Iran Fara Bourse, the junior equity market, is studying 15 requests from venture capital funds (VC), eight of which are in the final stage, the IFB chief said.
Amir Hamouni said so far 10 VCs are listed on the IFB, the Securities and Exchange News Agency (SENA) reported.
VC is a form of private equity and a financing instrument that investors provide to startup companies and small businesses that are believed to have long-term growth potential, or to companies that have grown quickly and appear poised to continue to expand.
Venture capital generally comes from big investors, investment banks and diverse financial institutions.
VCs in Iran largely operate in fintech, nanotechnology, health and pharmaceuticals. The government is optimistic that giving financial support to firms can help them expand and help curb the country's reliance on oil.
Observers say the bourse is a practical venue for financing startups and reducing their dependence on loans from the lethargic banking industry.
Earlier, the Iran National Innovation Fund, affiliated to the Vice Presidency for Science and Technology, spoke about plans to switch from conventional funding to venture capital investment to support fledgling startups and tech companies.
As per IFB regulations, VCs require 100 billion rials in capital to set up, 10% of which should be put up initially. VCs by nature are not open ended funds and must be disbanded in less than seven years.
Listing Private Equity Funds
Hamouni added that the IFB has issued permits for setting up three private equity funds, joining the two already operating in the capital market. "The funds jointly hold 38 trillion rials ($152 million)," he was quoted as saying.
A PE fund is a pooled investment scheme used for investments in equities. Institutional and retail investors provide the capital for the private equity, and capital can be utilized to fund new technology, expand working capital and bolster balance sheets of the companies.
Among the advantages of private equity are easy access to alternate forms of capital for entrepreneurs and company founders and less stress of quarterly performance. Those advantages are offset by the fact that private equity valuations are not set by market forces.
Regulations allow private equity funds to support public companies not yet listed, those listed on Iran Fara bourse's SME market and businesses that have failed to meet listing eligibility.
