What Value Do Venture Capital Investors Actually Create?

In recent years, the number of venture funds, accelerators, and investment institutions in Iran has increased. Yet the quantitative growth of these players does not necessarily mean that an efficient venture capital industry has taken shape.
A more fundamental question remains: can the conventional venture capital model, developed in more mature ecosystems, operate in Iran without significant adaptation?

The traditional VC model is built on several assumptions: a relatively continuous flow of capital, a sufficient number of high-growth companies, and an active market for investor exits. In such environments, investors can focus much of their attention on sourcing opportunities, selecting strong teams, and managing their portfolios.

In Iran, many of these assumptions do not fully hold.

The exit market remains underdeveloped, mergers and acquisitions occur on a limited scale, and public offerings are neither a short nor a reliable path for most innovative companies. At the same time, many startups face challenges that cannot be solved through capital alone. Limited market access, difficulties in hiring experienced talent, weak management structures, regulatory and legal barriers, and the challenge of raising follow-on funding are all common obstacles.

Under these conditions, capital by itself cannot ensure the success of a business. In some cases, injecting money without addressing the company’s underlying problems only postpones the moment when those problems become critical.
This is why the role of a venture capital investor in Iran should extend beyond financing. Investors need to contribute where companies lack the experience, capabilities, or access required to move forward. This may include opening doors to customers and commercial partners, helping recruit senior executives, strengthening management structures, improving corporate governance, preparing the company for its next funding round, and, in some cases, supporting the resolution of legal or regulatory issues.
This is often described as post-investment value creation.

Many funds and investment firms already present themselves as providers of “smart capital” and refer to market development, networking, and strategic support in their communications. The main issue, however, is not whether these claims are made. The issue is how such value creation is defined, evidenced, and measured.
The performance of venture funds is usually assessed through indicators such as the number of investments, the volume of capital deployed, portfolio value, the number of portfolio companies, and the number of exits. These indicators are important, but they are not sufficient to evaluate the quality of an investor’s performance.

A high number of investments does not necessarily mean that the investor has played a meaningful role in the growth of those companies. Likewise, a smaller portfolio should not automatically be interpreted as a sign of weak performance.
One investor may complete many transactions but remain largely inactive after the deal closes. Another may manage a smaller portfolio while playing a continuous role in business development, recruitment, organizational improvement, and follow-on fundraising.

For example, introducing a portfolio company to a major customer may materially change its revenue trajectory. Recruiting the right senior executive may resolve a major operational weakness. Supporting commercial negotiations, helping refine the business model, or assisting with the next funding round may also have a decisive impact on the company’s survival and growth.
The economic value of these interventions can sometimes exceed the amount of the original investment. Yet they are rarely recorded systematically and usually have no clear place in fund performance assessments.
As a result, value creation often remains a broad and unverified claim, making it difficult to distinguish investors that actively support growth from those whose role is largely limited to providing capital and attending board meetings.
To address this gap, financial metrics should be complemented by a set of operational indicators.

These could include the number of business opportunities created for portfolio companies, commercial contracts resulting from the investor’s direct involvement, support in recruiting key employees, strategic partnerships established, new sales channels developed, improvements in reporting and corporate governance, and the success of portfolio companies in raising subsequent rounds of funding.
It may also be useful to assess how much time and specialist support an investor dedicates after the investment, whether a clear development plan exists for each company, and which specific interventions have produced measurable results.
Such an assessment does not need to be overly complex. Even a simple and standardized framework could provide a much clearer view of post-investment performance.

Of course, attributing a company’s results to one investor is not always straightforward. Startup success or failure is shaped by multiple factors, including the founding team, market conditions, management decisions, the broader economic environment, and the role of other shareholders.

However, the difficulty of attribution should not become a reason to avoid measurement altogether. The type of investor involvement, the extent of participation, and the outcomes of specific actions can still be documented. Over time, this can produce a more reliable picture of the investor’s actual contribution.
For this discussion to move beyond theory, the measurement of investor value creation should become part of the ecosystem’s formal reporting structure.
Iran’s Annual Financing Report for the Technology and Innovation Ecosystem could provide an appropriate starting point.
At present, most of the information in such reports focuses on financing volumes, the number of transactions, financial instruments, and the composition of market participants. These data are essential for understanding the flow of capital across the ecosystem, but they do not provide a complete view of investment quality.

Adding a dedicated section on post-investment performance would make it possible to assess not only how much capital entered companies, but also what kind of support accompanied that capital and what results followed.
The report could, for example, include indicators such as the number of commercial opportunities created for portfolio companies, contracts developed with the investor’s involvement, participation in market development, recruitment of key talent, strategic partnerships, improvements in corporate governance, and successful follow-on funding rounds.
Collecting this information will not be easy in the early stages. Much of it is not currently recorded in a consistent way, there is no widely accepted definition of investor value creation, and some investors may be reluctant to disclose detailed information about their portfolio activities.

Still, the process can begin with a limited set of indicators and a basic reporting framework that is improved over time. The goal is not to create a perfect evaluation system from the outset. The goal is to establish a common language for assessing what investors actually contribute after deploying capital.
Publishing these indicators could improve transparency and help funds compare their performance with other market participants. It could also encourage investment firms to strengthen their post-investment support capabilities.
For founders, such information would offer a clearer basis for choosing an investor. Rather than evaluating investors solely on the amount of capital they provide, entrepreneurs could assess their proven ability to support business development, recruitment, strategic partnerships, governance, and future fundraising.

The issue is also relevant to policymakers and institutions that allocate capital to venture funds. When public resources, government-backed financing, or the capital of large institutions is directed toward these funds, performance assessment should not be limited to the amount of money raised or deployed.

It should also examine what effect those resources have had on the growth, revenue, structure, and long-term resilience of portfolio companies.
In Iran’s venture capital ecosystem, access to capital remains important, but capital alone does not create a sustainable competitive advantage.
In many cases, companies are constrained not only by limited liquidity, but also by weak market access, inexperienced management teams, inadequate professional networks, regulatory barriers, and an inability to navigate the next stage of growth.

Investors capable of addressing these gaps are likely to play a more important role in the future. Their advantage will not simply come from having more capital, but from being able to increase the probability of success across their portfolios.
The key question for Iran’s venture capital industry, therefore, is no longer only how much capital has entered the technology and innovation ecosystem.

The more important question is what changed in the trajectory of these companies after that capital was invested.
Introducing value-creation indicators into the Annual Financing Report could be a practical first step toward answering that question and clarifying the difference between a financial backer and a genuine venture capital investor.