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As a business owner, one of the main issues that entrepreneurs have to fear is the availability of funds. The flow of investment into the business is crucial to sustain and grow. In the current competitive business world, between 50 to 70 percent of small and medium sized enterprises (SMEs) financing applications are rejected by traditional banks in the UAE. SMEs contribute around 70 percent of the UAE’s GDP.
If a business owner wants to start a business in a place like Dubai where the market is crowded with enough competition, it is often difficult for the entrepreneur to raise capital that is required by the authorities in the UAE.
In this blog, we will discuss effective methods of raising funds in the rapidly growing technology sector of the United Arab Emirates along with the top crowdfunding platforms in UAE.
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Crowdfunding is a way to raise money from friends, investors, and relatives via a collaborative effort through crowdfunding platforms and social media.
The crowdfunding platform makes use of the networks of these individual investors to boost their reach and visibility. This is in contrast to getting funds from mainstream business finance.
To raise funds, entrepreneurs need to create a business plan, introduce the product, and then contact investors, such as banks as well as financial institutions. The entire process can take months to raise the needed funds.
Crowdfunding platforms, on the other hand, utilize an approach to funnels and make it easier to identify potential investors in the venture without spending time.
Contact Archtech to learn more about Crowdfunding Platforms in UAE!
Since the year 2010, crowdfunding platforms like Beehive, Eureeca, Zoomal, Yomken, and Durise have gained enough attention to benefit and support the local economy across a range of areas.
In the UAE, the Dubai Financial Services Authority (DFSA) has introduced new rules that can benefit SMEs by raising money via crowdfunding. According to DFSA, crowdfunding regulations can be a catalyst for the development of the fintech sector across the UAE and are the first across the GCC.
The rules warrant an unambiguous governance of fintech companies and favor adequate protection for their clients.
Similar to other types of fundraising, there are three major kinds of crowdfunding: Reward-based, Donation-based as well as Equity Crowdfunding. The importance of Equity crowdfunding has increased in recent times. But, this article will discuss the various ways to use it.
This kind of campaign is not a source of financial reward for the investor. Donation-based crowdfunding is typically employed by charities, non-profits arts, and medical emergencies.
This kind of campaign involves individuals contributing to your business to receive a prize that is usually a part of the item or service that the startup provides.
The reward-based crowdfunding model is a variant of donation-based crowdfunding. The only difference is that the reward is given after each campaign.
The most well-known crowdfunding platforms for this kind of campaign are Kickstarter, and Indiegogo as it allows the business owner to reward their donors without incurring any additional cost.
This kind of program is popular among investors who want to invest in innovative and emerging businesses.
Investors get a small amount of equity to participate in the expansion of the company. For post-trading capital in the company, equity owners get a portion of the profits as an income distribution or dividend.
Contact Archtech to learn more about Crowdfunding Platforms in UAE!
Crowdfunding, a method of funding through the collective effort of family members, friends, customers, and private investors, is gaining popularity across the United Arab Emirates (UAE) day by day. This unique approach to financing has drawn the interest of authorities from the UAE authorities.
Many regulatory authorities are overseeing crowdfunding in the UAE. This includes those of the Securities and Commodities Authority (SCA) and the Central Bank of the UAE (CBUAE) as well as The Financial Services Regulatory Authority (FSRA) located in Abu Dhabi Global Market (ADGM) and the Dubai Financial Services Authority (DFSA) located in the Dubai International Financial Center (DIFC).
These authorities warrant that all financial services and operations such as crowdfunding comply with set regulations and standards.
DubaiNEXT is the first digital crowdfunding platform that was launched by the Dubai Government to support small and medium-sized businesses (SMEs). This platform works using an All-or-Nothing model. Entrepreneurs set a target for fundraising and must achieve it before they can receive any money.
This type of model encourages campaigners to put in the effort to achieve their financial goals being confident that they will retain full control of their initiatives regardless of the outcome. DubaiNEXT is particularly keen on empowering young people and entrepreneurs.
The program also provides them with the opportunity to get the support of a larger investor base, which is aligned with the UAE’s goal to promote the spirit of entrepreneurship and innovation.
Beehive has become an important player in the crowdfunding scene in the United Arab Emirates. It’s an equity-based third crowdfunding platform that connects those businesses that require funding with the appropriate investors.
The partnership between Dubai SME which is part of the Dubai Department of Economic Development, and Beehive displays a strong determination to improve the access to financing for SMEs.
This partnership lets investors raise funds for local SMEs which helps to fuel the UAE’s economic diversification as well as expansion.
Contact Archtech to learn more about Crowdfunding Platforms in UAE!
Eureeca is an equity crowdfunding platform based in Dubai that has played a key part in financing regional ventures. It has scored important funding rounds, such as the $1.3 million funding of the car-sharing company Udrive. Eureeca’s involvement in the crowdfunding ecosystem is crucial.
It provides businesses with a means to raise funds from a large investor base as well as a platform for new business ideas and improving the UAE’s image as a hub for startups.This partnership lets investors raise funds for local SMEs which helps to fuel the UAE’s economic diversification as well as expansion.
Contact Archtech to learn more about Crowdfunding Platforms in UAE!
SmartCrowd is another platform that is making waves in the world of crowdfunding in the UAE. It lets individuals invest in different real estate investments using minimal amounts of capital, thereby opening up the market for property to a larger market.
Nowadays, more people can take part in the real estate industry and reap the potential rewards previously only accessible to those who had substantial capital.
Stake Properties make real estate investing more accessible to people by allowing them to purchase stakes in property without requiring a large initial investment.
This strategy broadens possibilities for investment for the general public. It eases the way for getting into the real estate market and creates a more welcoming investment climate within the UAE.
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The growth of these platforms demonstrates the UAE’s commitment to creating an environment that encourages the growth of SMEs which is crucial to the long-term outcome of the economy.
With the Cabinet’s approval to crowdfunding in both the private and public sectors, these platforms could boost the country’s liquidity dramatically.
They are essential for financing innovative and creative business ideas. The frameworks for regulation established by the DFSA increase the credibility and integrity of these services, providing customer security and encouraging the growth of fintech within the region.
Crowdfunding has been recognized as a major source of financing for entrepreneurs in the UAE using the backing of a large public. The method is primarily supported by social media and other specialized websites, increasing the reach and visibility of entrepreneurs.
Since the beginning of 2010, extra platforms such as Zoomal and Yomken have been added to the mix, assisting diverse sectors within startups in the area.
The regulations formulated through the DFSA have played a significant role in creating a favorable environment for the fintech industry, creating a standardized governance framework, and providing the protection of investors.
The efficiency of these rules can be seen in the rise of crowdfunding. For example, between 2015 to 2016 the UAE had 97 successful crowdfunding campaigns with a large portion of them being led by women entrepreneurs, adding together about $3.25 million. These figures highlight the possibilities for crowdfunding which is predicted to increase exponentially worldwide.
Contact Archtech to learn more about Crowdfunding Platforms in UAE!
Anyone can take part in the crowdfunding process in the UAE. There is no limit or restriction for it.
Crowdfunding can help innovative companies that specialize in NFTs, blockchains, and art to raise money. Even companies that adhere to Islamic financial standards can utilize this method to raise funds in a way that is Sharia-compliant.
The advantage of crowdfunding is the possibility to attain a high ranking in the marketplace based on the kind of investment. For instance, investors who invest in the real estate business could see their funds increase in value and earn 12 to 14 percent in annual profits
Yes, crowdfunding is legal in the UAE. This activity is monitored and carried out by government-approved channels.
The UAE government has backed crowdfunding to boost the country's liquidity pool and add extra financing options for small businesses.