Thousands of miles from Silicon Valley, Armenia is building a booming tech sector

Further underlining its status as a tech hub, in October the World Congress on Innovation and Technology will be held in Armenia for the first time since 2019.

American companies are playing a big part in the country’s tech boom. In 2022, Nvidia Corp. opened a research center in Armenia. Other U.S. tech giants operating in the country include Adobe Inc. which opened its new office in the capital of Yerevan last year, Cisco Systems Inc. and Microsoft Corp.

describes itself as one of the largest IT employers in Armenia, with over 1,000 employees. 

There is also plenty of activity around home-grown tech companies. One of the big success stories is AI photo and video editor Picsart, which was founded in Armenia in 2011 and had racked up a valuation of over $1 billion 10 years later. Picsart moved its headquarters to the U.S. in 2015 after receiving an investment from Sequoia Capital, but still has a large office in Armenia. The company told MarketWatch that approximately 500 of its roughly 700 employees worldwide are based in Yerevan.

“There’s no question there’s a new world order,” Arda Nazerian, a New York-based communications professional and founding board member of the Armenia Project, a nonprofit that forges links between Armenia and the international community, told MarketWatch. “Whereas people used to say, ‘This region is for this product or that region is for that product,’ people are starting to see Eastern Europe and what was the former Soviet republics in an extremely new light.”

But Armenia, which is about the size of Maryland, also faces challenges. The country of around 3 million people has few natural resources and is in a region fraught with tension. In 2020, Armenia fought a bloody war with Azerbaijan over the long-disputed region of Nagorno-Karabakh.

Yet the country is targeting technology as a vehicle for economic growth. “As a landlocked country with restricted land access due to tensions with Turkey and Azerbaijan, the Armenian ecosystem still manages to create substantial innovation,” said global startup-research center StartupBlink in its 2024 startup-ecosystem report. “The Armenian government has long understood that innovation is critical to the future of the country, and resources have been allocated to grow local ecosystems.

“Armenian startups are built to target the global market from inception, and the country offers a sizable amount of tech talent,” the report added.

In 2022, Armenia experienced “impressive” GDP growth of 12.6%, emerging as the fastest-growing country in Eastern Europe and Central Asia, according to World Bank data. The services sector — particularly IT, trade and transportation — played a significant role in driving that growth, the World Bank said.

The roots of the country’s tech industry can be traced back to the Soviet era, according to Ashot Arzumanyan, co-founder and partner of venture-capital firm SmartGateVC, which is based in Los Angeles and Armenia.

“In Soviet times, [Armenia] used to be called the Silicon Valley of the Soviet Union,” he told MarketWatch. “Armenians from major educational institutions moved back to Armenia in Soviet times and created this ecosystem of research institutions, of universities and also R&D centers.”

The country is also harnessing the vast Armenian community around the world, a legacy of the Armenian genocide in the early 20th century. Armenia has one of the largest and oldest diasporas in the world, with an estimated 8 to 10 million people of Armenian descent living outside of the country, according to the United Nations. It is speculated that there could be as many as 2 million people of Armenian descent living in America.

Arzumanyan, whose VC firm has invested in 31 companies since 2018, says the country’s connection to the diaspora, particularly in the U.S., is critical. “The Armenian diaspora is strongly linked to Armenia,” he said. “That’s an important mindset that makes a big difference.”

Vahe Kuzoyan, president and co-founder of ServiceTitan, a U.S.-based software company for home and commercial contractors, is a prominent figure in the diaspora. Born in Armenia, he moved to America as a child. He founded ServiceTitan in Glendale, Calif., in 2012 with Ara Mahdessian.

“We met each other through the Armenian network and if you look at the journey of ServiceTitan, whether it’s the first set of investors or the first set of employees or the first set of customers, the Armenian network was a big part of our story,” he told MarketWatch.

The company now has approximately 2,800 employees, of whom around 400 are in Armenia. Kuzoyan explained that ServiceTitan opened its Armenian operation in 2019 when the company needed additional engineering skills.

“Initially we were just looking at engineering talent, and that was the big turning point,” he said. “And what we saw was there’s such an interesting dynamic that kind of mixed together. A fire in the belly you just saw in peoples’ eyes — they were really hungry to do something meaningful and make an impact, both on themselves personally and the bigger picture within the country.”

ServiceTitan ended up building “a full stack” of R&D teams in Armenia, and many functions within the company now have a team in the country, Kuzoyan noted. The software company, which has attracted IPO chatter, has been valued at $9.5 billion, according to CBInsights.

“I’d say we have maybe 10 to 15 startups that have been financed by non-Armenian VCs,” Samson Avetian, the Yerevan-based chief executive and co-founder of the Angel Investor Club of Armenia, told MarketWatch. Some of them were on their Series A funding rounds while others were on their Series D and E rounds, he added.

Avetian describes CodeSignal, which provides skills assessments and AI-powered learning tools, as one of the country’s rising tech stars. Founded in 2015, CodeSignal counts Robinhood Markets Inc. Uber Technologies Inc. and Meta Platforms Inc. among its customers.

One factor cited as a boost to the Armenian IT sector is a recent influx of Russian nationals following that country’s armed-forces mobilization effort amid its full-scale invasion of Ukraine. Estimates suggest that up to 100,000 Russians, mostly IT specialists, migrated to Armenia in the wake of the February 2022 invasion, according to a November 2023 article for the Italian Institute for International Political Studies by Benyamin Poghosyan, founder of the Yerevan-based Center for Political and Economic Strategic Studies and senior fellow on foreign policy at the Applied Policy Research Institute Armenia.

“In general, the influx of Russian IT specialists has played a positive role in the further development of the already booming IT sector in Armenia,” he wrote.

Amalya Yeghoyan, executive director of the Gyumri Information Technologies Center in Armenia’s second-largest city, told MarketWatch that the influx of Russians had a “huge impact” on Armenia’s economy, although many have since left. “During this last year, they left Armenia for other countries,” she noted.

Experts who follow the development of Armenia’s IT industry told MarketWatch that, as of 2023, there were around 10,000 non-Armenian citizens working in IT in the country, of whom nearly 90% were Russian.

Like Arzumanyan, Yeghoyan highlights the American impact on Armenia’s tech sector — not just in terms of investment, but also expertise. “They bring technology know-how to Armenia,” she said. Yeghoyan is focused on developing future Armenian tech workers and engineers through the GITC, which was founded in 2005 by the U.S.-based Fund for Armenian Relief. The organization, which covers all of Armenia’s 11 regions, has graduated more than 15,000 young people with certifications in skills such as web technology and electrical engineering.

San Francisco-based design executive Peter Michaelian was born in the U.S. but is actively involved in the Armenian tech diaspora, serving as a board member of GITC.

“It’s a small country, landlocked, not many natural resources. There’s this historical factor of this underdog mentality,” Michaelian said. “The other byproduct of that is around the never-give-up entrepreneurial spirit that exists within the people in Armenia and the diaspora community.”