How Abu Dhabi can help start-ups grow


We all love a success story, whether in sports, music, science or business. Nothing captures the imagination more than the story of the growing black horse. For me, I have always been inspired by the stories of start-ups that become mastodons. Bold entrepreneurs who start from scratch and transform entire industries with their innovations. They are what captivate generations and, in so doing, mark our society.

Perhaps the most exciting moment of these entrepreneurial journeys is the transition from start-up to scale-up. This is when all the stars seem to align: the innovative idea, the right dose of patience, hospitable market conditions and perhaps most important – adequate funding.

During this decisive phase, the need for capital will almost certainly increase. Leaders of promising start-ups suddenly realize that the funding they need to scale is more critical than the funding they needed when they started their businesses. Maybe they need this vital injection of capital to buy assets, handle growing orders, or capture as much market as possible in the shortest amount of time.

However, the inability of startups to easily access the investment capital they need is an ongoing global challenge. Today, many businesses fail because they lack cash, even though we are told the market is full of capital. Crunchbase, a US-based investor prospecting platform, confirmed that startups closed 2020 in a much stronger position than at the start of the year, with global venture capital funding. up 4% year-on-year to $ 300 billion.

Despite the increase in venture capital funding, start-up capital is unevenly distributed across sectors. Internationally, seed funding tends to be concentrated in certain high-tech sectors such as FinTech, HealthTech, and EdTech; this goes without saying, given the limitless potential of these sectors to generate ideas, solutions and innovations with positive impact. On the flip side, start-ups in less consumer-oriented industries – such as industrial technology, logistics, and agricultural technology – may find it harder to gain attention despite the benefits they bring to the market. the society.

On top of that, according to audit and financial advice Deloitte, the odds of a new business scaling up are around 0.5%, meaning that only one of the 200 new surviving businesses will become a scale- up. .

Start-ups need to assess all options at scale if they are to have any chance of success. They have a plethora of choices when it comes to raising capital and must cultivate an open-minded approach to how they seek funding.

Angel investors, for example, are a very effective source, especially in the pre-seed or seed stages. These are usually high net worth individuals (HNWIs) who provide early support to start-ups in the form of equity financing, but they can also provide advice and connections. A similar source is family offices, which are private wealth management companies that invest on behalf of HNWIs or their families.

Venture capital is another credible avenue for start-ups. Venture capitalists or VCs can be HNWIs or companies that provide seed funding for a percentage of equity. Once they invest, VCs tend to become actively involved in the start-up and can play a central role in the post-investment phase by facilitating the growth of the business.

In my opinion, start-ups should also be aware of the types of government funding or support available. If your innovative idea contributes to a priority sector or will produce residual benefits for society at large, then practical support might be available. This support can involve funding but can also extend to incentives such as mentoring or market access.

In addition, incubators or accelerators provide a way for start-ups to access essential support, in the form of networking, mentoring, resources, as well as a gateway to other investors. Some of these programs, especially those run by for-profit accelerators, may also offer a seed investment for an equity stake in the start-up.

By knowing the potential options and committing to finding those options, start-ups have a chance to grow successfully. We have seen this firsthand across the UAE. In 2020, startups in the Middle East and North Africa secured record funding of over $ 1 billion, the first time Mena startups broke the $ 1 billion mark, according to MAGNiTT 2021 Emerging Venture Capital Markets report. The UAE ranked first among innovation hubs, accounting for the lion’s share of total funding and the highest number of deals at Mena.

Overall, this strong performance reflects the UAE’s position on start-ups as well as the supportive ecosystem we have created. In Abu Dhabi, we made it our mission to support innovation-driven businesses by providing pathways to capital, market opportunities and talent. We have also designed an enabling business environment that includes creating strong capital markets that provide funding, alternative expansion plans and exit options for start-ups.

Here in Abu Dhabi, leaders of promising start-ups may find several options for moving forward. It’s up to them to look for them.

Posted: Sep 26, 2021, 9:00 AM


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