How to get Startup Funding for Innovative Businesses?

So, you have a billion-dollar (or dirham) business idea? Ideas on their own don't mean much without execution, capital and timing. The biggest challenge is funding, capital or investment as it's crucial to 'take off' for research, create prototypes, incorporation and commercialize the innovation into a sustainable business.
 

However, access to external sources of finance is challenging at the seed level or conceptual stage, as the company lacks a track record of customer orders, sales and maturity.
 

It doesn't have to stop you. Thankfully, there are five options to make your innovative idea a reality:

1. Friends and Family
   
   Asking family and friends for money might seem daunting. However, tapping those closest to you is a good first step before getting external funding. However, before asking them, have a business plan ready.
   
   Through the plan, explain to them exactly what you're selling, how you'll make it, any demo, prototype or sample you have, potential sales, risk factors, competitors and how you'll make money. Be realistic and honest in way they will understand as the relationship matters. Tell them whether you're asking for a loan, an investment, or a gift.
    

2. Alternative Funding Sources
   
   If your requirement is a small amount - such as up to $5,000 - there are micro-loan companies such as Kiva, Accion, Liwwa that lend to startups and entrepreneurs. Other alternatives are crowd-funding sites, such as Kickstarter, Gofundme.com Eureeca, Kapitalboost, Zoomal, and IndieGoGo, that provide a platform to raise money from hundreds or thousands of individuals/informal investors who want to support you and put in smaller amounts or place advance orders, so it accumulates into the target amount.
    

3. Look Locally
   
   Check out your local small business development centre. The Abu Dhabi government for instance, has instituted the Khalifa Fund in 2007 to help Emirati entrepreneurs, with a total capital investment of AED 2 billion.
   
   Emirates Development Bank (EDB), has allocated AED1 billion to fund SMEs run by Emirati entrepreneurs. EDB also extends finance up to 80 percent of fixed assets and purchases with attractive interest rates and flexible tenors.
   
   In the past 10 years alone, Dubai SME has helped 12,500 entrepreneurs and assisted the launch of 1,200 local businesses.  The Business Incubation Center has helped launched 350 SMEs.
   
   These companies can help you get connected to entrepreneurs for networking and angel investors. Some can guide you to the many incubators, 'startup hubs' and accelerators that have popped up all over the UAE.
   
   You can also get in touch with your local chamber of commerce, industry association or business council on guidance for local funding. Many Emirates in the UAE sponsored by the government or the respective free zones also have programs to foster startups.
    

4. Angel Investors
   
   If bootstrapping and crowd-funding can't help, reach out to angel investors i.e. high net worth individuals (HNWI's), family offices or entrepreneurs looking to invest in promising companies to diversify, mentor and give back.
   
   To find angels in the UAE, ask other entrepreneurs for referrals, or check out Angel.co, CrunchBase, Magnitt, Wamda amongst others. While angel investors can invest for equity or offer a loan, angel investing groups host monthly events, competitions, pool in funds (co-invest) and contacts.
    

5. Venture Capital
   
   If you need serious funding (at least $1 million), turn to venture capitalists (VC) or institutional investors that invest on behalf of their clients' - limited partners. The region has over 30 VC firms that invest varied amounts based on the sector, stage of company (seed, early, growth, and late stage), location of your business and many other factors.
   
   The stakes are high, so is the due diligence. They will ask for an in-depth, business plan, financials, 3-5-year forecasts, your track record, competitors, look for clear legal structure and any red flags. But then, they can give larger amounts of money and expertise. VCs invest in only about 1-2% of all applicants i.e. 100 companies apply for funding, just one or two make the cut.
   
   Also, you should know VCs look for a return from 3-10 times their original investment, within the next 5-7 years, so it's best to have an exit strategy in mind.

After completing 6 months in the new Business, you can also approach RAKBANK Business Banking for a loan. Just email us at: [email protected] with your company information, contact details and Business requirement