Pricing Risk in Frontier Markets: Currency, Country and Exit Risk

7 min read

Dariia VasylievaFounder & CEO, GETVISION

A disciplined early-stage investor in a frontier market does not apply one vague emerging-market discount. They price four separate risks: currency, country, exit and key-person. Each one lands in a different place in the deal: the valuation, the terms or the structure.

That matters to founders because each risk can be reduced on its own. A company that earns in dollars, holds its shares through a well-chosen holding company and has a team beyond the founder can be priced very differently from a company with the same revenue and none of those features.

This is the framework GETVISION uses when we look at early-stage companies from Kyrgyzstan to the wider region. It pairs with our guide on why your comparable set is wrong, which covers the valuation methods themselves.

Key takeaways

Replace the blanket discount with four separate risks: currency, country, exit and key-person.
Public markets already price country risk, and Damodaran's January 2026 data puts Kyrgyzstan's total equity risk premium at 12.64% against 4.46% for the United States.
Currency risk is easy to underestimate, because the investor measures returns in dollars while the company often earns in local currency.
Each risk shows up in valuation, terms or structure, and founders negotiate better when they know which one is driving the price.
The strongest mitigants are hard-currency revenue, a sound holding structure, credible co-investors and a team that does not depend on one person.

Why one discount hides four risks

A single discount tells a founder nothing about what to fix. Breaking risk into parts does. It also explains why two companies in the same country can raise on very different terms.

Public markets offer a reference point. Aswath Damodaran of NYU Stern publishes country risk premiums built from sovereign ratings and market data. His January 2026 figures show how much extra return equity investors demand in each market:

Country	Moody's rating	Country risk premium	Total equity risk premium
United States	Aa1	0.23%	4.46%
Kazakhstan	Baa1	2.07%	6.30%
Uzbekistan	Ba3	4.66%	8.89%
Kyrgyzstan	B3	8.41%	12.64%

These are public-equity numbers, not venture numbers, and nobody should plug them straight into a startup valuation. They show direction and scale. An investor in Kyrgyzstan starts with a higher required return before looking at the company at all.

How risk enters an early-stage price

Early-stage investors rarely use a discount rate. Most work with some version of the venture capital method: estimate what the company could be worth at exit, divide by the return multiple the investor needs, and work back to a price today. Each of the four risks changes one input.

Currency risk lowers the expected exit value once it is converted into dollars.
Exit risk lengthens the expected holding period, so a higher multiple is needed to earn the same annual return.
Country risk raises the chance of a total loss, which the investor covers by asking more of the companies that succeed.
Key-person risk does the same at the level of a single company, and usually shows up in terms rather than price.

Knowing which input is driving the number tells a founder where to push back, and what evidence to bring.

The question is not whether a market is risky. It is which risk you are being charged for.

Risk 1: currency

How it shows up: The investor measures returns in dollars or euros. If the company earns in local currency, a devaluation shrinks the dollar value of everything, including the eventual exit. This has happened in the region. On September 5, 2017, Uzbekistan's central bank moved the official rate from 4,210 to 8,100 som per dollar, roughly halving the som's value, as RFE/RL reported. In Kazakhstan, the tenge fell about 23% on August 20, 2015, the day it moved to a free float, according to Tengrinews.

Where it lands in the deal: A lower valuation, a higher required multiple, or an instrument denominated in hard currency.

Mitigation: Revenue in hard currency through exports or foreign customers, pricing linked to the dollar where local law allows it, costs that move with revenue, and cash held in a stable currency. Rules on foreign-currency pricing and accounts differ by country, so founders should confirm them with local counsel.

Risk 2: country, political and regulatory

How it shows up: A change in law, license, tax regime or special economic zone that alters the business overnight. The extreme case in the region is Kumtor: Kyrgyzstan took control of the gold mine from Canada's Centerra Gold in 2021, and a 2022 settlement ended with Centerra leaving the country. Startups rarely face anything that dramatic, but they do face changing tech-park rules, new licensing requirements and uneven enforcement.

Where it lands in the deal: Stronger protective provisions, governing law outside the country, and a preference for a holding company abroad.

Mitigation: A holding company in a jurisdiction with predictable courts, contracts under a neutral governing law with arbitration, and co-investors that governments listen to, such as development finance institutions. In Kazakhstan, the Astana International Financial Centre offers a court and an arbitration center based on English common law. For larger projects, political risk insurance from MIGA, the World Bank Group's guarantee agency, can cover transfer restrictions, expropriation and war, though MIGA states that its currency cover does not protect against depreciation. We compare holding structures in how to structure an investment in Central Asia.

Risk 3: liquidity and exit

How it shows up: Few local acquirers, thin stock exchanges and long holding periods. A company can do everything right and still have no buyer when its investors need one.

Where it lands in the deal: Lower entry valuations, longer assumed holding periods, and terms such as drag-along and tag-along rights, rights of first refusal and liquidation preferences.

Mitigation: A credible map of buyers from the first round, clean records that make diligence quick, and a structure a foreign buyer can acquire without restructuring first. Our guide to the emerging-markets exit problem covers this in full.

Risk 4: key person

How it shows up: In a small company, the founder often holds the customer relationships, the licenses, the bank signatory rights and the strategy. If that person leaves or cannot work, the company may not survive.

Where it lands in the deal: Founder vesting, key-person clauses and, in some deals, a requirement for key-person insurance.

Mitigation: A second layer of management, documented processes, shared signatory rights and contracts held by the company rather than by a person.

The risk pricing table

Here is the full set in one view, including two risks that sit underneath the other four.

Risk	Signal investors look for	Mitigation founders control
Currency	Share of revenue in hard currency	Export revenue, dollar-linked pricing, natural hedges
Political and regulatory	Dependence on one license or regime	Holdco, neutral governing law, DFI co-investors
Liquidity and exit	Named buyers, active acquirers in the sector	Buyer map, clean records, acquirable structure
Key person	Who holds clients, licenses and bank access	Second-layer team, shared signatories
Legal enforceability	Where disputes would be heard	Arbitration clause, recognized courts
Governance	Board minutes, approvals, audited accounts	Regular board cadence, annual audit

Before the next round, a founder can usually lower the price of risk without changing the business model:

Report revenue by currency, and show the trend toward hard-currency income.
Put the holding structure in place before the round, not during diligence.
Name at least five potential acquirers and the reason each one would buy.
Hire or promote a second-in-command with real authority.
Move key contracts, domains and IP into the company's name.
Bring in a co-investor that adds credibility with regulators or later-stage investors.

Frequently Asked Questions

It is the extra return investors require for holding equity in a riskier country compared with a mature market. Practitioners often start from Aswath Damodaran's published estimates, which are based on sovereign ratings and market spreads.

They estimate how much a devaluation could reduce the dollar value of revenue and exit proceeds, then reflect that in a lower valuation, a hard-currency instrument or a higher required return. Startups with hard-currency revenue face less of this discount.

It reduces part of it, mainly around legal enforceability, dispute resolution and the ease of a future sale, but it does not remove the operating risk in the country where the business runs. The right jurisdiction depends on tax treaties and investor requirements, so founders should confirm the choice with counsel.

No. MIGA, for example, covers inconvertibility and transfer restrictions caused by government action, as well as expropriation and war, but states that currency depreciation is not covered.

When buyers are few and holding periods are long, investors pay less at entry to protect their return. Founders can narrow this discount by showing a credible list of buyers and keeping the company easy to diligence.