One of the most difficult tasks in starting a firm anywhere in the globe is raising the initial capital, investment, or funding. If you don’t have enough investment to raise a business, it gets really challenging for anyone to get going with their company. As startups have no track record, It is difficult to look for an outside source of funding. But over the past few years, the UAE has created a favorable environment for startups and new businesses, which has gradually increased activity in areas such as venture capital, bootstrapping, crowdfunding, angel investment, etc. The UAE government offers financial support to small and medium entrepreneurs (SMEs), startups, and potential businessmen. There are numerous options to raise funds for business in UAE. This guide covers those ways along with other important aspects that you must know before making a move.
Let’s start with the guide right away and see which method suits your new company the most.
Top Ways to Raise Funds for Business in UAE
Ahead we have discussed some of the modern-day methods of raising capital for your startup that will help it place its roots in the UAE.
Business Incubators
Business incubators are those organizations that provide numerous facilities and packages to entrepreneurs and startups instead of funding. Fret not, Ultimately, these facilities and packages would be a financial advantage for new businesses and startups. They offer startups and full-service support to new businesses, ranging from market positioning and launch to marketing and funding for company operations. A few of the top business incubators in the UAE include:
- Techstars Dubai
- Astrolabs
- The Dubai Technology Entrepreneur Center (DTEC)
- Turn8
- Hub71
- In5
- FinTech Hive
- Dubai Future Accelerators
Bank Loans
Let’s talk about a method of getting the investment that is usually not given much importance– getting a loan from banks. There is a common misconception that getting a loan for a startup in the UAE is nearly impossible. This is frequently assumed because SMEs have to overcome significant obstacles before they can convince banks that they are a serious & legit company and will be able to repay the money they borrow. Due to the lack of financial data outside of estimates, this is often challenging early on in a startup.
With that being said, banks offer loans at lucrative interest rates. The reason for this is that in order to draw in new clients, they frequently compete with each other to provide the lowest possible interest rates.
You can get a loan if your credit score is almost perfect, the credit requirements are strict. You might require to put up some collateral. You can get loans from various popular banks such as:
- HSBC
- Emirates NBD
- First Gulf Bank
You’ll need to repay the loan within two to twenty-four months of receiving it. You require a trade license to apply for a business loan. This is a grant from the UAE government to launch a startup.
Look into the startup funds run by regional banks; occasionally, the government of the Emirates would grant such funds to support startups. These are started by the minister of finance and distributed through the Emirates Development Bank to chosen and deserving entrepreneurs.
Family and Friends
The simplest strategy to obtain financing is by requesting it from friends and family. Asking friends and family for money can feel intimidating. However, in order to persuade their friends or family, the person must have a distinct idea and think about the startup. The person should ensure that the business plan is complete before seeking funding.
With the help of the prepared business plan, The person must explain to them precisely what the startup has to offer and how it intends to succeed. Any prototype, demo, projected sales, competitors, risk considerations, and financial plan can be presented. In order to comprehend the relationship matters, the person should be honest and realistic in this situation.
Crowdfunding in Dubai
Crowdfunding is the process of obtaining modest financial contributions in the form of capital from a large number of individuals in order to finance a project. As the term implies, it occurs when the “Crowd” “Funds” a startup.
Together, friends, investors, and family members contribute money to this funding technique. This strategy mostly uses social media and crowdfunding websites. In this case, you can take advantage of their networks to gain exposure.
Since 2010, crowdfunding platforms have played a significant role in supporting the local ecosystem. Some of such platforms that you can opt for are:
- Zoomaal
- Eureeca
- Beehive
Let’s talk about them one by one:
Beehive
Beehive is the UAE’s first internet platform for crowdfunding. Here, you can contact investors who are ready to fund your startup directly. Investors provide capital to your startup directly, eliminating the need for a traditional middleman. Beehive Peer-to-Peer lending uses the internet as the platform to connect with thousands of potential investors.
Eureeca
Eureeca was the first equity crowdfunding platform, and it is a well-known platform in the UAE. Members of the investor networks invest in the startup by purchasing shares in exchange for access to the funding.
It is the most sought-after among investors who want to put money into cutting-edge and modern startups. If the startup decides to distribute earnings, the contributors will get a piece of the pie (profit share) in the shape of a dividend or other payment.
Zoomaal
It is a top-rated crowdfunding platform for creative enterprises in the Arab world, including filmmakers, artists, and writers. You showcase your financing proposal to an audience of global supportive people willing to provide you with money.
Supporters will select the amount they wish to donate to startups they find appealing. The founder offers rewards based on the contribution in exchange.
It’s easy; after submitting your idea for the startup, you start a campaign that consists of a brief biography, a video, a description, and reward options. Your concept is reviewed by the Zoomaal staff before being posted on their website and you may begin receiving funding.
Once you have the money, it’s up to you to invest it according to your plan and keep your supporters updated on new developments.
Angel Investors in UAE
The next option is angel investors. These are often acting as lone venture capitalists in this sector. This reduced level of formality can help to put new startups at ease when they’re under pressure to acquire funding. It is because they’re most likely to begin by focusing on your relationship with them rather than the hard, cold facts.
In order to connect with investors who are more likely to be interested in your startup, there are a variety of angel investment networks that you may use, such as Emirates Angels.
Look Locally
Fundraising for companies based in Dubai, UAE is also made easier by the local small business development center. Dubai has been assisting numerous business owners for a very long time in raising money for establishing their startups and companies in the United Arab Emirates. These businesses can connect investors with entrepreneurs for networking purposes and angel investors.
There are also individuals who may take the investor to the numerous incubators, accelerators, and startup centers that have earned their places and are located throughout the UAE. The person can also speak with the regional business council, industry organization, or chamber of commerce for advice on local fundraising. Multiple UAE emirates, supported by their respective free zones or governments, offer programs to support the development of new businesses and startups.
Importance of Networking for Raising Capital in UAE
The importance of networking for getting investment for your startups in the UAE is unimaginable. In almost every industry, building a strong network will increase your chances of successfully raising capital. It is its own form of unique currency.
Being in contact with skilled and experienced individuals is really beneficial for you and your business, especially if they have knowledge and talents that you don’t. Nowadays, there is no justification for not making networks with such people. It is because instant connections offered by networking websites like LinkedIn make it so much simpler. You are investing in your future when you create a network with smart people with knowledge.
Requirements for Raising Funds in UAE
Everyone you get in touch with will have similar needs regardless of the kind of fundraising you’re in search of. Applications for fundraising will always call for basic details about your startup’s nature, people who are engaged, and the amount of funding you need. Any applications you submit will be much quicker to complete and less likely to have an error if you have all of these details available in the documentation.
You must first put together a comprehensive business strategy that has all the specific details about your company. Furthermore, You must create an executive summary and a pitch deck to go along with your detailed business information. These two factors will complement one another and be a component of your marketing strategy for catching the attention of potential lenders or investors.
Along with the financial data about your company’s current operations and the predictions for its future growth, it must include the major headlines about your service or product. Investors will question your research, so be sure to provide your logic and clear vision in addition to your numbers.
Conclusion
Getting capital for your new business in the UAE is not that hard. You have various ways in which you can raise investment for your startup. However the competition is fierce out there, and if you are poorly advised, you might not succeed in obtaining any meaningful finance.
If you want to set up your business/company in the UAE, you should get in touch with Riz and Mona, professional business setup consultants in Dubai.
Please Note: We do not provide any assistance regarding fundraising. Read more about our company and how we strive to bring business services to our clients.
