Azerbaijan courts venture capital with new tech investment laws

Azerbaijan is pushing to reduce its long-standing economic dependence on oil and gas by courting foreign investment in its technology sector. The former Soviet republic, which gained independence in 1991, has historically relied heavily on energy exports — at the peak of the oil boom, hydrocarbons accounted for roughly three-quarters of economic output and 90% of exports, according to the International Monetary Fund.

By contrast, the technology sector contributed just 2.1% of gross domestic product last year, up from 1.9% in 2024. The government now aims to grow that share and transform the capital, Baku, into a technology and innovation hub on the Caspian Sea.

A key step came in July with legislation establishing a legal framework for investment instruments. Officials say this will allow startups and investors to structure deals within Azerbaijan rather than registering entities abroad, cutting costs and simplifying future funding rounds. Deputy Digital Development Minister Rashad Hasanov said foreign venture capital, corporate, and institutional investors are expected to provide a significant share of new funding.

Baku also plans to launch a fund combining local and international capital, though details remain under discussion. Hasanov noted the fund's size would depend on the quality of the pipeline and partners, and that officials had studied best practices in countries such as Singapore and Estonia.

The domestic venture capital market remains modest. In 2025, just 22 startups raised $2.62 million, while three venture funds — Caucasus Ventures, INMerge Ventures, and Tumar Ventures — operate with total disclosed capital of about $11 million.

Entrepreneur Tural Selimli of local tech firm Sera AI welcomed the new framework but cautioned that Azerbaijan, as a commodity-exporting country, would need to build awareness and trust among foreign investors. Central Bank Governor Taleh Kazimov, however, expects new players to enter the market now that legal provisions for equity- and debt-based crowdfunding exist. The central bank has six months to approve regulations, and Kazimov said it is awaiting applications.