Fifteen platforms are licensed to handle crowdfunding operations at the IFB…More than 2,470 individuals have made investments via crowdfunding in one year," head of the Iran Fara Bourse (IFB) Meysam Fadaei said.
Fadaei was speaking at the International Exhibition on Investment Opportunities, Kish Invex 2022, held in Kish Island in the Persian Gulf, the IFB website reported.
“Iran’s crowdfunding market reached 3.2 trillion rials ($9.8 million) during the past twelve months," he said.
Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new businesses. It provides easy accessibility of vast networks of people through social media and websites to bring investors and entrepreneurs together with the potential of promoting entrepreneurship by expanding the investor pool.
Rules for crowdfunding in Iran were announced in August 2018.
IFB officials earlier said crowdfunding got attention since inception, noting that several companies applied to launch a crowdfunding platform.
Fadaei elaborated on the contribution of venture capital funds and private equity funds in financing knowledge-based firms and startups saying that 3 trillion rials ($9.2m) was raised via VCs and PEs last year.
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 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.
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.
Regulations allow private equity funds to support companies not yet listed and those that have failed to meet listing eligibility, such as startups.
Currently, there are 15 VCs and five PEs in Iran's capital market. As per IFB regulations, 100 billion rials are required to set up a VC, 10% of which should be put up initially. These funds by nature are not open-ended funds and must be disbanded within seven years.
Regulatory Support
According to the IFB chief, it is planning to redesign the market for SMEs so that it can host loss-making companies or those not eligible for joining the main IFB list.
"This should help startups with diverse functions list easily with the IFB."
Stock market officials say regulatory barriers for such firms have been removed and new guidelines for listing startups are being finalized.
Startups can now go public under special conditions. Special procedures, different from normal companies with clearly defined assets and financial structures, will be announced soon for startups.
Under the framework, startups will be required to sell shares only to professional investors, namely mutual funds, instead of the public via the popular book building method.
Iran has an estimated 7,000 knowledge-based companies and 1,600 startups. The government has welcomed startups’ entry in the bourse and says it will support such firms given their gradually increasing role in the economy.
By introducing ways of crowdfunding, easing regulations and promoting transparency, several companies in the digital economy are expected to be able to list in the near future.
