I have been working in the field of Information Technology for more than 20 years, in Data Center-based services for more than 10 years, and in the last 3 years as an official company on various projects. The project I am currently leading is one of the startups that received the “Startup Certificate”. It has been almost three years since we received this certificate, and I want to share with you the positive and negative aspects, difficulties and suggestions I have encountered during this period.
Problems:
First, let me talk about the problems I have encountered in this field.
1. The Reality of the “Startup Certificate”
Although it was initially said that the startup certificate would create great opportunities, the reality is completely different. The certificate only gave us the opportunity to place a link on the SME website and be exempt from profit tax. However, this was not useful at all for a small company. So far, due to the “Startup Certificate”, we have not been able to attract customers to our project, nor a stand at exhibitions, nor investors, nor preferential credit conditions from the bank.
2. Banking System
Banks mostly do nothing but provide high-interest loans, and numerous documents are required to receive payments from abroad. Sometimes it happens that a person himself is already in such difficulty that he doubts himself, wondering if we are doing something illegal?
3. Access to Investors
In our country, access to real investors is still limited. Our project is developing by bootstrapping, and we encounter various difficulties at every step. Despite this, we are working to form a local project in the country.
4. Events and Real Impact
Events held in the sector (for example, Inmerge, etc.) are usually fruitless - speeches are given, but there are no real results.
5. Tax and Banking Problems
We face additional commissions for each payment in banks, penalties for delays, and high fines for minor technical errors. In addition, since we have accounts in three banks, when a fine of 500 AZN comes from the tax system (in fact, we have made the payment, just because we entered the system late), each bank applies this fine separately. As a result, 500 AZN is deducted from the turnover 4 times. Although these amounts are later returned to the account as a deposit, the temporary withdrawal of such funds from the turnover causes various problems.
6. Registration of the Ministry of Communications
Our project is registered with the Ministry of Communications as a host provider. However, at the moment this has no real benefit. Perhaps in the future some functional purpose or requirement for this registration will emerge.
Real Problems We Encountered:
1. Payment to a foreign country
We talked to one of the banks with which we have a main account and opened an account in Russian rubles to make a payment to a company in Russia. We transferred funds from AZN at the exchange rate, but in the end the bank said that they do not make transfers to Russia. We investigated and found out that another bank could make this transfer. However, this time, the previous bank also said that we do not perform money transfer operations to that bank. When we wanted to withdraw the money, we encountered many technical and administrative obstacles. As a result, we lost about 1,000 AZN in financial losses.
2. Credit experience
At the first stage, the bank opened a credit line for us and extended the period several times. However, the last time, it closed the credit line without warning and demanded the full amount of the debt immediately. When the funds were credited to the account, the amount was written off without our knowledge. Later, we contacted the bank and reached an agreement to pay the debt in installments over 6 months or 1 year. However, as a result of this process, we lost 7,000 AZN in working capital. This was another blow to the Startup by the bank. Despite all these difficulties, we are trying to stay afloat.
3. Office problems
Although our team works mainly online, we are forced to maintain a small office in terms of image and registration. We spend about 1000 AZN per month for this. This also creates additional difficulties in locating servers for temporary repairs and finding physical space for the object code.
How do other countries do it?
Estonia:
Through e-residency, any citizen can establish a company and submit a simple report once a year. After a turnover of 40,000 EUR, they become VAT payers.
Information from the e-resident portal in Estonia
USA:
It is possible to easily open a company using the Stripe Atlas service.
Dubai:
Unfortunately, I do not have personal experience, but it is one of the popular models I have heard about.
How we did it
Our company provides server-based services located in Azerbaijan and Georgia, we serve more than 20 countries. For this reason, we have established companies in both Azerbaijan and Estonia.
- For foreign companies, we use an Estonian company,
- For domestic companies, we use a local company.
- We process PayPal and other e-commerce payments through Estonia, and AZN e-commerce payments through a local company.
By processing our cPanel license and other external payments through a foreign company, we simplify the procedure and try to save on our costs.
Suggestions
Tax Simplification: Estonia
- A simple tax system and annual reporting, such as the model, would make things easier for startups.
- Direct participation of real investors in projects should be ensured, and not just measures should be limited.
- Each measure should be evaluated based on previous results, the volume of investment attracted and the obtained results should be presented transparently.
- Electronic banking services should be more accessible and convenient, and special credit opportunities should be created for small startups.
- Make the Startup Certificate a Real Benefit: Support and opportunities should be created not only in documents, but also in the real business environment.
- Additional Support: There should be government support mechanisms for office and other expenses (e.g., discounts for office rent).
Development
If these proposals are implemented, we can see the development of the field in these directions:
- Qualified personnel in the field will no longer be satisfied with just opening courses, they will establish real startups, teach at universities and involve students in practical projects.
- Those who make money in the startup sector will invest in new startups in their own fields of expertise, not in other areas — for example, Yango, Uber, construction, and the cafe business.
- The activities of scientists will not be limited to theory, but will turn into practically oriented research.
- Instead of seminars and events, networking and strong startup communities will form that create real connections.
