So you’ve had a dream of having your own business in the UAE? For sure, “dreams are valid.” However, a dream will remain just a good idea unless you execute it.
You need funding, capital, or investment to take off, and that’s the most significant hurdle for many startups. therefore, becomes the most crucial part of your startup cycle.
Access to external financing sources is a real challenge at the seed or conceptual stage because the business lacks a record of customers, sales, and maturity. But that shouldn’t have to stop you from pursuing your goal.
The good news is, there are few avenues through which you can get funding for your business in UAE.
Crowdfunding is the practice of funding a projects by raising small amounts of money from a large number of people. As the name suggests, it is when the “Crowd” “Fund” a project or business.
This funding strategy raises money from friends, investors, and relatives through a collective effort, mainly through social media and crowdfunding platforms. Here, you leverage the network of these individuals for exposure.
From 2010, crowdfunding platforms like Eureeca, Zoomaal, and Beehive have found prominence in supporting the local ecosystem in different fields.
This is a popular crowdfunding platform in the UAE and the first Equity crowdfunding platform. Members of the investor networks buy shares in the business and, in return, provide access to capital.
It’s the most sought-after in the investor community seeking to invest in new-age companies. The contributors will receive a share of profits in the form of a dividend or distribution only if the business decided to distribute profits.
It’s the first online crowdfunding platform in the UAE. Here, you get connected directly to investors who are willing to finance your startup. Investors provide finance to your business without the need for a conventional intermediary. The internet is the platform through which Beehive Peer-to-peer lending uses to reach thousands of potential investors.
It’s the Arab world’s leading crowdfunding platform that supports entrepreneurs who are creatives, including Artists, authors, and filmmakers. You present your pitch for funding by supporters from around the world.
Supporters will choose the amount they want to contribute to support startups they like. In return, the founder offers returns based on the contribution.
It’s simple; you submit your project and then run a campaign in four parts; video, description, reward packages, and a short biography. The Zoomaal team checks through your project, publishes it on their platform and you can start receiving funds.
Once you receive the funds, it’s your turn to invest as per your plan and keep sharing the latest news for your backers to get excited with you.
2. UAE Bank Loans:
Many people think that that getting a loan for a startup in the UAE is almost impossible. But that’s not the reality. Loans are available only if the credit conditions are strict, you may need to put up some collateral, and your credit score must be near-immaculate.
But the interest rates are lucrative, and any bank where you have a running account will offer various options. After obtaining a loan, you’ll be required to pay within two to twenty-four months.
You can check out for loans from Emirates NBD, First Gulf Bank, and HSBC.
When applying for a business loan, you need a trade license. The UAE government grants this to start a business.
Check out startup funds operated by local banks- sometimes, the UAE government provides such funds to boost startups. These are initiated by the ministry of finance and given to selected recipients through the Emirates Development Bank.
3. Angel investors:
Who are angel investors?
These are high net worth entrepreneurs and family offices looking to invest in up-and-coming startups to diversify, mentor, and give back. In return, the angel investors get ownership equity or convertible debt.
The entrepreneurial ecosystem in UAE has flourished, leading to a rise in the number of angel investment options. If you’re looking for angel investment, you’ve options from large companies, small groups, to even individual investors.
However, finding the right angel investor is not very simple, as this needs a well- knowledge of reputed angel investors in the UAE.
If you are looking for Angel investors, you can check out Dubai Angel Investors website.
Dubai Angel Investors
This is a company that invests in seed and early-stage technology. It’s a member-managed investment company with more than 100 power angels. DAI deploys up to $250,000 initial investment to a startup, and individual members can co-invest alongside DAI.
To get funding from DAI, there is a process. The company mentions the following on their website:
“The best way to apply for funding is to get in touch with a member of our Investment Committee as you will need one of them to ‘sponsor’ your company. The best way to do this is to attend one of our pitch nights or to send an email with some information about yourself and your company.
Once you have a Dubai Angel Investors sponsor, he/she will review your application and advise you on any steps you should take prior to submitting it. Before you submit your application and other pitch materials to your sponsor, please ensure it complies with the basic investment criteria.”
4. Venture Capital:
Otherwise known as VCs are other potential sources for your startup funding. The UAEs startup economy has grown tremendously, which has attracted venture capitalists from all over the world.
The venture capitalist is a private investor who provides startup capital to the businesses and companies that exhibit high potential for growth and get an equity stake in the exchange. These capitalists don’t mind the risks involved because they stand to gain big if they successfully launch the business and sustain operations.
Some of the UAE’s Venture Capitalists are:
Middle East Venture Partners (MEVP)
Established under CL2677 in the DIFC, MEVP is a subsidiary of Middle East Venture Partners and is regulated by DFSA to manage collective investment funds, assets, and related activities.
This is a UAEs early-stage venture capital firm whose mission is to reinvent the Middle East through technology entrepreneurship and innovation. They believe in getting startups off the ground and are ready to walk with you and help you raise funds to build a great business.
These are venture capitalists who invest in transformational startups by creating meaningful partnerships with entrepreneurs. Their vision is to grow MENA businesses together with mentors and community experts on their platform.
Arzan is a venture capital that believes in investing in founders, promoting collaborative growth and nurturing innovation, and growing a startup ecosystem. They operate on ‘first come, first pitches’; you send your pitch directly to the investment team, and they’ll give you a decision on the spot.
When it comes to venture capital, the stakes are high; you must be ready to give an in-depth business plan, financials, up to 5 years’ forecasts, among other details.
5. Business Incubators:
These organizations offer full support for startups from inception, product positioning, launching, marketing, and financing.
The leading business incubators in UAE are The Dubai Technology Entrepreneur Center, and FinTech Hive.
Fundraising Mistakes that you need to Avoid:
Most of the startups looking for financing don’t meet the basic threshold for angel and VC investment. To make sense to potential investors, your startup must show potential explosive growth and a clear exit.
Here are three mistakes you must avoid when seeking investment funding.
One of the worst mistakes when sourcing for funds is putting your hand to ask for money. Network as early as possible as you leverage existing connections and relationships. Many investors love helping founders and therefore keep them updated on your idea, and when that time comes, you’ll have enough angels and VCs who can fund you.
Fundraising too Early
Most of the startups that apply for funding are not ready. Unfortunately, you only get a slice of what you’re supposed to get. Ask your potential investors if they think you’re ready when doing your pre-fundraising networking.
No company wants to invest in an early-stage company; it’s an unnecessary risk. Examine all key assumptions underlying your business model, ensure your unit economics work at scale, and determine if your customers will change behavior to adopt your solution.
Failing to Understand your Audience
Many startups think that investors are interested in the same things as customers; that’s a misconception. Investors only care about your company flourishing and returning many times their investments.
When communicating with potential investors, ensure they understand your language, don’t use jargon- otherwise, they’ll move on to the next company. Talk about your company, not technology. Your company should make sense to the investor- talk about the important key metrics.
Before you plunge into the complex world of startup business financing, you should seek advice from a specialist. Competition is stiff, and if you are not well guided, you may fail to secure any significant funding. A local advisor will come in handy in showing you the best options and how to go about it.