Worldwide, there are about 300 million people trying to start about 150 million businesses. About one third will be launched, and it is approximately 137,000 per day.
Based on the latest MENA research conducted by Arabnet, 31% of MENA investors are located in UAE, $459M is the value of investments in the UAE made in Digital for 2018.
The total number of deals (2013-2018) has grown at a cumulative annual growth rate (CAGR) of 9.5%, while the total value has grown much faster at a CAGR of 23% – signaling a maturing ecosystem.
Obviously, this didn’t go without stellar examples of Careem (350 USDm) and Souq.com (275 USDm) back in 2017 and 2018 respectively.
UAE government put tremendous effort under the UAE Centennial 2071 strategy umbrella to attract and bootstrap entrepreneurs across the world by promoting events, creating hubs, providing guidelines and adjusting regulations in favor of entrepreneurs and investors. Some examples include:
- Step conference is the largest tech experiential festival in the Middle East that takes place in Dubai. The event so far recorded over 6,000 attendees with 1,000+ participating entrepreneurs and $1B funding.
- Abu Dhabi launches Hub71 that brings together tech start-ups, global powerhouses (i.e. Microsoft). Initiative taps into Abu Dhabi government’s Dh50 billion stimulus program. Entrepreneurs may account for perks such as no-cost office space at the heart of Abu Dhabi luxurious business park, subsidized accommodation, and access to the business environment. There are many other comparable options now available in UAE, including hubs by Dubai Internet City, Masdar Tech Park, Dubai International Financial Center, and many others.
- Dubai Chamber issues whitepaper outlining the recommendations and solutions for fundraising challenges faced by startups.
- Federal Decree No. 19 of 2018 on Foreign Direct Investment, and Federal Decree No. 9, 2016 on Bankruptcy are just a few recent examples of how the regulatory framework has been optimized to facilitate entrepreneurship.
Big tech companies are also playing an important role in the Middle East market by offering complimentary no-cost services to entrepreneurs. For instance, Amazon Web Services (AWS) and Google Cloud offer credits that are easy to avail and use to provision Cloud infrastructure or service. Microsoft has launched a Head Start community of mentors, gurus, and free training underpinned by events that are designed to help startup launch.
The fun of fundraising
Let’s drop not very exciting options of bootstrapping a business, such as money from friends and family, loans, grants, and 51:49 investment (was quite popular in the Middle East back in days). There are four main sources of fuel for your startup:
- Venture Capitalists manage large pools of money (millions/billions of dollars in so-called assets under management); it is convenient to think of them as wholesalers of fundraising. Some regional examples include Wamda Capital, Equitrust, Dtec Ventures by Dubai Silicon Oasis.
- Government (rarely direct as sovereign wealth fund, often through VCs or partnership) invest in ventures to both drive ROI and boost the country’s economy; Check on Investment Corporation of Dubai (ICD) as an example. As such government is set to accelerate entrepreneurship development exponentially in Dubai and UAE in the next decade.
- Angels, individuals that accrue significant wealth, some look for returns, and others just look to give back. Angel.co provides a reasonable data set to dig in.
- Angel groups, can cut larger checks, get better terms, spread out due diligence, and leverage larger networks to help startups succeed. Dubai Angels Investors might be a good example.
Amongst all options, fundraising through Venture Capitalists might be the most challenging and at the same time the most promising option. When startups raise money, they do it with rounds of investments. The first is called the seed round and, if the company starts to find traction, there will be a Series A-B-C, all the way until they either go public (IPO), sell, or run out of steam.
In each round, the company receives money from venture funds. Different funds specialize in different points in a companies growth, and matching with the right funds can be crucial to startup success as they often provide more than just capital infusions.
According to UAE government recommendations, there are many steps that entrepreneurs must take before launching any project or initiative, such as that they must do their full due diligence on their market or service, they must be able to convince investors of the feasibility of their project (in many cases expose their technology art piece as well), and they must hire a legal specialist to ensure they use well-drafted contracts that protect themselves and their stakeholders by obeying the commercial laws of the UAE.
Worth noting that with Venture Capitalists one will likely have only one chance and due preparation is crucial. I recommend starting preparation activities in parallel with your MVP and go to market presentations. Not only it may increase your chances of raising funds but will also help mature business model and core product. Feel free to ping me and discuss your challenges and aspirations.