In 2014, while ISIS controlled territory an hour's drive from Baghdad, a team launched Miswag, Iraq's first e-commerce platform. Today it carries over 15,000 products and delivers nationwide. That founding story captures something essential about Iraqi entrepreneurship: the willingness to build while others see only risk. A decade later, Baghdad's startup ecosystem has grown from a handful of pioneers to a genuine scene, with venture capital, accelerators, innovation hubs, and a generation of founders who believe Iraq's reconstruction includes a digital layer.
Iraqi startups raised an estimated $30-40 million in 2024, primarily through local investors and diaspora networks. That figure is modest compared to regional neighbors. Saudi startups raised billions; UAE startups operate in a mature ecosystem with abundant capital. But Iraq's funding represents something different: the beginning of a venture ecosystem in a country that had essentially none a decade ago. The trajectory matters more than the absolute numbers.
The Demographic Opportunity
Iraq's startup potential rests on demographics that would make any emerging market investor pay attention. A population of 43 million, larger than Saudi Arabia's citizen population. Over 65 percent under the age of 35, a cohort that grew up with mobile phones despite everything else happening around them. Internet penetration has reached 75 percent. Smartphone penetration exceeds 82 percent. The infrastructure for digital services exists in users' pockets even where physical infrastructure remains incomplete.
This young population represents both market and talent pool. They're customers for the delivery apps, e-commerce platforms, and digital services that startups are building. They're also the engineers, designers, and operators that those startups need. The challenge isn't finding people who want to use technology or work in technology. It's building the ecosystem structures that channel that energy productively.
At Fusion AI, we see Iraq's demographics as indicative of broader emerging market patterns. Young populations with high mobile adoption but underdeveloped traditional infrastructure represent billions of people globally. The solutions that work in Baghdad, designed for mobile-first users with intermittent connectivity and price sensitivity, potentially scale to markets across Africa, South Asia, and beyond.
The Startups Making It Work
Several Iraqi startups have achieved scale that proves the market is real. Lezzoo has become integral to urban convenience in Iraqi cities, offering on-demand delivery for groceries, food, and courier services. The company solved logistics challenges that would defeat operators accustomed to reliable addressing systems and predictable traffic patterns. Sandoog, a logistics company based in Baghdad, provides nationwide delivery including product handling, storage, and payment processing, the infrastructure layer that enables other businesses to reach customers.
Healthcare technology is finding traction where the need is acute. Health 360 offers local hospitals a software platform designed to reduce mistakes and streamline patient care, addressing the paperwork chaos and patchy records that characterize many Iraqi medical facilities. The company ranks among top healthcare tech startups in Baghdad, proving that enterprise software can work even in challenging institutional environments.
EdTech represents another growth area. Medresty provides school management systems with a mission of improving Iraqi education, enabling teachers and parents to communicate and track student progress. Corrsy, a Finnish-Iraqi EdTech startup, raised $500,000 in pre-seed funding to transform education across the region. Media and entertainment have also found footing: Al Sharqiya Television's investment in 1001, an over-the-top streaming platform, attracted a million users in just three weeks.
Building the Ecosystem Infrastructure
Startups don't emerge from vacuum. They need the supporting infrastructure of investors, accelerators, mentors, and community that mature ecosystems provide. Iraq has been building this layer with international support. Since 2017, GIZ has implemented the ICT for Youth project, which has established seven innovation hubs across Baghdad, Basra, Mosul, Erbil, and Sulaymaniyah. More than 8,500 people have completed training courses, and 378 startups have received development support.
The investment side is maturing as well. IVP holds the distinction of being Baghdad's first locally-based early-stage venture capital firm. Founded by experienced business figures including Omar Al-Handal, Bassam Falah, and Mohammed Khudairi, IVP partners with international funds like Orange Corners Innovation Fund. Their Gateway Fund targets pre-Series A and Series A investments with check sizes from $250,000 to $1 million, meaningful capital for Iraqi startups that previously had few options beyond bootstrapping or friends-and-family rounds.
KAPITA, a business incubator and accelerator, has played a central role in ecosystem development. With GIZ support, KAPITA launched the Iraqi Angel Investor Network, the country's first organized angel network providing startups with knowledge, seed funding, and connections to domestic and international resources. These institutional layers take years to build but enable the next generation of companies to start from a stronger foundation.
The Unique Challenges
Iraqi founders face obstacles that would seem exotic to their Silicon Valley counterparts. Banking infrastructure makes payment processing complicated; cash remains dominant in ways that challenge digital business models. Regulatory frameworks for technology companies are underdeveloped, creating uncertainty about everything from data protection to employment law. Electricity reliability affects operations in ways that founders elsewhere never consider.
Security, while dramatically improved, still influences business decisions. Which cities can support on-the-ground operations? Where can delivery drivers safely travel? How do you build a workforce when some skilled professionals remain reluctant to return from diaspora? These questions don't have equivalents in stable markets, but Iraqi founders navigate them as routine business considerations.
The talent pipeline presents its own challenges. Iraq's universities are producing more technology graduates, but the ecosystem can't yet absorb all the talent it needs. Senior technical roles often require recruiting from abroad or from the diaspora, which means competing with salaries and stability that Iraq can't always match. Building technical teams requires creativity, commitment, and often patience that well-funded startups elsewhere don't need.
The Reconstruction Tech Opportunity
Iraq's startup ecosystem exists within a broader reconstruction context that creates specific opportunities. Infrastructure is being rebuilt. Government services are being digitized. Industries from agriculture to healthcare need modernization. This isn't a mature market where startups compete for marginal improvements. It's a market where fundamental services remain underbuilt, creating space for companies that can deliver basics reliably.
From Fusion AI's regional vantage point, Iraq represents a different kind of opportunity than the Gulf states where we're headquartered. The budget constraints are real. The operational complexity is higher. But the potential for technology to address genuine needs, rather than optimize already-functional systems, creates a different kind of impact. Companies that succeed in Iraq will have built capabilities that translate to similarly challenging markets worldwide.
The founders building in Baghdad today aren't chasing easy venture returns. They're betting that Iraq's reconstruction includes a digital layer, that 43 million people deserve modern services, and that building something meaningful sometimes requires doing it the hard way. The ecosystem is early. The challenges are real. But the trajectory, from nothing to $30-40 million in annual funding, from zero innovation hubs to seven, from no local VCs to organized investment infrastructure, suggests something is working. Iraq's startup story is just beginning to be written.