According to Karang, the event “Challenges of the Capital Raising Process” was held at the University of Science and Culture. The event was attended by Meysam Zargarpour, Capital Raising Strategist and Business Development Consultant; Mohammad Reza Masoumi, Investment Manager of Golrang Ventures; Taha Razavi, CEO of the “Shab” website; and Seyyed Mohammad Reza Farhi, Co-founder of Bimbazar. The panel of this event was moderated by Meysam Soleimani, Editor-in-Chief of Karang Weekly.
A good team is the reason for investment.
Soleimani raised the topic of investment at the beginning of the panel and asked the participants what was the most important issue for starting to invest in a startup?
Mohammad Reza Masoumi, investment manager of Golrang Ventures, first referred to the two concepts of “jockey” and “horse” in business literature in response to this question. According to him, a jockey is a symbol of the founder in business literature and its characteristics include agility and flexibility. Explaining the “jockey” business model, Masoumi stated that they usually receive a small amount at the beginning and if they win, they receive the entire amount, which is what they have in common with funders.
Speaking about the concept, or in other words, another metaphor in business literature called “Horse,” he said that he looks at the different dimensions of a business model.
The investment manager of Golrang Ventures continued: “In the world, the concept of a jockey comes before a horse, because usually a good founder has the ability to launch a good business.”
He finally made the point that senior management is a business that matters, because a good startup must have a good team and not necessarily a good founder.
Soleimani went on to raise the issue that sometimes a startup idea is good, but the startup does not have the ability to implement and execute its idea. Can an investor enter at this stage, or does the investor lose interest in the entire project when they see the startup’s status at this stage?
In response to this question, Masoumi stated bluntly that such plans are usually shelved. He went on to explain: “At this stage, of course, it is also considered that the strategic business model has the possibility of investment with a change in management, which of course is also true for startups that have reached a certain level of maturity.”
He also made the point that for investors, the founder, in other words, his reputation, is important first, and then the business model itself; but ultimately, the combination of the business model and the founder motivates the investor to invest.
The investor must be famous.
Meysam Soleimani then raised the issue of investment from the perspective of the investor and asked Razavi, CEO of the Shab website: “When accepting an investment, do you only pay attention to the financial aspect or do you also consider another component?”
Razavi replied: “Of course, the financial aspect is very important, but the reality is that for a startup, there is a clear roadmap and the component that is missing is money, which is what offers are heard at this stage. In comparison, for a business, the reputation of the investor is very important. We also try to predict the future that awaits us after the investment. Ultimately, the combination of reputation and portfolio is very important to us.”
How should an investor behave in a crisis?
The Shab business, as a tourism business, was facing some damage during the Corona era. Soleimani raised this issue with Razavi, the CEO of the business, and asked him: “What were investors’ expectations of Shab during that time?”
Razavi replied: “Retaining human resources is of great importance to Shab, and for this reason, the business did not make any layoffs for six months after the outbreak of the coronavirus. However, after conducting the necessary investigations, we began making layoffs so that we could best preserve our resources.”
Corona was one of the critical cases for businesses. But in general, businesses enter a crisis phase in a situation. Soleimani, raising the issue of the crisis, asked about the initial action of investors for such times.
Capital raising strategist Meysam Zargarpour said: “The answer to this question is complex and depends on the circumstances in which the investment takes place, but two answers can be given; the first answer is given according to whether the investor’s approach to his investment was purely economic or did he also have a strategic view of his investment? In other words, was the investor’s view a “VC” or a “CVC”. Considering this, the investor will react differently. If the approach is strategic, the CVC investor’s reaction to the financial injection will be greater during the crisis. Because he recognizes this situation as the weakness of competitors and at this time can take the market from competitors. Or the business has a high strategic aspect and he does not want his business to disappear and as a result continues the financial injection.”
During the discussion, Soleimani raised the issue of the uncertainty of the dimensions and timing of the crisis, saying: “How much can an issue like Corona, for which no outlook can be considered, affect the investment discussion?”
Zargarpour responded: “The investment business is the business of buying and selling dreams. In other words, a founder raises the issue that he has partially completed the work and needs capital to continue working. The investor also pays attention to a set of items to start investing. These items include the vision, motivation and feeling of the founder towards the business, the quality of the team and, of course, the numbers and figures that exist from the team. The quality of belief in the vision was of great importance to investors during the Corona era. In other words, the resilience of the business and its value are important for the continuation of an investor’s work.”
In concluding his remarks, Zargarpour likened the issue of investment to a marriage contract and said, “Ultimately, it is the value of a business that compels the investor to continue investing in critical situations.”
The ofood is not a dream.
An oral understanding is a discussion that can be formed between the investor and the business members during the period of stability of a business. Of course, a written form of understanding and contract, as is known, has a more legal and solid form. Soleimani raised the issue of oral and written understandings between investors and the business team and asked Zargarpour’s opinion on this matter.
Zargarpour first pointed out that, in principle, oral and written agreements should not differ, but in practice they will be different because an oral agreement is open to interpretation, but if it is in writing, it will have a clearer meaning.
The panel discussion continued with the topic of business dreams and the boundary between the rational and irrational nature of these dreams. In response to this issue, Farhi stated that one must understand the difference between a business that knows its idea will not be implemented and a business that believes in its idea, but ultimately that idea is not feasible.
Masoumi also pointed out that since we entered B2C businesses, the amount of dream selling has decreased, and even investors are somewhat disappointed with the dream selling of businesses.
Golrang Investment Group has recently invested in the service “Ofood“. “Ofood” is an online food ordering service and is preparing itself to compete with the big player in this field, Snapfood.
Soleimani asked Masoumi: “Is launching an online food ordering startup like “Efood” and claiming to compete with Snapfood a dream or a reality?”
Masoumi said: “It is reality and not just a dream. Of course, it also follows a different path. There is a time when a team takes the lead in investing and there is a time when the investment group itself starts to create a team; if the second situation is created, the investing organization considers benefits and, in other words, has seen the circles. If the person who is dreaming also sees the whole chain, then definitely good things will happen.”
Continuing Masoumi’s speech, Soleimani asked him: “What market do you intend to reach by buying a business like Alopik and launching Efod?”
Masoumi replied: “The point is that we have previously been active in the FMCG market. Currently, a large number of orders are being received through the Ekala ordering system called “Zap,” and it has the second largest market share after Snap.”
He also used the argument of business development strategy in explaining the purchase of Alopeik, explaining that Alopeek and Zap’s activities will run in parallel for the time being, because the needs of the two are distinct from each other.
The actual investment number is two to three times the announced numbers.
During part of the panel, there was a question and answer session between the attendees and the participants. In response to a question from one of the attendees about whether there was an exact number of investments regarding successful and failed investments, Meysam Zargarpour said: “The Association of Venture Capitalists publishes an annual report on this matter, and this year’s figure was around $50 million. But the point is that these numbers are estimates; in the sense that the groups that were willing to announce their investment numbers, and most of them were members of the association, were also members.”
Regarding the accuracy of these numbers, he said: “They are being verified, but based on my estimate, the real number is between two and three times the announced number, because members outside the association, in addition to some other investments, do not announce their numbers. Of course, investment failures are not counted in these numbers, but ecosystem members are aware of these failures.”
Masoumi, investment manager at Golrang Ventures, continued Zargarpour’s remarks, saying: “The number is around $50 million, but if it is higher, it will seem like a joke. For example, Turkey, which of course does not include the Trendol report, has announced its investment figure of $2 billion.”
He further explained: “The reality is that we don’t really have investment in our country, even the venture capital investments that are made in Turkey are mainly done by foreign VCs. In the past few years, we have witnessed that VCs in Iran have lacked teams, and the existing teams, on the other hand, lack capital.”
In response to the question of how much the entry of investment groups can change the venture capital generation and ultimately break the investment deadlock, Masoumi said: “Regarding the investment deadlock, I must explain that the volume of venture capital in the world has dropped by 30 to 40 percent. What VCs are doing now in the world is survival. This is while Iranian startups have been in the survival phase for about six years. Exiting the elite is a way to continue surviving.”
He continued: “Given the inflation in the country, foreign VC investment will not be possible either. The lack of investment for foreign businesses has been happening for about a year, while Iranian businesses have been struggling with this issue for about five years, due to inflation and lack of connection with foreign investors.”
The investment manager of Golrang Ventures said: “The discussion about investments by industrial groups is that they do a lot of calculations before investing, and the reason is that they have a traditional business in themselves that has reliable profits for them. In general, the entry of industrial groups is positive for investment. Of course, it will definitely be difficult to put a startup and an industrial group that has a traditional nature together, and this is where the main challenge will arise.”
In another part of the Q&A, one of the attendees asked: “Regarding startups that are in the basic stage, investment is not happening like before, and industry groups and other investors are choosing startups that have reached maturity, and that is why we are not witnessing creativity among businesses. What is the reason for investors choosing mature startups?”
Masoumi, investment manager at Golrang Ventures, said in response to this question: “The reality is that the level of risk in grassroots startups increases, and this reduces the incentive to invest.”
Asked whether Golrang Ventures is willing to adopt an investment system like Sarava, he said: “Yes. Right now, some of the teams we see are at their most basic level.”
Masoumi also said in response to whether or not investments have been made in these teams: “Now we are moving two teams towards finalization, which were in their most superficial state at the beginning of the cooperation.”
Explaining the important parameters for investment, he explained: “We consider two issues regarding teams that are in the early stages; one is that the team in question can complete our value chain and second is that they are focused on a relatively new area. We also cooperate with teams at the early stage by considering these two parameters. Their areas of work are mostly in the areas of logistics, artificial intelligence and industrial raw materials.”
Sarava did not fail; it just stopped.
Sarava Venture Capital is one of the first investment companies to invest in large companies such as Digikala. The events surrounding this investment company in recent months have caused some instability in the company. For example, the events that happened to Azadi Innovation Factory; Azadi Innovation Factory was one of Sarava’s investments in the startup ecosystem, which is now coming to an end with the property being requested by its owner.
ناگفته نماند که سرآوا یکی از اصلیترین توسعهدهندگان و حتی تشکیلدهندگان اکوسیستم استارتاپی ایران در دهه ۹۰ است. به اعتقاد بسیاری، اگر سرمایهگذاریهای سرآوا نبود، دوران طلایی اکوسیستم استارتاپی در آن دهه شکل نمیگرفت.
میثم سلیمانی از شرکتکنندگان پنل پرسید: «با توجه به اتفاقات اخیر سرآوا، آیا در حال حاضر تجربه این شرکت شکست خورده یا به نتیجه رسیده است؟
“The reality is that we cannot talk about the failure or success of the Sarava experiment,” said Meysam Zargarpour. “Because this is not a race with a finish line, but more like a relay race. Sarava began its activity with the early years of Rouhani’s presidency and the JCPOA, and ultimately an atmosphere of hope; therefore, it is not correct to decide whether the Sarava experiment was a success or a failure.”
He continued: “We also cannot judge the process that led to a decision because we do not know the factors that influenced it. But we can examine the results and consequences of a decision. Considering Sarava’s more than 10 years of activity, we can evaluate the company’s activities positively overall. It is worth mentioning that if it were not for Sarava’s boldness at the time of its start, we would not be in the current situation and we would not even be able to talk about our investment gap with other countries. Personally, despite my criticism of Sarava’s methods, I evaluate the company’s activities as positive and progressive overall.”
Continuing the previous question, Soleimani asked Razavi, CEO of Shab Business: “Given the current conditions, can businesses start operating with your business model?”
Razavi responded: “Regarding responding to old needs with innovative methods and quickly preparing the team to face the market, there were methods in the world that entered Iran with a slight delay by Sarava and had a positive impact on the lives of all Iranians that cannot be denied. Regarding the fact that people can enter the market with the “Shab” business model and the entire business model at the time of the start of “Shab” activity, I must say that it is 100% possible. Because our movement is based on innovation and innovation is not limited, and it is enough to focus only on the customer.”
Soleimani asked Farhi, co-founder of Bhimbazaar: “Can we see another sweet decade for startups like the 90s?”
Farhi replied: “The experience of the 1990s was really sweet. I have never worked with Sarava in any capacity before, but Sarava deserves a lot of appreciation. One of the reasons is that when a country is completely stable, foreign investment is possible. When it is less stable, it receives foreign capital in the construction sector, and in the most unstable form, it can receive capital in the energy sector; therefore, the $200 million that Sarava brought into the country in the field of venture capital is equivalent to $20 to $30 billion in the energy sector, so Sarava deserves a lot of encouragement.”
He further explained: “It cannot be said that Sarava has failed, because no one could have predicted today’s conditions. As a result, I do not see Sarava’s activities as failed, but rather as halted.”
Industry groups cannot replace large investors.
In response to the question of whether investors like Golrang can create hope for the ecosystem, Masoumi said: “The answer is no. The reality is that our economic reserves are different, and given the method of industrial groups, their failure rate is probably higher, because they unconsciously compare their investments with their main business. In general, given our current economic reserves, the industrial group probably cannot untie many knots of work. In addition, we are currently in a situation of inflationary stagnation and this stagnation needs to be reduced. On the other hand, we are also facing a high rate of exit, or immigration. Ultimately, a return to the sweet years of the 1990s will not be possible.”
Soleimani finally asked the panel participants: “Do you predict inflation conditions in the future in a way that will provide a more favorable situation for businesses?”
Masoumi, investment manager at Golrang Ventures, said in response to this question: “We have set our work plans based on inflation of over 40 percent in the next five years and we will proceed with the current reservations.”
