Dubai Gets Into The Business Of Angel Investing
Dubai, with its recently stated goals of looking to assist struggling small businesses, has launched the Dubai Ventures Network, an angel investor service that they expect to open a new funding avenues for the emirate’s entrepreneurs.
Developed by the Department of Economic Development (DED) and Dubai SME, this network will target investments between $50,000 and $100,000.
According to a statement, the Dubai Ventures Network aims to create an investor ecosystem together with incubators and accelerators to help small and medium sized businesses.
This move comes after a recent report from the DED found a staggering 80% of UAE SMEs have had to rely on bootstrapping for growth and development.
“The limited source of funding to start businesses is a major gap in our SME ecosystem,” said Sami Al Qamzi, director general at the DED.
He said addressing market gaps and channelling investments into SMEs is critical to Dubai’s knowledge economy initiative. “Based on the findings in the report, Dubai SME has formulated strategies and initiatives to improve SME performance in the years ahead, facilitate SME access to financing, and enhance SME competitiveness.”
Dubai SME also teamed up with the European Trade Association for Business Angels (Eban), which has an active investment membership of 25,000 to share ideas and business practices, for this initiative.
“We already have 200 willing investors to become part of the investment ecosystem,” said Abdul Baset Al Janahi, the chief executive of Dubai SME.
“About 30% of the investors are Emirati with others made up from the expatriate community. The tie-up with Eban means their investors can see the ideas that we have in front of us and we can see the investment options in Europe.”
The lack of funding available to startups and small businesses has hampered the growth of the SME community as the risks to investors have often outweighed the rewards across the GCC and the UAE.
An onshore law that requires 51% of a company to be owned by an Emirati means that many times it is not worth organisations investing in smaller companies.
Some of the UAE’s long-standing company regulations have also hampered home-grown angel investors, including the costly and lengthy bureaucracy needed to change share ownership of an entity.
“The cost of share transition here in the UAE makes it very difficult to rationalise an investment,” said Kamal Hassan, the managing partner for Turn8, a local incubator. “Say you want to invest Dhs100,000, it will cost Dhs50,000 to Dhs60,000 for the cost of transition, which makes the investment nonsensical.
“In Singapore it takes five minutes and costs $100. That’s what we need to make the process easy. We need to create a buzz and excitement in the opportunities that are available and then make it inexpensive to invest,” he added.