Azerbaijan looks to develop its tech sector and move beyond oil

Azerbaijan, which has been heavily reliant on its oil and gas sector for many years, is now attempting to attract foreign investment into a small but growing tech sector.

Since its independence in 1991, the former Soviet Republic has become heavily dependent on exports of energy. According to the International Monetary Fund, at the height of oil boom, hydrocarbons made up about three quarters of the economic output and 90 percent of exports.

The 'technology sector', on the other hand, only accounted for 2.1% of the gross domestic product in 2018, up from 1.9% in 2024. However, the government wants to increase this share and make Baku a technology hub and innovation center along the Caspian Sea.

The Investment Framework is a Legislatively Established Framework

The government says that the July legislation creates a framework for investment instruments. This will allow investors and startups to structure deals within Azerbaijan, rather than establishing entities in foreign jurisdictions. It will also reduce costs and make subsequent funding rounds more straightforward.

Rashad Hasanov, deputy digital development minister, said that foreign venture capitalists and corporate and institution investors will provide a large share of the new funding for this industry.

Hasanov added that Baku plans to launch an investment fund that will combine local and foreign capital. The details are still to be finalised.

He said that the size of the pipeline will be determined by the quality and partners we bring into the project, and not the other way round. Officials had also studied best practices in countries such as Singapore and Estonia.

Azerbaijan’s venture capital market is still small. Only?22 startups raised $2.62 millions in 2025. Three venture funds, Caucasus Ventures INMerge Ventures Tumar Ventures operate in Azerbaijan with a total disclosed capital of approximately $11 million.

Tural Selimli, entrepreneur Tural Selimli from local tech firm Sera AI, welcomed the new investment structure but said that the commodity exporting country will also need to build trust and awareness among foreign angel investors and?venture capital.

The Central Bank Governor, Taleh Kazimov, said he expected 'new players' to enter the market once a legal framework was established for equity and debt-based crowdsourcing. The bank will have six months to approve regulations.

Kazimov stated, "We're waiting for applications." (Reporting and editing by Helen Popper; Nailia Bagirova)

(source: Reuters)