ServiceTitan's IPO Could Be A Watershed Moment For Armenia's Growing Tech Community

A tech revolution is underway in a small country in the South Caucasus. Armenia is building a tech ecosystem that may one day rival other small nations known for their tech prowess.

The country scored a major win on Thursday after ServiceTitan, Inc. TTAN made its Nasdaq debut. Shares soared 42%, valuing the company at $9 billion.

ServiceTitan is the first Armenian-founded tech company to IPO on Nasdaq. Its Yerevan office employs over 400 people and powers roughly half of the company’s R&D. 

While the company headquarters is in Glendale, home to the largest Armenian diaspora in the United States, founders Ara Mahdessian and Vahe Kuzoyan were well aware of the abundance of tech talent in their native country.  

Armenia is a landlocked country with restricted borders to neighboring Turkey and Azerbaijan, making exporting products difficult. However, the nation has recognized that developing technology is the most sensible path forward.

ServiceTitan’s IPO could be a watershed moment for Armenia’s growing technology ecosystem, drawing more eyeballs to a country where nearly 10% of the population comprises scientists and engineers. With many employees holding equity in ServiceTitan, this windfall could help support the country’s next generation of tech startups. Armenia boasts over 4,000 tech companies while supporting a population of under three million. 

Armenia showcased its technological capabilities in October when it hosted the World Congress of Innovation and Technology (WCIT). This event coincided with the country’s homegrown tech conference, Digitec, highlighting the nation’s growing startup landscape.

WCIT and Armenia even caught Elon Musk’s attention, who expects to bring Starlink to the country in 2025.

The CEO of Tesla Inc told WCIT attendees that he is interested in “working with the local tech community on some exciting projects from space exploration to developing open and transparent AI that pushes the boundaries of human understanding.”  

Armenia’s Tech Evolution

Armenia’s technological acumen dates back to the Soviet era, when it was supplying 70% of the Soviet Union’s military technology. In the 1990s, as Armenia achieved independence, a mass exodus of scientists fled the country.

During this time, some American-Armenians who were successful in technology came to Armenia to assess the remaining talent. Upon arrival, they discovered scientists, PhDs in radiophysics, and professors working low-level jobs to make ends meet. 

“They were recruiting taxi drivers,” said Sargis Karapetyan, CEO of the Union of Advanced Technology Enterprises (UATE), a national technology consortium responsible for bringing WCIT to Armenia for the second time.

In the 1990s, telecom companies emerged in Armenia, followed by IT outsourcing firms in the 2000s. The country’s startup ecosystem began to cultivate in the following decade. 

“There were Armenian startups that international companies acquired, so we had some tech enterprises that brought much knowledge. Our startup ecosystem grew out of the IT ecosystem,” said Sona Veziryan, Director at BANA Angels and Partner at Formula VC. 

During this period, several multinational technology companies established a presence in Armenia, including Microsoft Corp, IBM Common Stock, and Cisco Systems. The influx of global tech giants marked a milestone in the country’s growing tech ecosystem.

Adobe Inc. and NVIDIA Corp. recently opened branches nationwide.  

“The IT sector in Armenia has great potential for development, which provides an opportunity to take steps towards further deepening cooperation,” said NVIDIA CEO Jensen Huang at a meeting with the President of Armenia, Vahagn Khachaturyan, in May. 

Why Armenia? 

So why are companies interested in Armenia, a country located in a highly complex geopolitical region with hostile neighbors and threatened safety and security?

Armenia’s appeal to tech companies partly stems from its talent pool.

“Our startups are very tech-heavy, knowledge-intensive products. Our founders are 90% tech guys; that is a value here,” Veziryan said, admitting that it is simultaneously a benefit and a drawback.

While the country boasts deep tech knowledge, it lacks business acumen, given its former communist ties. Thus, marketing and sales are relatively foreign concepts.

“The success cases are when we have a tech founder convert into a business founder or join forces with those with the skills to grow the business,” she explains.

Armenia’s tech evolution is also born out of necessity.  

Armenia projects its 2024 military budget at $1.7 billion, while neighboring Azerbaijan expects to spend $3.9 billion. Armenians believe developing a strong technology sector is the most effective strategy to counter this stark imbalance.

“Tech is the only way we can balance this huge gap between powers from both Turkey and Azerbaijan. Both with huge economies, natural resources, and massive armies,” Karapetyan said.

As a result, tech is exploding in the country, with membership to UATE doubling in the past nine months. 

Karapetyan says all these startups are world-class and compete in US and EU markets. However, with a small population, developing products for the domestic market is not the focus. Instead, Armenian startups build for the global market at inception.

The Diaspora: Armenia’s Superpower

What sets Armenia apart is its diaspora, a crucial element of the country’s tech sector. ServiceTitan is perhaps one of the best examples of this connection and the mutual benefits it can unlock between the United States and Armenia.  

Armenians outside the country outnumber those in the homeland by more than two to one. This diaspora advantage parallels Israel’s, as both nations benefit from a substantial portion of their global communities residing in the United States, which provides crucial support and connections for their respective tech industries.

“Armenia always has to be flexible and maintain good relations with everyone because it doesn’t have any country that will protect it,” said Stefan Papp, who relocated from Austria to Armenia and founded IT consulting firm Sophron Engineering.

Estonia is a startup tech center from which Armenia draws inspiration. With a population of just 1.3 million, this tiny Baltic country has produced ten unicorns. 

Building a tech ecosystem in a small country has unique advantages. Armenia’s close-knit, collaborative community stands out. A success in Armenia resonates across the entire ecosystem. 

Armenian Tech Trailblazers: Global Success Stories

Armenia has already produced one unicorn: Picsart, a photo-editing app with 150 million monthly active users. In 2021, Picsart raised $130 million from Softbank’s Vision Fund II. 

Overall, 2024 has proven to be a productive year for Armenia’s tech startups. So far: 

• February 1: Podcastle announced a $13.5 million Series A Funding
• March 26: Activeloop announced $11 million Seria A Funding
• July 11: HerculesAI announced $26 million Series B Funding
• September 16: EasyDMARC announced $20 million Series A Funding
• November 18: SuperAnnotate announced $36 million Series B Funding
• November 19: ServiceTitan announced filing for IPO
• December 12: ServiceTitan launches IPO Nasdaq under the ticker (TTAN)

Startup Blink lists Renderforest, Fastex Expert, SoloLearn, and Krisp as notable startups originating in Armenia.

Rising Up The Global Ranks

Some professionals believe a lack of awareness hinders the country’s progress.   

“Armenia requires more strategic positioning to enhance its global visibility, which is essential for a regional ecosystem to draw investment and create more partnership opportunities,” Mathew Zein, founder of Life in Armenia, said in an interview. 

Amid its relative obscurity, Yerevan, the capital city, has been quietly growing as a startup hub. According to Startup Blink’s 2024 Global Startup Ecosystem Index, it has advanced 21 spots and now ranks 200th globally. 

Currently, Armenia ranks as the 57th-best technology hub in the world.

The onset of the Ukraine-Russia conflict saw an influx of new residents into Armenia, viewed as the first stop for Russians fleeing the country.

The country’s challenge is retaining these new residents and attracting more. Neighboring countries Georgia, Kazakhstan, Uzbekistan, and the UAE are also aggressively recruiting talent from Armenia. 

With a stronger currency making outsourcing less competitive and a limited population, the country’s outsourcing framework is not sustainable, prompting a dramatic shift in focus toward innovation. 

“Armenia is going through a transformation, leaving the outsourcing model to product and innovation because of the limited amount of labor and the exchange rate appreciation over the last couple of years,” said Samson Avetian, founder of Eqwefy, a platform enabling investment into Armenian startups.

“In such cases, we are less cost competitive and need to work on higher value products. This would always be the case, but over the past couple of years, it has moved more acceleratedly,” Avetian says.

Looking Forward

Armenia’s technology industry has emerged as a critical catalyst for its long-term stability and sovereignty.

“Armenia’s biggest advantage has been its resiliency and ability to survive. They have to be on their own to create something new. They couldn’t rely on someone else protecting them from an aggressor,” said Papp. 

Despite these threats, the country works urgently to put itself on the map as a technology center. It is with the hopes that the next generation will lead its tech sector to usher in a new era and transform the country for good.  

“It’s a very entrepreneurial country. Armenia has many young people who want to thrive, are risk-takers, and love to be creative. For that, this is a great time,” Papp said.

Disclosure: I have no business relationship with any companies mentioned in this article. I also do not own any shares in the companies mentioned. 

(Photo courtesy of Armenia Travel)