Reading Term Sheets in Teheran

Reading Term Sheets in Teheran

First, a disclaimer.  There are many negative articles to be found about Iran.  This is not going to be one of them.  In contrast, this, you will find to be an unabashed love note.  Iran, as it turns out, is much more interesting than many in the media would have you believe, and includes a highly-educated, diverse market that is on the cusp of breaking open.

A second disclaimer: If I come across as a raving fanboy, consider the setting as I compose this diary entry: I'm lying on my back on an ancient carpet looking up through a cloud of mint-scented shisha smoke to the North Star as a crescent moon hangs in the night sky. 

It is an absolutely silent and still summer night. On the rug next to me lies an assortment of delicious grapes, nuts, and fruits purchased from within the twisted streets of the old bazaar (here pronounced "buzzer") in downtown Teheran.  A cat (not Persian, more of the Tabby variety) is pushing at my knee, angling for a back rub.  I've just spent two days in a mountain canyon setting that reminds me of the better parts of Los Angeles - without the noise and the smog. I've been sampling delicious home-made breads, cheeses, wine, kebabs, salads, and cakes, from a multitude of hosts, non-stop, since we arrived... and my stomach is full to bursting. 

In two hours, we'll be taking off from Iman Khomeini International Airport, a modern airport filled with flat screen TVs and efficient, friendly, uniformed staff that wouldn't look out of place in a European city.  The highway that leads there will be brightly lit, well-paved, and covered in speeding, relatively new Iranian and Chinese-made cars laden with families.  The signs for the exits will be both Arabic and English.  We will pass warehouses being constructed for the about-to-boom market, and jostle for a parking space among the BMWs, Porsches, and Citroens in the airport's multi-story car park.  

Why are we here?  Ostensibly, for the world's biggest Persian Carpet Show.  But the reality is, we're here because this is the second biggest market in the Middle East (the third, if you include Pakistan) and we're curious to know more about it - and because we've heard that a number of people are similarly taking stock of Iran right now, and we want to see with our own eyes what this market is like, and perhaps will be like, when it opens up.

Upon arriving, the issuing of our visa took about 20 minutes and the immigration queues were slow.  But that was the last real inefficiency we experienced.  While driving in from the airport to the exhibition, our host was quick to wave his hand at suggestions that his country was anything but another incredibly large commercial market in need of the kind of goods that consumers seek in every market: cosmetics and beauty products, financial services, better Internet connections, premium cars, more food choices - and fashion.      

Fashion?  Absolutely.  The women of Teheran are extremely fashion-conscious and wear the mandated hijab as a leopard-spotted accessory to a pair of Chanel sunglasses and a Jackie-O do.  Jeans?  Common - but these are knock-offs of Diesel, Levis, Lucky (the sunglasses probably are as well).  Makeup and perfume are in evidence everywhere (FYI - women in the Middle East understand that their perfume must slightly overpower its owner if it is to seduce those nearby - resulting in a wonderful chorus of scents in places like the streets of the old bazaar.)

Internet?  Available - widely.  YouTube, Google, email - all usable on your smartphone, via wifi services in cafes (one market about to break open?  Smartphones?  Android smartphones (and korean manufacturers, such as LG and Samsung) are everywhere - and advertising via billboards staked out across the city and beyond.

Can you spell C-O-F-F-E-E?  This is a 70 million person tea-drinking society that is about to make the switch.  Starbucks should note that Raees Coffee (on Seoul Street) has a lock on their green - and is leading the charge to change.  

Coca-cola?  Manufactured en-masse - but not by The Coca-Cola Company, but an unlicensed factory outside Teheran owned by locals.  Available everywhere under the original logo, Coke need only turn up and file suit and step in behind a working distribution network - making it probably the best-placed western manufactured brand in the market, and all because of copycat producers.

Financial services?  There are zero credit cards in use in Iran.  Trade finance is virtually non-existent compared to markets of comparable size.  Consumer credit rates can go as high as 25% or more.  Debit cards are widely used, but when it comes to financial services, entire industries are waiting to be created here.  In most cases, from scratch.

Persian Carpets?  We must have seen thousands while in Teheran.  Ranging in value from hundreds of dollars to a $600,000 award-winner at the show we visited, to a priceless old carpet shown to us by a dealer surrounded by almost $25 million in inventory.

The selling of carpets, as it turns out, is a slow, social process, involving tea, and much discussion about the people and history of the place in which the carpet was manufactured (my favorite towns of origin?  Qom, and Isfahan).  At which point, the stories started to flow - about an Iran slightly more different than the widely-reported "bastion of evil".  Stories of Jews rescuing Muslims from jail.  Stories of a Muslim family keeping safe a Jewish house after the owners fled the revolution - up until they returned twenty years later (we met the old man in question - a quiet, peaceful person with the kind of humility you'd expect from someone who watered someone else's plants for 20 years, in the hope they might one day return.)

We went for a drive up into the mountains to the West of Teheran, and on the way heard more stories - stories of the growing number of fire-worshippers (Zoroastrians - the original religion of ancient Persia), and Christians.  We witnessed a fight between our driver and a policemen, in which our driver upbraided the policemen for his lack of politeness - and received an apology, a smile, and a lower fine as a result.

And we watched massive power grid pylons disappear into the distance as the sun set into the dust clouds behind rows and rows of Mediterranean-style apartments under construction (no, you can't buy 100% as a foreigner - yet. But there are ways...)       

Then we stopped at the in-laws of our host and ate BBQ wings in their backyard, with rice and flatbread, as the neighbors watched football on their satellite television and cars of laughing teenagers occasionally swept past us down the mountain.   

Maybe you're reading this and thinking, it's propaganda.  Or "he was carefully led around the town inside a cocoon of government-manufactured experiences".  You'd be wrong on both counts - I thought Teheran rocked.  The easy mix of people around the tables we sat and ate at - Kurds, Muslims, Jews, Christians, Sikhs, Zoroastrians, and atheists - spoke of a religious and cultural diversity greater than Lebanon, and a country far different than the rough outlines delivered by the likes of "Argo" and the western media.  The level of discourse at the table (Herodotus, Diogenes, Kafka, anyone?) made it obvious that claims to literacy (82% overall, 97% of people under 30 with zero gender discrepancy) are anything but over-rated. 

The term sheets?  I'm sorry to leave the title hanging there for so long.  The term sheets relate to an investment we're working on in Dubai, not in Teheran.  But I hope one day soon, our capital will be able to be deployed here.  

Because as markets and people go, Iran is more than attractive and has a lot of capacity - and a lot to offer back to the world, post re-integration.     

John Sharp

John is a serial entrepreneur and investor, and the co-founding Partner of Hatcher+, a data-driven, globally-focused venture investment platform based in Singapore. In addition to leading capital raising and deal syndication, he is the visionary and architect behind the Hatcher Stack, the company's venture-oriented business process automation platform. Over the past five years, John has led numerous venture investments in early-stage companies, including ASYX, DocDoc, Dropsuite, Invit, Inzen Studio, SocialCops, ThoughtRiver, and Telr - and syndicated over US$100Mn of additional debt and equity co-investment. IPOs and trade sales in which he was acted for the majority shareholder include Dropsuite (ASX:DSE) and Inzen Studio (ASX:ICI). His M&A work includes the merger of payment leader Telr with Dubai-based Innovate Payments, and the merger of Singapore-based companies DocDoc, and DoctorPage. Prior to co-founding Hatcher, John founded cybersecurity technology leader Authentium (acquired by CYREN in 2010), and acted as a director for global payments aggregator Mozido, and an advisor to Africa-based Gateway Communications, satellite technology developer MDS America, Kuwait-based Internet marketplace Sheeel.com, and Orion Partners, a $2B private equity fund manager based in Hong Kong.

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