Iran’s stock market is expanding its role in financing startups and knowledge-based companies, managing director of Iran Fara Bourse, the junior equity market, said.
Despite difficulties in listing startups and knowledge-based companies, 30 firms are being financed through IFB and the Tehran Stock Exchange, according to Amir Hamouni.
"Knowledge-based listed companies hold shares worth 130 trillion rials [$520 million]," he told a state TV, the IFB website reported.
Hamouni pointed to the increasing contribution of venture capital (VC) and private equity (PE) funds in raising money for startups, saying that so far there are 10 VCs operating in the IFB and six more are on the waiting list.
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 areas such as fintech, nanotechnology, health and pharmaceuticals.
IFB has also issued permits for setting up six PEs, which Hamouni said are totally worth 30 trillion rials ($120 million).
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. Regulations allow private equity funds to support companies not yet listed and those businesses that have failed to meet listing eligibility, such as most startups.
Obstacles on the Way
Startups have been face major hurdles in entering the stock market. One key problem is that their assets cannot be identified and assessed precisely, according to the IFB boss.
Unlike other listed companies that own tangible assets, startups are largely intellectual property and brand names, which apparently cannot be easily assessed under normal valuation procedures.
However, it appears that startups are gradually overcoming the hurdles. "In terms of meeting IFB listing norms, startups have made improvement in the past three years," Hamouni said.
He added that many applicant companies have met the requirements related to financial performance and disclosure of business information "but [asset] valuation is still a key stumbling block.”
ICT Minister Mohammad Javad Azari Jahromi earlier classified IT companies under two categories: those under the telecom sector and startups, noting that the former are already listed like the Iran Telecommunication Company and Mobile Telecommunication Company of Iran.
Alireza Daliri, an official with the Vice Presidency for Science and Technology, said earlier that five startups and knowledge-based companies are in the process of listing.
The Rouhani administration has often publicly said it supports the startups given their gradually increasing role in the economy. Support for tech firms are aimed, among other things, at curbing Iran's dependence on oil export and developing the technology ecosystem.
