Azerbaijan is turning its attention to building its technology sector as the oil-rich former Soviet republic looks to reduce its long-standing dependence on energy exports and attract more foreign investment.
The government is rolling out reforms designed to make the country more attractive to technology companies, startups and venture capital investors, with the capital, Baku, targeted as a potential technology and innovation hub on the Caspian Sea.
Azerbaijan’s economy has relied heavily on oil and gas since it gained independence in 1991, at the height of the oil boom, hydrocarbons accounted for about three-quarters of economic output and 90 percent of exports, according to the International Monetary Fund.
Technology, however, remains a relatively small part of the economy as the sector contributed 2.1 percent of gross domestic product last year, up from 1.9 percent in 2024.
The government is now seeking to accelerate that growth by creating a more investor-friendly environment for startups and technology companies.
New legislation passed in July establishes a legal framework for investment instruments that would allow startups and investors to structure deals locally instead of creating entities in foreign jurisdictions.
Officials believe the changes could lower costs for companies and make it easier for startups to attract additional funding as they expand.
Deputy Digital Development Minister Rashad Hasanov told Reuters that foreign venture capital firms, alongside corporate and institutional investors, are expected to provide a significant portion of new funding for Azerbaijan’s technology industry.
Baku also plans to establish a fund that would bring together local and international capital, although the size and structure of the fund have yet to be finalised.
Hasanov said the government had examined technology ecosystems in countries such as Singapore and Estonia while developing its strategy.
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Azerbaijan’s venture capital market remains relatively small; however, only 22 startups raised a combined $2.62 million in 2025, while three venture funds — Caucasus Ventures, INMerge Ventures and Tumar Ventures — currently operate in the country with total disclosed capital of around $11 million.
For Azerbaijan, attracting capital may prove easier than building investor confidence.
Tural Selimli, an Azerbaijani entrepreneur and founder of local technology company Sera AI, welcomed the new investment framework but said the country would need to do more to build awareness and trust among foreign venture capital firms and angel investors.
The Central Bank of Azerbaijan also expects the new rules to open the door to more players through equity- and debt-based crowdfunding.
Governor Taleh Kazimov said the bank is preparing regulations for the emerging market and has six months to approve them.
“We are waiting for applications,” he said.
The reforms mark a broader attempt by Azerbaijan to diversify its economy beyond oil and gas, but industry experts say building a competitive technology ecosystem will take time.
For Baku, the challenge will be turning new investment rules into sustained investment, successful startups and a technology industry capable of playing a much larger role in the country’s economy.
About the Author
Cecilia Attah is a tech analyst with a degree from Benue State University. She covers tech news and startups at TechRegard with a focus on how technology is transforming Africa and shaping the global landscape.
