As the top emerging market in the GCC, the UAE’s economic growth is being bolstered by public and private sector efforts to drive innovation, diversify the economy, and support ground-breaking entrepreneurial efforts.
Par for the course, startups play a critical role in this development, but to thrive and succeed, these ventures need strong financial support during their formative years. Enter angel investors, motivated, often high-net-worth individuals that offer early-stage startups and entrepreneurs (and in some cases advice and mentorship) in return for ownership equity in the firm.
The Emirates Angels Investors Association
Last year, in a bid to contribute to the UAE economy’s competitiveness, a group of young investors launched the Emirates Angels Investors Association to help accelerate the growth of start-ups and facilitate startup investments and entrepreneurs’ activities in the country.
Registered with the Ministry of Community Development and supported by the Ministry of Economy, the Abu Dhabi-based non-profit organization primarily focuses on launching training programs, as well as activities that would attract and stimulate investment initiatives.
“It’s a form of giving back to the community,” Mohamed Al Owais, Board Member at Emirates Angels, and Executive Chairman at Al Owais Enterprises, told the Abu Dhabi SME Hub.
“Angel investing is considered a high-risk investment in startups with a high growth characteristic,” he continued. ‘Given the high risk nature of [these businesses],they cannot always have access to bank funding. That’s where angel investment comes in.”
Al Owais explains that angel investors dilute this risk by splitting the investment among several members of their community. After a period of time, through collaboration between the entrepreneur and their angel investors, the startup in question secures a sustainable business model, eliminating a large part of that original risk factor.
“Then, everyone gets a share of the pie,” Al Owais noted. “The main benefit would be to extrapolate an opportunity and have people work on this SME and therefore contribute to the economy.”
Encouraging an investor culture
While there are some prerequisites to becoming an angel investor, such as achieving ‘Accredited Investor’ status, the greater challenge lies in raising awareness about the activity itself, to entice wealthy individuals to become angel investors that will support the development of the national economy through empowering startups.
“Encouraging people really comes through awareness,” Al Owais said. “We have to make people aware of the risks and rewards of such investments: awareness of the [business] idea [of a startup], and the potential it has. I believe these two are the main reasons for any individual to become an angel investor, really.”
To smooth an individual’s transition into the role of an angel investor, Emirates Angels exists to support and connect them with a growing network of young experienced peers, offering them “a glimpse of what the investing landscape is forming into - a glimpse into the ideas of the future.”
If you’re interested in joining Emirates Angels, you can find more info here.
Seeking out angel investors
As for the entrepreneurs themselves, Al Owais recommends that they seek out angel investors once they have a “minimum viable business - in terms of idea, business plan, initial revenue, [and the like].”
In terms of why entrepreneurs should seek out angel investors as opposed to other sources of funding, he noted that it’s about more than just acquiring funds.
“I think the main reason here is not really the amount of money needed in order to grow the business, [but] really the benefits of having an external advisor [figure] that can bring in value to the business,” he explained.
He recommended that entrepreneurs treat an angel investor like a partner that would invest in their business, helping them achieve their business objectives. This again highlights the benefits of resorting to an angel investor as opposed to simply going to the bank.
The Emirates Angels app
To digitalize their services, Emirates Angels recently released a mobile app that acts as an aggregator, helping match angel investors with entrepreneurs that are currently seeking funding. Investors are able to browse startups based on their type (fintech, for example), and business owners are able to search for investors that can meet their financing needs, or those that can offer them the right mentorship expertise.