In May two thousand sixteen, I took a trip to Zurich. I joined executives from all over Europe, the US, and Canada who were there to talk about Iran. For years around was isolated from the rest of the world. Foreign companies had serious limitations around doing business there, which meant
that often they did no business there at all. But that changed in today, after two years of negotiations, the United States, together were international partners, has achieved something that decades of animosity has not, a comprehensive long term deal with Iran that will prevent it from obtaining a nuclear weapon. Sanctions were lifted in January last year. When the sanctions were lifted, then we started really having a lot of
excitement inside the whole startup world. This is Fuzzy Amir Sole Money, founder of Ku, an online retailer selling baby products. I first met Futty at that gathering of exact patives in Zurich. I saw her again in September. Her story stayed with me because the end of sanctions was a
big deal for Iranian startup founders. We were finally going to access some real funding sources, and so we had a lot of meetings with foreign investors who were really excited with this country fut He thought the lifting of sanctions with market turning point for the growth of her business and the broader tech industry in Iran. At the time, Kodak who was talking to a Swiss fund about a
potential investment of a million dollars. But just as the sanctions lifted, one presidential candidate halfway around the world was attacking the deal. The Iranians are very good negotiators. The Persians are always great negotiators. They are laughing at us back in Iran. I would have made a deal, not from desperation. I would have doubled and tripled up the sanctions,
and I would have made a much better deal. Of course, this candidate went on to win the US presidency, and his victory spooked a lot of potential foreign investors in Iran, like the Swiss investors for he was talking to. It took a well, it took a few months before it really you could really feel that the interest had dryed out.
Now things might get even worse, as President Trump has stuck with the heartline approach that he promised, and tensions between the US and Iran have escalated any day now, Trump could trigger a series of events that would cause the US to reimpose sanctions, and that could isolate Iran from the world once again. Hi m a kite and I'm the Dan Necessary and this week Undercrypted, we're taking a look at Iran and what the rising political tensions
could mean for the country's budding taxing. In recent years, Iran has been helped by your more moderate political leader, President has San Rohani, who was elected in two thousand thirty. Then came the nuclear deal and the lifting of sanctions. These changes have fostered a more open business climate, and Iran has seen dozens of startups appear, some of them
even getting funding from international investors. But if the US chooses to reimpose sanctions, a lot could change and that would have wide ranging implications for ordinary Iranians who just gotten used to life in the digital economy. So the entrepreneur Facty is Iranian, but spent most of her life abroad. She grew up in France, went to Columbia Business School and worked in mergers and acquisitions at Morgan Stanley in London.
Then in two thousand nine she took time off from Morgan Stanley to have a baby during that time, a level to Iran a few times uh and had the difficult experience of trying to find baby products from my kids. You have the huge traffic inside the city. There's a lot of small shops. In France, she said, most of the retail space was organized retail, but in Iran it was the opposite seventy where mom and pop shops and Fatty was used to shopping online, but she soon discovered
that wasn't really an option in Tehran. Around the economy mostly had been closed to the world for a decade. As a result, there was very little money from outside investors to fund startups, and companies like Amazon, Facebook, and Twitter were blocked. And you know, Tehran is a gigantic city of twelve million North Carolina. Is that the foothills of the Albows Mountains, with it's cooler temperatures and cleaner air.
It's where the more affluent choose to live. The more south you go, though, and the more ends busy and polluted. The city becomes a twelve mile avenue links north to south Tehran. But here's the thing. Despite highways, dedicated bus lines, and efficient subway lines, downtown Tehran is still often jammed with cars and hijacked by spot In Iran, for hundreds of years, commercial life has been focused around the buzz aar,
which is this marketplace of merchant family businesses. You realize that this retail space is very fragmented and there's a lot of small shops and no major organized retail right. So my first reaction was to think, Okay, this market has to be consolidated. Futty wasn't the only one to see the huge opportunity for technology to organize and expand Iran's retail sector. I've been reporting stories from Iran for more than a decade, and in the last two to
three years alone, I've seen some drastic changes. A couple of years ago, the teh Run started seeing was still a phenomenon on the margins with a handful of vcs and a bunch of young Iranian founders. Now the impact of the tech community is much more visible. Some notable startups include snap, which is Iran's version of Uber, and Dishkala, which is kind of like the local Amazon. These companies
have become part of everyday life in the capital. For example, I spoke to one of the security guards at a shopping center in central Tehran. His name is Reza Hasani and he lives in Kadah, just outside the capitol. Before he would use a combination of buses and metro to make it to work. With Snap, he treats himself sometimes because it's half the price of a normal cap Most people around me use it, my dad, my brothers, my sisters, my aunts, whoever I suggested to their using whoever I
suggested to, They're happy with it. My parents used Snap. They have learned. The first couple of times is difficult, but I kept showing them and now they're easier with it. Reza showed me he spooned so I could see the iteena reas he had saved on his parents phone. In there. It has an option you choose that and it saves the trips you take. So I saved for them route one and two and three, my house, my brother's house, my younger brother's house, my sister's house. My mom used
to say, what is this electronic world? What are these mobile phones in the hand of kids? But since I've showed her Snap, she says, this one thing at least is good. She's happy with it. So you have ordinary Iranians getting familiar with the convenience of technology. Iran is also a country of eighty million and some seventy arounder the age of thirty five. What Futty also saw was
a lot of people potentially interested in baby products. For me, the opportunity in this retail market were huge, Um, and I was ready to take a chance to go back in the country and maybe build, I mean build an e commerce company. Futty had lived most of her life abroad. She looked for a partner who knew the country and the culture. When Fotty called me with the idea, and I just could not resist working with her and the
idea because Peo both already had our first children. This is Lord and gold Cheny, who happens to have the same name as me. She's Fotty's business partner. We knew the Hassele's moms had to go through shopping with a little kid, driving in traffic of Tehran for hours, um
with a screaming child at the back. At the time, in twelve, Iran was still under sanctions Press Senate Rohaney wasn't empowered yet, Ivan had limits on its oil exports, Its banking system was cut off from the international payment system swift and few Western companies were involved, and that was taking its toll on the economy. Inflation picked at GDP was shrinking and the national currency had lost a
third of its value compared to the dollar. It was it was a big question to know if we were actually going to launch the product or not because the prices were fluctuating so quickly. I mean, the prices of product tripled during that year, right, So being an internet e commerce based company, you always had to have the updated prices on on the website. We would have needed to change the prices every two weeks on four thousand, five thousand products. So obviously that's a really tough environment
in which launches startup. The election of President Rohaney changed everything. The election of Faster and Rohaney no have commers a surprise to many result this election would be much more fragmented, but it's not a surprise to so many of his supporters. They voted for change, they voted for hope, and although it's a little bit earlier, they're already saying goodbye to
the current president. As soon as he was elected in two thousand thirteen, he made it clear that priorities were to stabilize the currency market, control inflation, and negotiate with
world powers to get the sanctions lifted. Prices started stabilizing around two thousand thirteen, and we started getting signals from the market in two thousand thirteen that basically things were settling down, that the market was getting more stable, and on the other side, that the customers were back into I mean, customer confidence was higher and they were back into purchasing products. And that's basically when we started to launch the business in Iran in two thousand thirteen, e
commerce was still a novel concept. Fautian Ladan were trying to work with importers, including the buzz Aar, which remember is the powerful traditional marketplace. We had a very tough first year, and the problem was getting the suppliers to
trust us to have their products being sold online. They did not want to sell it or create a competition for their physical shops, so basically took us a while to try and educate them, to take them through the whole concept of marketplace and what's happening internationally with e commerce businesses. In a way, those traditional business owners turned out to be right. E commerce websites have created competition for their main businesses. The market is going in that direction,
Instagram businesses, e commerce, it's going towards internet market. I really think Digicala sells as much as this entire shopping center. That how much they sell. This is Hasha your bobboy, a salesman in a computer accessory shop, and the company he referred to, Digicala, is the big online retailer in Ivan, sort of like Amazon. Kasha Year says he often has kids walk into his shop, ask about the price of something and say it's cheaper to buy this on Diga.
We are businessmen. We don't want the customer to leave the shop. Sometimes we have even sold a product without making a profit, just so the customer doesn't leave empty handed. We have no choice. We got to compete, Hashaer says, even though they owned the shop and have been in business forever, Digkala has become a nuisance to them. I think in a few years people won't even shop like this, like come and walk around here in the shopping center. But then Hasha told me he shops online himself. I
bought a shaver once. It's not bad at all. To be honest, you said, at home, drink your cup of tea, choose your product, they send it home, and even above a certain price, it's free delivery. Yes, why not? Unfortunately, m H. When you ask Iran's tech founders about the various challenges they face, the one issue they all talk about is access to funding. Fatty and Laddan launched Kuduku with their own money in and two years later they started looking for their first infusion of cash. It seemed
like a good time. That year, the nuclear deal went through, which meant that the sanctions were going to be lifted. After the Iran Deal, things changed. A lot of foreign investors got very serious about Iran and they started looking into the market. They were receiving weekly, on a weekly basis, phone calls and emails. Fatty and Laddan had plans. They wanted to boost their marketing and partnerships with local hospitals. They hope to expand into accessories for women and home decoration.
But they had no idea that the business climate was about to change. Okay, so let's past forward to the nuclear deal had been agreed to, the sanctions were mostly gone, and Fatty and Ladan were fielding all kinds of calls from foreign investors who wanted to learn more about their business. Some of these investors had even sent them term sheets, which is this document outlining the terms of investment. It's what gets the ball rolling for the two sides to
sign a final agreement. For Fati and La Dan. It wasn't just their money that they were excited about, and the foreign investors are the ones that actually understand what it takes for an e commerce business to escape the money requirements and also other restrictions and requirements that are needed for an e commerce business to become the Amazona dig you call us of this world. But then Trump are elected and what seemed like these dune deals fell apart.
Foreign investors opted to wait in this new world of uncertainty. When you're an entrepreneur, being an entrepreneur as a roller coaster, so you have you have down moments and up moments all the time. Right, it's a real roller coaster. Today, Fatty and London are in tact with local investors. They said they've had to scale back their ambitions, but they are confident that they'll be able to raise enough to keep going. It's not just Fatia da Dan who are
struggling in this new climate. Take for example, here returned to your run in two thousand eleven at the height of sanctions to launch netback, a bargain site similar to group On. We were seeing the world and you could see that this this thing is going to happen sometimes, I mean it was clear. I think the people who who believed in this industry that this is going to happen. Sometimes we didn't know when today at the result is at the head of an umbrella company that includes five startups,
including net Barrack. The nuclear deal which lifted the sanctions helped his business grow. There was this way of Parners coming to Iran. They told Iran is going to change drastically. Ali Reza says he contacted a German fund that had made an investment in a partner company a year and a half ago, but after Trump's election the answer was different. I'm not sure. Let me think about it. I think Trump's administration had some negative effects and the people's hope
of things going yeah much more faster. He's a very uncertain person. I mean you cannot predict his behavior for the next week. So that the companies want to come to your and they want to look at their next ten years so open they see that there is this uncertainty, they will have more doubts. And if you're not totally sure where the sanctions stand at the moment, you're not the only one. There have been new twists to the
story every day right now. The sanctions that were lifted with designing of the nuclear deal still remain lifted, but that might not last long. Most recently, Trump went to the UN to try to convince you as allies, to renegotiate the nuclear agreement. European leaders didn't budge, insisting on keeping with the original deal, and Iran has said it can walk away from the agreement if other countries push
for renegotiations too. Trump now faces an impending deadline. You have to decide whether they declare that Iran has been complying with the terms of the nuclear agreement. If he says that Iran has not complied, the U S Congress would have sixty days to consider imposing back sanctions on Iran and even putting aside these fundraising concerns. Building a
startup in Iran presents its own set of challenges. For example, Facebook and Twitter, or band in Iran, although many officials use them and it's easy to get hold of epns, and even though most of the sanctions are still lifted, there are some that remain. That's meant that Iranians can't access cloud providers like Amazon Web Services, which makes things
particularly hard for internet startups there. More recently, Apple decided to remove some Iranian apps sitting trade sanctions enforced by the U S Office of Foreign Assets Control, and that included some of the popular apps like Snap, the white hailing app. We mentioned earlier the mistake that I think most of the business people make about Iran. They want the good safety. That's Ali Reza again. We have learned in business school that when you have a high risk,
you have a high retain. When there is a little risk, yeah, you have a low return. So you cannot have a high retain and a low risk. Iran is a high risk, high return country and we believe in its potential. It's this mentality that has prompted many Iranians like Fatty and Alireza to be turned to Iran and share their knowledge. When I look at what was the sort of pool of talent and the amount of information which existed in
all the people. Like four years ago campaign to now, there has been much more training and talent in the country. So when people come they bring Even if they start their own company, they start training other people inside their company, and these people will go to other companies and the information is shared slowly. The government of Iran Centrist President Hassan Rouhani has been supportive of the tech industry. It's under Ruhani that three G and four G internet appeared
and expanded. Before that, the internet was very slow. Ruhani's government has also invited Iranians abroad to bring their creativity and ideas back to their own country. I met a guy called mohammadres as Ali. He wants the tech Russell website in Iran, which he likes to refer to as the Iranian Tech Lunch, and he said he and his colleagues regularly received emails from Iranian studying or working abroad.
They are assessing the market to try and be persuaded that this is a good place to come back to because abroad the market is already mature. The chance to stay there set up a successful startup is very low. Here, the space is untouched. Many are seeing this and want to do something of course, whether these Iranians are brought actually come back home depends on what happens to the nuclear deal and the sanctions and how foreign investors and
executives respond. For now, many European companies, including multinational always like to tell and Siemens have taken chances on Iran. But if the US reapplies some of the economic sanctions on Iran, that could really put international investors off. Sanctions come with a lot of rules for companies that still want to do business with that country, and most people don't want the hassle of having to comply with such
a complicated settle US. In the meantime, for forty and La Dan, it's about taking it one step at a time. This kind of setback forces you to become better, right, and to become more lean and make your company more efficient, right to to become successful. Right. So I think that's where we're standing today. We must see setbacks in the next um three or four years, and three years, I
would say, but that doesn't matter. We're as Iran, yes we're We don't look into um ops downs and changes short term because we've had we've had a royal coaster of changes in the country, but we usually have more of a long term prospect, so I'm very hopeful. And that's it for this week's episode of Decrypted. Thanks for listening. Before we let you go, just a quick note. On last week's episode about Stands Sack Company. We said that Randy Shekeler is the CTO of Stance, but in fact
he oversees quality assurance. We'd love to hear what you think of the show. You can email us at Decrypted at Bloomberg got let or I'm on Twitter at the Dawn Massari and I'm at aki Eto seven. If you haven't already, please take a moment to rate and review our show. It's the best way to help us get the show in front of new listeners. This episode was produced by Pia Gatcary, Liz Smith, and Magnus Hendrickson. We'll see you next week.