As reported by IDEA, Arian Afshar, the CEO of Finova Investment Company, discussed the state of Iran’s startup ecosystem and venture capital investments in the field in a recent interview. He emphasized that the startup ecosystem is not on the path of destruction; rather, it is undergoing a transformation towards becoming more real. He highlighted the need for the startup ecosystem to complete its economic cycle to accelerate the availability of more risk capital, although the pace of progress remains slow.
Afshar pointed out one challenge faced by the Iranian startup ecosystem, which is the decreasing number of teams in comparison to investors. He explained that, for instance, an investment firm aiming to invest in five teams in a year needs to closely examine around 100 teams to select those five for investment. In contrast, globally, for every 100 teams, only one investment is typically made, while in Iran, this number is slightly higher, ranging from 3 to 5 teams per 100.
Instability within the Ecosystem
Regarding economic instability in Iran, Afshar said that both the number of teams seeking investment and the available funds for investors have decreased this year. Consequently, justifying the process of venture capital investment has become a serious challenge. This situation may continue until economic stability is restored.
He also highlighted the issue of brain drain as a new problem. The absence of individuals interested in entrepreneurship has led to reduced investments. Another challenge, according to Afshar, lies with older investors or investment companies that have been in the field for more than five years and have yet to experience an exit.
The Venture Capital Cycle
Afshar described the venture capital cycle as one where investors exit a startup after a period and reinvest some of the gained profits into other teams.
He concluded that these three factors pose significant challenges within the Iranian venture capital investment field, and it seems that these challenges may continue into the next year.
Regarding the current state of startups in the context of the current internet conditions, Afshar stated that they perceive the internet situation as having significant instability. This includes a combination of slow internet, filtering, and the subjective interactions of some institutions with startups. For example, he mentioned instances where a payment service suddenly gets filtered and can’t provide services.
All these factors fall under the shadow of unpredictability, which diminishes hope, predictability, and justification for businesses. This leads to higher investment risk. The lack of funds and investors contributes to a decrease in entrepreneurship. All these elements collectively result in a flawed ecosystem. To achieve stability, there’s a need for predictability, which is currently lacking.
Arian Afshar has recently resumed his role as the CEO of Finova and has also been elected as a member of the board of directors of the Iranian Co-Working Spaces Association.
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