Capital in the ecosystem is more than a good startup

Activists in the field of startup investment believe that the presence of teams that are well capitalized is more important than the lack of capital in this market

According to Iran digital economy annotation, those present at the “Financial Instruments in Technology Business” meeting believe that startup teams should identify the investment risks rather than focus on their idea and prepare themselves for the optimal advancement of the idea. They had conflicting views on crowdfunding as a method of raising capital.

Mehdi Motaghian, CEO of Boomrang Company and Secretary of Panel, mentioned financing as the most important challenge for companies and said: In the last 12 years in the field of technology, financing through loans has become very easy. In 1991, they begged to give money to the collections, but instead of attracting investors, we got facilities. The weakest VC funds are in the stock market, and one of the reasons is the issue of facilities.

Mohammad Kolahi, director of credit affairs and commercialization of the New Technologies Development Fund, explained about the importance of the timing of attracting capital in the life cycle of startups, it is important in which part of the life cycle the company takes facilities.

The company may take the facility early and lose out because it has not reached that maturity. Early stage companies need accelerator support but too early will lead to failure. Government support facilities are also useful for turning an idea into a product, but at times, if the product does not find its place in the market, it can be detrimental to the collection.

Rejecting the excessive habituation of companies to government support, he said: some knowledge-based companies follow support literature for years, and even at higher stages, they ask for grants from the Vice-Chancellor of Science. In these stages, companies should look for other financing methods, such as financial markets, rather than seeking help from the government.

Venture capital does not meet demand

Hossein Saberi, a startup activist and adviser to the head of Pardis Technology Park, also said in this panel: With the establishment of the innovation fund, a regulatory body for the funds was created. The method of injecting resources into the fund was such that it went mostly towards loans and guarantees. Unfortunately, there is very little venture capital infrastructure in this fund. Co-investment is done, but it is small compared to the volume of demand. In the country, we have about 17,000 knowledge-based companies that the existing financial institutions cannot meet their demand.

He added: In my opinion, crowdfunding institutions can overshadow all these tools in the future. The exchange has given 25 licenses to companies, and non-exchange entities can also enter this field.

According to him, the main problem of venture capital in the country is the lack of venture capital.

Mohammadreza Masoumi, investment manager of Golrang Ventures, while pointing out that they are a thousand billion CVC, said: In different periods, I think that from round A onwards, the only concern of the business is market development and receiving money for scaling. There are a large number of startups that have remained at one stage since 2016, they have not been able to enter the capital market or attract other funds.

Regarding the importance of macroeconomic variables, he said: Last year, the Silicon Valley Bank went bankrupt because America had 6% inflation for one year and the investment risk had increased. Now imagine that we have 40% inflation in Iran for 5 years. In this situation, it is reasonable not to make risky investments.

Farzaneh Abolfazl, Parsian Bank’s chief digital transformation consultant and chairman of the board of directors of Lotus Piruzi innovators, also said about the importance of banks’ presence in the investment field: the reality is that despite all the tools, the logic of the market floor gives its own answer.

If I build a business that I will eventually sell, the investor will recognize it. In this situation, no matter how many new tools we create, the logic of the market must still respond. In any industry, the new technologies that enter cannot eliminate the old ones. The same is true of legacy financial instruments. The position of banks cannot be limited.

She continued in this regard: All funds do not have a volume compared to the banking system. So banks cannot be removed.

Does crowdfunding work?

Mohammad Kolahi also said about the role of crowdfunding platforms: crowdfunding platforms work for some companies, but not for some companies. Somewhere, the investor does not want to put his money in the bank and just wants to preserve the value of his money. If this money comes in property and currency, it leads to inflation, and on the other hand, there are some collections that can make money.

When a company knows how to create more added value from the conventional profit margins of the market and cannot use conventional financing methods for any reason, it can turn to crowdfunding tools. None of the financing tools are bad and they work.

Saberi, advisor to the head of Pardis Technology Park, also defended crowdfunding and said: Crowdfunding numbers have no effect on inflation. Many businesses sometimes have little opportunity for financing and reach their goal in this way. A company said that it had requested to register an order for several months and the central bank did not approve it.

Now it has been approved and I have one month to finance. This company has 75% profit and is ready to give 50% to an investor. Crowdfunding isn’t good for everyone, but it can be good for some.

The investment manager of Golrang Ventures also said: Crowdfunding is not attractive to me because it has high rates. The bank gives 25%, but the credit card gives 50%. In my opinion, when startups have passed a level of maturity, they need market development. If it is a business that takes a combination of smart money and cash capital, it can be a driving engine for the jump.

Of course, he further explained that this group has no problem with this method of financing: Crowdfunding does not affect CVC. We have all financing tools from the beginning of the startup life cycle to the end. There is so little money in the country that I don’t think any of these tools are competitors.

Parsian Bank consultant Abolfazl also predicted that crowdfunding will have a brighter future: I agree that crowd is suitable for short-term work now, but I think the development of crowdfunding is the next hyip of the financial market. Previously, the cost of collecting small capital was high, but now technology has reduced this cost and crowdfunding is justified. Asset-based crowdfunding can be even more attractive.

The participants in this panel answered the question of the attached reporter about what is the main reason for the decrease in investment in recent years. In this regard, Saberi pointed to the problem of teams and said: Those who bring ideas and value them do not understand that they and the team are the most important. Ideas abound, but teams must be able to develop them. Investment skills in the country need to evolve.