Introduction
In this text, the term “Startup” refers to a company that is in the early stages of its Function and is founded by one or more entrepreneurs. These entrepreneurs aim to develop a unique product or service that they believe meets an existing demand. Startups are typically innovative, scalable, and high-risk that seek to solve specific problems or address market needs (https://www.investopedia.com/terms/s/startup.asp). Despite the successes and high potential of Iranian startups, they have consistently been affected by sanctions. Restrictions on access to global markets, payment services, and modern technologies have created significant challenges for their growth. This text explores these challenges.
Supplying Financial Resources
Economic sanctions have a multifaceted impact on businesses, particularly small businesses. The most apparent effect of these sanctions is the significant financial strain they create. Increased production costs put considerable pressure on achieving proportional profits and compel business owners to absorb additional expenses (https://www.preprints.org/manuscript/202501.1184/v1). Financing is crucial for developing countries, as they require substantial financial resources for development. In this context, both the public and private sectors seek to secure financing through domestic or foreign trade and investment. Financial sanctions, which encompass restrictions on financial and banking activities, embargoes on financial transfers, asset freezes abroad, disruptions in the opening of letters of credit for traders, and prohibitions on insurance, can severely harm the national economies of these countries (https://dor.isc.ac/dor/20.1001.1.22286462.1398.9.2.34.0).
As newly established businesses, startups face significant challenges in securing financial resources and capital due to the impact of economic sanctions. These sanctions diminish foreign exchange earnings, and the resulting shortage of foreign currency complicates project financing. This situation can lead to inflation and increased costs for startup activities. Since startups are new businesses founded on creative ideas, they often encounter challenges in attracting capital and financial resources. Under normal circumstances, investors tend to be hesitant to invest in the early stages due to high uncertainty, the risk of financial failure, the unpredictable nature of the market for these businesses, and the potential for their creative projects to fail. This issue is exacerbated in times of sanctions, as investors face additional challenges from international restrictions, currency fluctuations, and economic instability, in addition to the inherent risks of startups, which reduce the likelihood of capital returns.
Attracting Foreign Investment and Connecting with Global Markets
Attracting foreign investment and connecting with global markets is a direct connection with the issue of supplying financial resources. So as with the imposition of sanctions, the risk of foreign private actors doing business with Iran is very high; This issue affects startup activity, depriving them of the ability to attract foreign investment and connect with global markets. Under economic sanctions, Iran’s access to global markets and international payment services is severely restricted, leaving businesses with few viable solutions to reach foreign customers. Establishing an office abroad, receiving international payments, and attracting foreign investors can be extremely challenging, if not impossible, for these companies (https://uperim.com/15_Challenges_of_Iran%E2%80%99s_Startup_Ecosystem.html#:~:text=Sanctions%20have%20left%20startups%20with,is%20just%20a%20simple%20daydream).
On one hand, these conditions hinder the launch of new startups; on the other hand, they can push established startups to the brink of closure. According to a report from January 2025, about 60 percent of Iranian startups have been unable to continue their activities under these conditions in recent years (https://www.econegar.com/fa/tiny/news-25173).
Access to Technical Knowledge and New Technologies
One of the most significant effects of sanctions against Iran is the challenging access, or in some cases, the complete lack of access, to technical knowledge and new technologies worldwide. This restriction presents a significant challenge for startups. On one hand, Iranian startups, which require collaboration and knowledge exchange with international companies and institutions, are excluded from participation in advanced research and educational projects. The lack of access to technology hinders the implementation of creative ideas and the ability to compete fairly on an international level (https://akhbarroozazad.com/?p=17674). Stricter US sanctions imposed since 2018 have significantly restricted Iranian startups’ access to hardware and software from European and American companies. Even tech giants like Google and Apple have restricted some of their services to Iranian users. These limitations present problems for startups, particularly those focused on new technologies, as many of their products rely on international platforms and infrastructure. Additionally, these restrictions hinder Iranian startups from connecting with foreign investors and companies (https://www.atlanticcouncil.org/blogs/iransource/sanctions-and-domestic-constraints-cripple-irans-startups/#:~:text=An%20additional%20issue%20is%20that,to%20move%20out%20of%20Iran)
Problems Related to Artificial Intelligence
Developing artificial intelligence models requires robust hardware infrastructures, which pose a serious challenge due to sanctions and high supply costs. Due to the sanctions, the import of equipment related to artificial intelligence technology is facing challenges, resulting in many services and processing models being unavailable in the country (Khabar Online, https://www.khabaronline.ir/xnkc9, 29 March 2025, in Persian). Startups engaged in artificial intelligence or those that require AI models to advance their businesses encounter significant challenges in this field. Although some startups have introduced indigenous innovations to address certain limitations, these efforts do not fully resolve all existing shortcomings. In addition to issues related to access to artificial intelligence, the exchange of experiences in this field also encounters challenges due to sanctions. For example, the director of an Iranian startup recently announced that some foreign journals avoid publishing articles that highlight the results of their innovations related to artificial intelligence due to sanctions (https://x.com/taghipour_1988/status/1461332499229986829?t=P9IA72_3-6OAlAtxPpzuBA&s=19).
A significant problem for startups is the lack of specialized personnel in the field of artificial intelligence. Sanctions have negatively affected access to training courses, the exchange of experiences, and scientific cooperation with institutions active in artificial intelligence. Additionally, Iran is experiencing a brain drain, which further exacerbates the shortage of qualified personnel for Iranian startups.
Many startups require tools like PayPal, Stripe, Revolut Business, and Wise Business to sell their products or services globally. However, due to sanctions, creating a legal account for these services is not possible (https://tejaratnews.com/?p=993640).
Conclusion
Iranian startups continue to operate despite numerous challenges, leveraging local creativity to offer a range of services under the shadow of sanctions. However, the detrimental effects of these sanctions on the growth and development of the startup ecosystem cannot be overlooked. Severe restrictions on access to global markets, cutting-edge technologies, and international financial networks present significant barriers to the ambitions of Iranian entrepreneurs. In the long run, these limitations could result in technological backwardness and diminished global competitiveness.
Recourses
- Mitchell Grant, What a Startup Is and What’s Involved in Getting One Off the Ground, Investpedia, https://www.investopedia.com/terms/s/startup.asp, 25 September 2024, Last Seen 9 June 2025.
- Olivia Roberts, “Investigating the Effects of Economic Sanctions on Small Businesses”, Preprints Org, (2025), https://www.preprints.org/manuscript/202501.1184/v1.
- Ali Naeej Haghighi, Parviz Saeedi, Hussein dideh khani and Rafik Nazarian, “Investigating the effect of financial Strategies of innovative new technologies companies on the geo-economic status of Iran”, Geography (Regional Planning), 9 (34), (2019): 557-578, https://dor.isc.ac/dor/20.1001.1.22286462.1398.9.2.34.0. (in Persian)
- Uperim, 15 Challenges of Iran’s Startup Ecosystem, https://uperim.com/15_Challenges_of_Iran%E2%80%99s_Startup_Ecosystem.html#:~:text=Sanctions%20have%20left%20startups%20with,is%20just%20a%20simple%20daydream, 24 May 2025, Last Seen 9 June 2025
- Econegar, The impact of sanctions on Iranian startups, https://www.econegar.com/fa/tiny/news-25173, 7 January 2025, Last Seen 10 June 2025. (in Persian)
- Akhbar rooz azad, Analyzing the impact of sanctions on innovation and technology industries in Iran, https://akhbarroozazad.com/?p=17674, Last Seen 10 June 2025. (in Persian)
- Mohsen Tavakol, Sanctions and domestic constraints cripple Iran’s startups, Atlantic Council, https://www.atlanticcouncil.org/blogs/iransource/sanctions-and-domestic-constraints-cripple-irans-startups/#:~:text=An%20additional%20issue%20is%20that,to%20move%20out%20of%20Iran., 7 February 2020, Last Seen 9 June 2025.
- Khabar Online, The Artificial Intelligence Time Bomb in Iran: The Migration of Experts and the Infrastructure Crisis, https://www.khabaronline.ir/xnkc9, 29 March 2025, Last Seen 10 June 2025. (in Persian)
- Mostafa Taghipour, https://x.com/taghipour_1988/status/1461332499229986829?t=P9IA72_3-6OAlAtxPpzuBA&s=19, 18 November 2021, Last Seen 9 June 2025.
- Tejarat News, Sanctions and challenges facing Iran’s IT industry, https://tejaratnews.com/?p=993640, 25 February 2025, Last Seen 10 June 2025. (in Persian)