With the gates open, venture capital is slowly trickling into the Islamic Republic of Iran, as indicated by a $22.3 million (€20 million) investment announced Monday by ride-sharing upstart Snapp. The round comes at a time when Iran’s taxi industry is facing a financial crisis.
South African mobile conglomerate MTN led the round as the sole investor, with the money going to the Iran Internet Group, which owns Snapp. MTN, already a prolific investor in Iranian telecoms, has a partnership with Rocket Internet in the Islamic Republic and also holds shares in Iran Internet Holdings and Irancell.
Snapp has challenges and protections unique to Iran. So far, they are operating only in the capital, Tehran, though with 8 million residents, the market is huge. On the one hand, US sanctions keep Uber from opening up a branch in the country. On the other, Iran is flooded with an excess of legally and illegally operated cabs, especially in Tehran. The industry is plagued by massive abuse by unofficial cabbies, known as shakhsi drivers (personal drivers). According to AFP, Tehran has 78,000 official cabs, five times more than New York City.
The company was founded by Shahram Shahkar as Taxi Yaab in 2014 and has 130 full-time employees. They have competition from the Tehran Taxi Organization, managed by CEO Meisam Mozafar. Iran has been hoping to see its own tech scene develop after the nuclear deal agreed with Western powers last year, which has led to visits by several business delegations from Europe and the unfreezing of financial assets.
Iran’s startups have a lot of work to do to build a true ecosystem, though. Although it has high literacy rates and a large number of technical schools, the country is still recovering from decades of sanctions. There is significant interest in Iranian tech in places like Moscow and Stockholm. Swedish-based Pomegranate Investments recently raised €60 million to help increase its share of e-commerce-focused investor Sarava, which in turn controls e-commerce startup Digikala, which some call the “Amazon of Iran.” A meetup dubbed iBridge Barcelona will take place this year in Barcelona, Spain from December 8-10 to bring entrepreneurs from Iran and members of the Iranian diaspora together to help grow the ecosystem.
Shahkar told TechCrunch that “another thing that makes Snapp unique is that the price of the trip is set beforehand.” He added that the company has 10,000 drivers and over 500,000 riders using its app, and that the app eliminates the “bazaar” aspect of getting a ride. “This pre-pricing is our value proposition; it eliminates haggling.”
Snapp, unlike Uber, avoids the problem of illegal cabs by working only with officially licensed and insured drivers. The cash will likely be used to bring the service to the country’s next-biggest cities, like Mashhad (2.3 million people), Isfahan (1.5 million) and Karaj (1.4 million).
“We plan to invest in our current operations, expand to other cities, introduce different services such as premium vehicles and offer new features,” Shahkar said.