection point where Armenia simply can’t scale up with the resources it has fast enough, and we have to find other relevant tech centers to draw from. Those are very naturally Israel, India, Japan and Singapore,” he said. “We want to be more a Singapore.”

Today, Ohanyan, 38, runs HyeTech—a network of 400 like-minded entrepreneurs of Armenian descent with members in Los Angeles, Boston, Armenia, Russia, Singapore and Australia.

“We were very lucky to have started in Silicon Valley because it has a natural networking culture. The Armenians who got together were very much ingrained in this culture, so they brought in other Armenians, and that was a recipe for success,” said Ohanyan, who works at Vineti, a San Francisco-based healthtech firm specializing in software for precision medicine.

“Armenians have the advantage of living in most parts of the world. We are natives, not expats, and part of the fabric of those countries where we live—Iran, Lebanon, Syria, for example. So we empathize with other cultures,” he said. “I am just as American as I am Armenian. And together, we can create business connections in a way that others may not be able to.”

Larry Luxner

Miami native Larry Luxner, a veteran journalist and photographer, has reported from more than 100 countries in Latin America, Africa, Eastern Europe, the Middle East and Asia for a variety of news outlets. He lived for many years in San Juan, Puerto Rico, and the Washington, D.C., area before relocating to Israel in January 2017. Larry has been news editor of The Washington Diplomat since 2005.