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Nazrin Abdul

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In an era where global competitiveness hinges increasingly on innovation, countries around the world are racing to cultivate robust startup ecosystems. For emerging economies in particular, startups offer more than just technology—they represent a pathway to diversification, digital resilience, and long-term prosperity. Against this backdrop, Azerbaijan has emerged as a regional standout, with its capital, Baku, being named Startup City of the Year 2025 by the influential StartupBlink Index. This milestone is not only a recognition of Baku’s rapid rise but also a reflection of Azerbaijan’s strategic, whole-of-government push to become a leading hub for entrepreneurship, digital infrastructure, and tech-driven economic growth.

According to the report, Azerbaijan climbed six spots to rank 74th globally, marking the fastest year-on-year improvement among Central Asian nations. The country's 24% ecosystem growth rate surpasses all regional competitors, signaling that its strategy of nurturing tech entrepreneurship and building enabling infrastructure is paying off.

Baku’s ascent is not just a symbolic win—it represents a recalibration of Azerbaijan’s economic model. Long known for its oil and gas wealth, the country is now actively pivoting toward digital innovation and startup-driven growth. In the competitive landscape of Central Asia, Baku has emerged as the best-ranked city in multiple verticals, including E-commerce & Retail, Edtech, and Social & Leisure.

The city also ranks globally in the top 100 for several subindustries—Events (31st), Logistics (65th), Travel (71st), Marketplaces (91st), and SaaS (95th)—positions that no other Central Asian city currently occupies. This performance underscores Baku’s ability to generate startup activity in a broad spectrum of sectors, reflecting a healthy diversification of its innovation pipeline.

Central to this growth has been state-led institutional support, particularly through the Innovation and Digital Development Agency (IDDA), established in 2021. The agency serves as a nerve center for national digital transformation and startup development. Its initiatives range from subsidized co-working spaces and accelerators to international partnerships with tech giants like Microsoft, Huawei, and TIM (Italy), targeting frontier technologies such as AI, IoT, and blockchain.

Further amplifying these efforts is the ASAN Service, which contributes by facilitating startup access to public services, training, and financial resources. These bodies have combined forces to turn Baku into a testbed for smart-city solutions and a launchpad for scalable digital infrastructure. The city’s Smart City pilot and rollout of public Wi-Fi kiosks, cloud migration, and broadband access have laid the digital foundation necessary for sustained entrepreneurial growth.

Financial capital catching up with human capital

Despite the talent and momentum, access to capital remains a traditional bottleneck in emerging markets. Azerbaijan has started to address this with the emergence of local venture capital funds like Caucasus Ventures, INMerge Ventures, and a third fund reportedly in development. These funds now offer crucial support for post-seed and A-stage startups, expanding both the funding pool and investor appetite in the region.

At the same time, human capital development has not been neglected. Programs like SABAH.lab, Technest Scholarship, and partnerships with global coding academies like Holberton School are growing the city’s tech talent pipeline. This dual investment in startups and the people who build them signals a mature approach to ecosystem development.

Anchoring the ecosystem with global events

Baku’s role as a regional innovation hub is further reinforced through its growing event calendar. It now hosts prestigious platforms such as the Startup World Cup’s Caucasus final, Baku ID Innovation Festival, and INMerge Innovation Summit, bringing global investors, founders, and policymakers under one roof. These gatherings not only offer visibility to local startups but also cultivate a culture of innovation that reaches beyond government programs.

The IDDA Awards, an annual recognition ceremony for outstanding contributions to the startup scene, is becoming a bellwether for ecosystem health, celebrating not only technological innovation but also diversity, with awards like Women in Tech.

While the 2025 StartupBlink ranking offers a compelling snapshot of success, the real test will be sustainability. Countries in the region often experience short bursts of progress driven by state funding, only to plateau due to weak private sector engagement or lack of global integration. In Baku’s case, however, the trajectory appears more deliberate.

The government’s post-2015 reforms, particularly the Digital Azerbaijan 2020 roadmap and the establishment of centralized digital portals like MyGov and Online Azerbaijan, have laid down long-term infrastructure. More importantly, these have catalyzed private sector co-investment, with increasing participation from foreign stakeholders, signaling deeper systemic change.

If Baku can continue balancing state leadership with entrepreneurial freedom, and if local capital markets mature alongside global partnerships, Azerbaijan could position itself as not just a regional player, but a case study in post-oil economic transformation through tech-led development.

StartupBlink’s decision to name Baku its inaugural City of the Year is more than a title—it’s a recognition of systemic change, strategic foresight, and operational momentum. It affirms that innovation ecosystems are not born, but built with vision, infrastructure, and sustained investment. For Azerbaijan, and for other emerging economies looking to pivot toward digital futures, Baku’s rise is both a roadmap and a rallying cry.