Iran Fara Bourse, the over-the-counter exchange, said it has plans to create two new markets this year, including one for knowledge-based enterprises.
Mohammad Ali Shirazi, the CEO, said that the development of a knowledge-based economy is no longer a convenience but a compulsion, the IFB website quoted him as saying on Sunday.
Referring to the missing link in the chain of converting knowledge into wealth, Shirazi said, "Financing knowledge-based companies is a missing link, and entrepreneurs in this sector have had real concern about securing funding and venture capital for their projects.
"The new market can [help] fill that gap.”
He emphasized the diverse range of financial tools, institutions, and markets available to Iran Fara Bourse, saying that these features can create an effective environment for the expansion of knowledge-based companies and their funding.
The exchange has two main markets, namely the first and second markets, which are specific to companies with acceptance capabilities. "Currently, there are more than 170 companies listed in these markets, 14 of which are knowledge-based," he noted.
The measure comes as the government is pushing for the expansion of knowledge-based firms and effective innovation. Iran has been striving to promote the knowledge-based economy and boost innovation and entrepreneurship in recent years.
The country aims to increase the share of knowledge-based products in the economy and promote technology-based startups.
IFB was established in 2009 as an over-the-counter market for securities and other financial instruments. The exchange is regulated by the Securities and Exchange Organization. It is a multi-commodity center trading in a wide range of items, namely securities, including equity, debt, and Islamic instruments.
The move to establish a new market for knowledge-based companies is a positive development for IFB and the country's economy. It will provide a platform for innovative startups to secure funding and grow, as well as attracting new investments.
Per the rules, IFB can accept knowledge-based companies in both the first and second markets. In case of non-compliance with acceptance conditions, the over-the-counter market can serve as a suitable tool for this sector.
Tap30, a ride hailing app, went public last year. It was announced earlier that the next will be Café Bazaar, Iran’s largest Android app store and Filimo, a popular video-on-demand platform. It has been reported that almost 30 startups have applied to join the share market,
Iran has an estimated 7,000 knowledge-based companies and 1,600 startups. The government has welcomed the startups’ entry in the bourse and says it will support such firms given their inherent visible role in the economy.
Stock market officials earlier said that the 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 soon be in place.
Under the framework, startups will be required to sell shares only to professional investors, namely mutual funds, instead of the public via the popularly used book building method.
VCs and PEs
Currently, there are 21 venture capital and private equity funds active in IFB with a total investment of 3.4 trillion rials ($80 million), Shirazi said. "In addition, 18 platforms for crowdfunding, which provide a tool for financing knowledge-based companies, have been licensed by the IFB."
"We ended last year with the acceptance of a venture capital fund worth 500 billion rials ($12 million) and started the new year with the acceptance of a knowledge-based company in the food sector, which we hope will be a prelude to a good year for improving ties with knowledge-based companies."
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 private equity (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.
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.
Shirazi said that real estate and property funds, equity funds, land and building funds, and fixed-rate income funds are all active in the exchange, with some related to knowledge-based companies.
