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Tuesday, March 22, 2022
Khaleej Times - Crowdfunding to give key fillip to startups, SMEs
The entrepreneurial and startup ecosystem of the UAE is poised to get a significant fillip with the go-ahead given by the Cabinet to operate crowdfunding platforms to raise finance for innovative business ideas.The proactive initiative rolled out on Monday by the government under the regulatory framework of the Securities and Commodities Authority will have a far-reaching positive impact on the UAE’s business landscape that is overwhelmingly dominated by SMEs. In line with the new initiative, operators from government and private sectors can crowdfund projects, provided they get the necessary permits from the authorities concerned.
Crowdfunding, a process in which numerous investors are invited to participate in a project or business, has a global market size estimated at $114 billion in 2021, and according to statistics, fewer than a quarter (22.9 per cent) of all worldwide crowdfunding operations ended up being successful so far.
rowdfunding is essentially the opposite of the mainstream approach to business finance. Traditionally, if someone wants to raise capital to start a business or launch a new product or anything that requires capital to start, the entrepreneur needs to pack up a business plan, market research, and prototypes, and then market the idea to a limited pool or wealthy individuals or institutions.
With limited options to raise money, entrepreneurs could either take on debt from a loan or could raise money from friends, family members, and angel or venture capital investors. They could even take the “bootstrapping” route and scrounge up as much money as possible to fund the project themselves. In the late 2000s, a fourth option became viable for those trying to get something off the ground: crowdfunding.
Mohammed Shaheen, CEO, Seven Capitals, said crowdfunding has emerged as a new landscape for financing ideas and innovations.
“I believe that equity, debt, and rewards-based crowdfunding open new possibilities for funding more entrepreneurs in more places around the world. These changes enable entrepreneurs to utilise social media and the web to offer rewards, ownership of a shared vision, or even equity stakes to potential investors.”
Crowdfunding websites are creating transparency and more open communication by enabling investors to engage with these companies over time to monitor their progress and continue to support their success as the company grows.
“This technology makes it possible for an entrepreneur to more easily engage investors and customers anywhere; whether that be locally, the diaspora, or with others anywhere in the world,” said Shaheen.Source: