According to a report, over 60 percent of startup investment funding in the MENA region was given to companies based in the UAE. It is expected that the startups in the Middle East will attract over $1 billion in investments by the end of 2020.
The focus on startup culture is majorly due to changing markets around the world and the UAE government’s goal to diversify the economy and decrease dependence on oil and gas. As part of the Abu Dhabi Economic Vision, UAE aims to increase its non-oil sector contribution to 64 percent of the GDP by 2030. As a result, there are now numerous ways for startups to secure funding in the UAE.
If you are a new startup hoping to get funding, here are a few ways you can do that:
Bootstrapping
Bootstrapping or self-funding is a great way to finance your startup especially when you are just starting up and you don’t have any proof of concept to show to prospective investors. First-time startup founders can often find it very difficult to secure funding without any visible results, tractions, or a clear business model.
You can either get help from your friends and family, or you can also invest your own savings. As a result, bootstrapping can be easily done without much compliances or formalities.
Most entrepreneurs kickstart their business by bootstrapping because it is often considered the best first funding option when there aren’t any investors interested in your business yet.
But this is only suitable for the initial stages of your startup. After all, there is only so much of your own money that you can put into your business. Even if you end up generating some revenue, you will want to invest all of it back into your business. If you want to grow your startup and make it bigger, you will eventually need the help of outside investors.
Crowdfunding
Crowdfunding is a rather new way of funding a startup and this approach has gained a lot of popularity in the last few years. Instead of asking specific people to invest in your business, you share your business idea and product details on a crowdfunding website and anyone can invest, donate, or pre-order your products from there.
Usually, entrepreneurs need to mention their product specifications, business goals, profit plans, and how much funding they will need for their business — The more transparent, the better. Then, consumers can read about your business and give their money, if they like your idea. You can give people the option to donate directly towards your business or make a pledge to pre-buy your products before they hit the market.
For instance, Pebble, one of the first smartwatches to be launched in the world (even before Apple or Samsung decided to invest in smartwatches) raised over $20 million from over 78k people on Kickstarter, a crowdfunding platform.
The best thing about crowdfunding is that it spikes up interest in your brand online and helps you with both financing and marketing. You can create a buzz about your upcoming products even before they officially hit the market. It can also be a helpful step in case you are unsure about whether there will be a demand for your products or not.
When your future customers are investing in your products, it gives you more confidence and encouragement to continue. Most startups that are successfully crowdfunded end up attracting venture capitalists down the line.
Though it is important to remember that crowdfunding platforms can be a rather competitive place. You are essentially fighting for the attention of potential investors and without the right marketing strategy, content, and images, it can be difficult to get sufficient funding.
Angel investors
Angel investors are considerably well-established individuals with surplus cash who are interested in investing in startups that have the potential to go big. Usually, angel investors have a system in place to screen and select potential startups that are worth investing in. With their experience, they can also offer advice and mentorship to you.
Big enterprises like Alibaba, Yahoo, and Google were all funded by angel investors in their initial stages.
Angel investors readily fund startups in their early stages. They prefer to take more risks for higher returns, but also ask for a big part of the company’s equity. Moreover, they usually invest lesser amounts than venture capitalist firms.
Venture Capitalists
Venture Capitalists or VCs are professionally-managed funding companies that invest in startups with big potential to grow and invest. Mostly, venture capitalists invest in startups for equity and then exit when there is an acquisition or an IPO.
With their vast experience in funding startups, VC firms can provide you with the much needed guidance, expertise, and mentorship. Since VCs have helped several startups in the past, they know what it takes for a startup in your industry to grow and expand your user base.
Gaining VC investment is the next step for businesses that are already past their early stages. Fast growth companies like Uber and Airbnb with a clear exit strategy gained tens of millions of dollars in VC investments which helped them expand their company at a tremendous rate.
While VCs can offer you the best advice, startup founders have to be more flexible in taking advice and give up a bit of control of the business. For most startups that want to go big someday, getting a VC investment is the biggest goal.
Confused about which way to go?
Before you go into the funding stage, you need to have a clear idea about your business strategy, product alignment, entry strategy, and regulatory compliances in the UAE.
Centurion Consulting provides end to end business consulting services in the UAE for both startups and SMBs. We help you create thorough business plans that can help you impress investors, secure funding, and grow your business successfully.
Take a free online or offline consultation session of over 45 mins with Centurion Consulting to know how we can help.
