How to hire software engineers in Armenia

‍

In the last few years Armenia has become a hot bed for tech talent, with a growing number of software engineering professionals and startups emerging in the country. Since the inception of SmartGateVC, I have witnessed the tremendous potential of the Armenian tech industry first hand as part of the investment team at the fund. Over the years, throughout my work with our portfolio and pipeline companies I have come to appreciate the unique advantages that Armenia offers when it comes to building high-performing engineering teams.

Since the establishment of Hero House in Glendale, which is a tech and entrepreneurship hub in SoCal I have had the opportunity to engage with numerous entrepreneurs, technology enthusiasts, and executives based out of CA. A recurring theme among these interactions has been the potential to establish R&D and software engineering teams outside of the United States, specifically in Armenia.

The United States, particularly California, presents a challenging environment for recruiting and maintaining engineering teams due to high costs and intense competition for talent. As a result, many founders seeking to rapidly scale and expand their engineering and research teams are exploring options outside of the United States. When considering Armenia as a potential location, Hero House and SmartGateVC are often among the first places they turn to. This article aims to serve as a comprehensive guide for setting up a software engineering team in Armenia.

Why choose Armenia for your R&D team?

There are a few reasons why you might be considering Armenia as a destination for your team. Some of the possible reasons may include:

• You know someone who has hired engineers in Armenia and was impressed with the high-quality results they received.
• You've heard about the growing number of Armenian tech startups and the developing tech ecosystem in Armenia.
• Your R&D team used to be in Russia but due to the war between Russia and Ukraine, you can no longer keep your team there.
• You have personal ties to Armenia.

Setting up an engineering team in Armenia can be a major advantage for a newly launching company. The engineering costs in Armenia are 3 times cheaper (or even more if your alternative is California) than the United States. So hiring R&D in Armenia might mean 3 times longer runway and way less dilution early on.

Regardless of the reason, you've come to the right place. Armenia offers a skilled workforce, a growing tech ecosystem, and a neutral political climate, making it an ideal location for your R&D team.

Quick background on how the tech scene in Armenia emerged

Armenia has a long-standing tradition in technology, dating back to the Soviet era when it was the "silicon valley" of the Soviet Union. After the collapse of the Soviet Union, some Armenian entrepreneurs from diaspora among them Al Esaian, Adam Kablanyan, Sam Simonian and others recognized the potential of the country's talented workforce and established their engineering and R&D teams in Armenia. In the years that followed, several of these startups were acquired by major tech corporations such as Synopsys, National Instruments, Oracle, VMWare, Cisco, Mentor Graphics, Teamviewer, and D-Link. These corporations not only established their presence in Armenia but expanded their teams, thereby contributing to the training of high-quality and globally competitive engineers. This laid the foundation for Armenia to become a premier tech destination.

Today, Armenia is a hub for tech companies of various sizes and stages, including series seed to late-stage startups, tech corporations, and small and large tech outsourcing companies. The software talent pool is more diverse than ever, consisting of juniors, and seniors with 10-15+ years of experience in building tech products and technical teams. The country's skilled and experienced workforce, combined with its growing tech ecosystem, make it an ideal location for companies looking to establish or expand their R&D operations.

Hiring software engineers in Armenia

When companies consider hiring engineers in Armenia, one of the first decisions they must make is whether to hire an outsourced software development agency or an in-house development team.

Scenario 1: Hiring and outsourced software development agency

Armenia has a wide range of software development agencies, ranging from small boutique firms to larger companies with teams of 150-200 people. The process typically is the following:

• The client communicates with the CEO or sales manager of the development agency to provide project specifications, such as the technology stack, initial period, deadlines, and timelines
• The agency then allocates the required number of engineers who fit the project's scope.
• In majority of the cases the client will meet and interview the engineers, make a decision on their hiring for the project and will typically work directly with the engineering team and will handle communication, delegation and coordination with the engineers directly.
• In this case the software development agency will charge the client with the agreed upon rate for each engineer.
• As the project grows the agency allocates more and more people to the project to meet the needs of the client.

Pros:

• Avoiding the hustle of the legal side of incorporation, accounting and hiring.
• This is the quickest way to hire an engineering team in Armenia and may take as short as 1-2 weeks.
• Access to larger company resources/infrastructure.
• Seamless onboarding as the core team of the development company working with you will have previous experience of working as a team.

‍Cons:

• In some cases the relationship between the client and the agency may fall apart or the quality of the work may deteriorate because of various frictions inside the agency directly unrelated to the client. It is almost impossible to current the underlying issues and bring back the team performance as the client does not directly influence the culture or the management of the software development agency (and therefore picking the right agency as a partner is crucial).
• The services of a software development agency may be expensive, as they include back-office handling expenses.

‍

Software development Agencies to consider

If you decide to hire a software development agency a simple google search would give you a wide range of options to choose from. I suggest you check out the trello board which is a very good summary of Armenia's current tech scene. If you check out the “Service Providers'' card on the trello board you will find most of the development agencies with details.

If you would need help on making a choice feel free to reach out to me directly. I would be happy to hear about your needs and offer you my suggestions:

Scenario 2: Hiring an In-house Development Team

Many tech companies, among them startups such as Service Titan and Disqo have chosen to establish an in-house development team in Armenia instead of hiring a software development agency.

Think of hiring an in-house engineering team in Armenia as setting up a company branch in the country. The crucial things to consider are the following

• Hiring a manager/director for the Armenia operations: This may be the most challenging part of the process. The new hire will be responsible for managing the back office activities such as registering a company in Armenia, hiring an accounting firm, establishing formal contractual relationships between the US and Armenian legal entities, and conducting the paperwork for hiring, among other tasks. The ideal candidate for this position would be someone who is well-connected in the tech/startup scene of Armenia, has experience in successfully executing various types of company-building challenges, and has a strong network of engineers. I suggest finding either an entrepreneur who has “successfully failed” a startup after raising pre-seed or seed round or who has run a software development agency for some time and is seeking to transition into the next phase of his career and work with a startup founder to build and grow a single product.

• Recruitment of engineers: Once the manager of the operations in Armenia is hired, the founder of the company and the hire will start recruiting engineers. While Armenia offers a large number of engineers, it can still be challenging to recruit senior engineers. This is where a well-connected Armenia office leader comes in handy. Given the high number of tech companies that try to recruit engineers in Armenia, many engineers tend to prefer working for tech startups and engineering offices that are led by trustworthy leadership (assuming that the company offers a competitive compensation package including salary and stock options). The recruitment process may take longer than expected. Some companies rely on recruiter services, offering generous referral benefits to existing employees.

Pros:

• The company will have full control over project execution, hiring engineers that fit the company culture, and are fully focused and committed to the company's needs, instead of juggling multiple projects.
• The cost may be comparatively lower at scale.

 Cons:

• Finding a smart and connected leader for the operations in Armenia maybe challenging, and the success of this scenario is fully dependent on the experience and qualifications of leadership in Armenia.

Service providers who can help you set up an office in Armenia.

Throughout my work at SmartGateVC I interact with numerous recruitment agencies, tech recruiters and experts who work with tech companies that are already established in Armenia and new startups who are seeking to set up offices in Armenia.

Feel free to reach out to me directly or schedule a call via Linkedin and I will be happy to share advice based on the most recent info I have.

Incorporating a company in Armenia: Legals and Taxes

Setting up a company and the legal requirements for an R&D office in Armenia are among the easiest in the world. You can register your company in 30 minutes or less, and the government provides a number of tax incentives for software companies. We won't go into detail about what type of entity to choose or where to open a bank account, but if you're curious, my colleague Ashot Arzumanyan, Partner at SmartGateVC, has written a comprehensive guide with all the details you might need. You can find the article here.

Typically, if you hire the right accounting and legal team, they can take care of all the legal requirements for you. If you need recommendations for an accounting or legal firm, I'm happy to share my picks with you.

Cost of Hiring an engineering team in Armenia

Now that you know your options when it comes to hiring an engineering team in Armenia it’s time to understand what would be the costs for this. See below the chart summarizing the cost for each engineer:

Average net salary of a developer in Armenia:

• Junior: $580
• Middle: $1528
• Senior: $3061
• Team Lead: $3470

The below chart summarizes the after tax salaries for the Software Engineers in Armenia based on their years of experience. The data is based on the research implemented by a jobs and careers marketplace called Staff.am that has been working with Armenian tech companies for the last few years helping them with recruiting new hires.

If you decide to hire a software development agency instead of hiring a group of engineers on your own, the agency might charge you a small premium to cover their back office expenses.

Other factors to consider:

Time zone differences

The time zone difference between California and Armenia is 11-12 hours depending on the time of the year. This can be both a challenge and an opportunity. On one hand, it may be difficult to accommodate calls between the time zones as both teams will be forced to do calls either early in the morning or late in the evening. On the other hand, the positive side of this is that while the team in one continent is sleeping, the other continent can pick up the load and move it forward, meaning the work never stops.

Knowledge of English language within Armenian engineers

The majority of the tech talent in Armenia will speak and understand English very well. In rare cases, you may come across engineers who understand English but have difficulty speaking it. This may be a challenge, but most of the time it should not make the work impossible.

Final Notes

I hope the article answered your most important question and that you're now in the process of hiring a team inArmenia. The tech industry in Armenia has been booming lately and it's really cool to see both big and small tech companies moving there.

If you still have some unanswered questions, feel free to reach out to me! You can find me on Linkedin.

And even if you don't have any specific questions, don't hesitate to connect with me! Drop me a note on LinkedIn and let me know what you think of the article. We at SmartGateVC and Hero House always appreciate feedback.

‍