Baku, November 13, Tamilla Mammadova, AZERTAC

Azerbaijan is becoming an increasingly attractive market for startups, and key factors for success include a deep understanding of local specifics and the ability to adapt to global trends. Successful founders must not only understand their industry but also consider the historical context, which is especially important in emerging markets like Azerbaijan. In this context, investors should actively engage with local players to understand their real prospects and avoid the pitfalls of information asymmetry. Significant growth opportunities exist in areas such as artificial intelligence, fintech, and deep tech, where Azerbaijan has significant engineering potential. To accelerate startup growth, developing local financial infrastructure and supporting diaspora capital are crucial steps to help create a sustainable ecosystem.

AZERTAC presents an interview with venture capital and startup expert Roman Novacek.

- What distinguishes an "outstanding" startup from a merely good one at early stage?

- After investing in over 50 startups across CEE+ and sitting on 15+ boards, I've noticed patterns that separate exceptional founders from everyone else.

The best founders have deep domain expertise combined with healthy skepticism. They understand not just their industry, but its history. They know what's been tried before, why it failed, and what's changed to make their approach work now. They're students of their market, not just participants in it.

Then there's what I call productive paranoia. Good founders are confident. Outstanding founders are confident but paranoid. They're constantly asking 'what could kill us?' and they adjust quickly. They don't fall in love with their initial idea. When I look at companies that grew 50x or 80x, they all pivoted multiple times before finding what worked.

Outstanding founders also think in decades but execute in weeks. They have a compelling long-term vision of where their industry is going, but they're ruthlessly pragmatic about what to build today. This is especially critical in emerging markets where you need to balance global ambition with local execution realities.

-What advice would you give to investors looking to enter markets like Azerbaijan?

-I've worked in what some investors might call a more “difficult" market. What I've learned is that you have to spend real time on the ground. Not conference visits, real time. I visit each target country multiple times per year because you simply cannot understand a startup ecosystem from a distance. You need to meet founders, angels, operators, even the people who failed. That's where you learn what's actually happening versus what the narrative is.

If you are not building global distribution from day one, you need to understand cross-border commercial relationships. Azerbaijan's best startups won't just serve Azerbaijan. They'll serve the broader Caucasus, Central Asia, Türkiye, potentially further. You need to understand these trade corridors, where diaspora networks are, where money actually flows.

Finding local champions early is essential. Every market has a few sophisticated angels or early operators who've seen everything. Build real relationships with them. They'll tell you who to trust, which deals are real, what regulatory traps exist. This takes time but it's critical.

Once you understand the market and find the right opportunity, you have to move fast. In emerging markets, the best founders are often undervalued and available, but not for long.

- Does the Caucasus region have potential to become part of the global startup landscape?

-It's already happening, people just haven't noticed yet. Georgia saw its largest Series A ever at €10M with Citypay. Azerbaijan has some of the deepest technical talent I've encountered - engineers who've worked on complex problems in energy, aerospace, telecommunications. For years this talent was directed toward traditional industries, but that's changing now.

What makes the Caucasus interesting is the combination of exceptional STEM education and improving infrastructure. The region produces engineers who can compete globally, but at a fraction of Western costs. When this talent turns to startups, the quality can be remarkable.

There's something structural that works in the region's favor too. Unlike the US where a startup can build a €100M business serving one country, Caucasus founders know from day one they must think regionally or globally. This forces discipline and ambition early. They can't rely on a massive local market, so they build for scale from the start.

Angel and early-stage capital needs to deepen. That's the gap. There's talent, there's ambition, there's improving infrastructure, but there's still not enough early capital and not enough investors willing to actually engage with the market seriously.

The Caucasus won't become Silicon Valley, and it doesn't need to be. It can become a specialized hub for talent-dense, capital-efficient technology businesses. That's a significant opportunity.

-What barriers hinder foreign investment, and how can they be overcome?

- There are several barriers when investing in markets like Azerbaijan. Lack of reference cases is probably the biggest one. Investors want proof that a market can produce outcomes. They want to see companies that raised even a seed round, got acquired, and scaled internationally. You can't force this, but you can accelerate it by making sure the successes that do happen get proper visibility beyond just regional press.

The lack of a developed angel ecosystem is critical. I'm happy to invest, but I typically come in at later stages. If there's no local capital for pre-seed and seed, companies die before they're ready for larger investors or are too slow in bringing their ideas to market. This is why developing local angel networks matters so much. Lithuania created a program called Coinvest where the government matches private angel investments. It doubles available capital while creating experienced angel investors. That's one approach worth considering.

Information asymmetry is another challenge. Investors don't know which founders are credible, which markets are real, how to price deals appropriately. This is where local investors, scouts, advisors matter. At Terminus we're building infrastructure to track thousands of companies across emerging markets, but the more investors actively engage through local partnerships and regular visits, the faster this problem solves itself.

These barriers are real, but they're solvable. Georgia has shown this. Kazakhstan is showing this.

-What technology trends are most promising for emerging markets?

-Let me focus on areas where I see real opportunity in the Caucasus specifically.

AI-powered vertical software for traditional industries is huge. Emerging markets have massive traditional industries - manufacturing, logistics, agriculture, construction - that are barely digitized. The opportunity isn't building general-purpose AI tools. It's building AI-enabled software for specific industries where you can achieve 10x efficiency improvements.

B2B fintech infrastructure is another major area. There is an opportunity utilizing new payment railways and technologies that just use the world's best technology and allow the countries to leap frog developed western economies that utilize old technologies in their banking and have trouble changing it. As the emerging countries are lowering their unbanked population it is the right opportunity to introduce them to stable coins and other innovations.

Deep tech leveraging the region's technical strengths is compelling. The Caucasus has exceptional engineering talent in robotics, energy systems, and advanced manufacturing. There's opportunity to build hardware and deep tech companies that compete globally, especially in industrial automation and energy technology. The quality of talent can be comparable to the west and it has a lot of potential.

-What innovative financing sources could help Azerbaijan startups?

-The problem isn't just lack of money. It's the lack of a complete financing ecosystem with different capital sources for different stages that needs to develop over time.

Structured angel networks with some form of government co-investment would be most impactful. Corporate venture programs that provide more than just money could accelerate things significantly. Azerbaijan's largest companies in telecom, banking, energy, and fintech should launch programs where they give startups not just capital, but pilot projects, access to customers, and distribution channels. This de-risks startups and creates much faster paths to revenue.

Diaspora capital is underutilized. There are successful Azerbaijanis around the world who want to invest back home but lack deal flow and structure. Create vehicles that aggregate diaspora capital and deploy it systematically.

The foundational pieces matter too. Standardized legal frameworks that make investment simple, tax incentives for angel investments, education programs teaching both founders how to fundraise and angels how to evaluate deals.

Think of it as building a pipeline. Right now there are gaps in that pipeline at different stages. Fill those gaps systematically and the ecosystem accelerates. That's why we built Terminus - to be part of the solution for emerging markets that have talent and ambition but lack systematic access to growth capital.