Azerbaijan is looking to reduce its long-standing dependence on oil and gas by attracting more foreign investment into its growing technology sector. The country is introducing reforms aimed at bringing technology companies and venture capital into the market.
The former Soviet republic has relied heavily on energy exports since gaining independence in 1991. During the oil boom, hydrocarbons accounted for about 75% of economic output and 90% of exports, according to the International Monetary Fund.
By comparison, the technology sector contributed 2.1% of GDP last year, up from 1.9% in 2024. The government wants to increase this share and develop Baku into a technology and innovation hub on the Caspian Sea.
New investment framework for startups
Legislation passed in July has created a legal framework for investment instruments. The government expects this to allow startups and investors to structure deals within Azerbaijan instead of creating entities in foreign jurisdictions. This could reduce costs and simplify future funding rounds.
Deputy Digital Development Minister Rashad Hasanov said foreign venture capital, corporate and institutional investors are expected to provide a significant share of new funding.
Baku also plans to establish a fund that would combine local and international capital. Details are yet to be finalised.
“The size will be set by the quality of the pipeline and the partners we bring in, not the other way around,” Hasanov said. Officials have studied countries such as Singapore and Estonia for best practices.
Azerbaijan’s venture capital market remains small. In 2025, 22 startups raised $2.62 million. The country currently has 3 venture funds: Caucasus Ventures, INMerge Ventures and Tumar Ventures, with total disclosed capital of about $11 million.
Entrepreneur Tural Selimli of Sera AI welcomed the new framework but said Azerbaijan also needs to build awareness and trust among foreign venture capital and angel investors.
Central Bank Governor Taleh Kazimov expects more investors to enter the market after a legal framework for equity and debt-based crowdfunding was established. The bank has 6 months to approve the regulations.
“We are waiting for applications,” Kazimov said.
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