Startups are focusing more on the capital market for funds using assorted financing instruments at the Iran Fara Bourse, the IFB deputy for financial institutions said.
Most startups in Iran are not directly listed with the equity market and are largely funded by crowd funding projects, venture capital funds (VC) and private equity (PE) funds.
“VCs and crowd funding platforms pooled resources for 16 startups in the past month,” Aref Aliqolipour was quoted as saying by the IFB website.
VC is a funding instrument that investors provide to startups and small businesses that are believed to have long-term growth potential, or to companies that have grown and are well-placed 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.
Total funding to startups exceeded more than 1 trillion rials ($3.5 million) in the said month, Aliqolipour said, adding that the IFB is in the process of expanding funding platforms to help meet the needs of more startups.
Presently there are 14 VCs and 4 PE funds operating in the capital market and the official said two more PEs have received the agreement in principle to join the IFB.
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 improve balance sheets.
Regulations allow private equity funds to support companies not yet listed and those that have been unable to meet listing eligibility – as is the case with most startups.
The government has welcomed the entry of startups into the bourse and has said it will extend them support in light of the gradually increasing role and significance of startups in the economy.
