Funding can be an incredible way to drive growth in your business.
But it’s not easy.
Given that many entrepreneurs are unsure how to approach the whole funding landscape, let’s look at a simple four-step roadmap to help you secure funding:
- Research the investor landscape
- Profile your competitors
- Perfect your pitch
- Be ruthlessly realistic with your figures
Research the investor landscape
SMEs contribute nearly half of the UAE’s annual GDP. Also, nearly half of all the companies registered in Dubai are early stage startups.
Not surprising, then, that total startup funding across MENA increased by 12% in H1 2018 compared to H1 2017. That’s 141 investments in H1 2018 alone.
While there is certainly competition out there, there are also plenty of investors hungry to find suitable businesses for their investment. So securing funding is far from impossible. The important thing is to do your research, so you can differentiate yourself from other businesses.
Familiarise yourself with the investor landscape, so you know who to approach to make investment most likely.
The three most active venture capital investors in the UAE in H1 2018:
- 500 Startups – ten investments
- MEVP – eight investments
- Arzan Capital – seven investments
Read up about the major players in your market. Pay particular attention to businesses they’ve recently invested in. Find out which type of businesses they tend to favour, and how they prefer to invest. You can then approach the right people and tailor your pitch to their needs.
This makes securing funding more likely and stops you wasting time.
Profile your competitors
You don’t secure funding in a vacuum. That means it’s crucial to know your competitive landscape inside-out.
- Who else sells products or services like you?
- Who is successful – and why?
- Who is struggling – and why?
- How can you be different enough to succeed?
Look beyond direct competitors. Indirect competitors (vendors that solve the same customer need with a different product or service) are also a threat – and an opportunity.
For example, if you sell trainers you compete directly with other brands that sell trainers. You also compete indirectly with brands who sell slippers, flip-flops, biker boots and crocs.
Knowing your competitive landscape – both direct and indirect – helps you better understand your business’ positioning. That’s crucial to prove you’re worthy of securing investment.
Perfect your pitch
Pitching makes most entrepreneurs very nervous. After all, a great pitch can make the difference between securing funding and leaving with nothing.
Here are the five most important factors to perfect your funding pitch:
Prove customer fit: Funding can help you scale – but there has to be something worth scaling. If your fundamental product-to-customer fit isn’t there, you won’t grow. So that’s your first focus: prove your product or service has legs. Be clear about the problems you solve and you’ll be more likely to convince investors.
Focus on risk management: Investors are less risk-adverse than most. But any investor is looking to make money not lose it – which means they have a nose for danger, as well as opportunity. Show you’ve considered how to manage hurdles, to convince investors you’re an almost-safe bet.
Practice incessantly: The truth is, investors are buying into you – not just your business. So even though you’ll be nervous, practice until you can put those nerves to bed. If you present with charisma and confidence your pitch will be more compelling.
Show your team: For investors to put their money into your business, they need to trust you’ll deliver on your promises. Unless you’re a solopreneur, you’re not doing everything yourself. Make sure your pitch includes plenty of information about the key people involved in delivering success.
An exit strategy: Investors mostly aren’t looking for long-term, low-risk investments. They understand they’re gambling with a little risk – but the payback is that they hope to see their money back quickly. Show investors how they’ll get their money back – to make your opportunity irresistible.
Be ruthlessly realistic with your figures
Investors have seen it too many times: hopeful entrepreneurs who’ve done robust research, know their market, and have a confident, compelling pitch. But when you run the numbers, nothing adds up.
Typical figures you need to know to secure funding:
- How much revenue you expect to make over the next five years
- When you expect to reach profitability
- How much profit you expect to make and why
- What your company valuation is and why
- How much investment you need and why
Investors of any description aren’t out to be unnecessarily generous. They’re here to make money – by helping you make money, of course – but that’s the bottom line.
If your key forecasts aren’t accurate and realistic, it undermines your credibility. Worse, it undermines your claim that your business presents a good money-making opportunity. So investors are more likely to walk away.
Justify your figures by referring to the market and competitors.
For example, if a competitor launched five years ago and now posts annual profits of USD 5m, you’ll need a very good reason for claiming you’ll see profits of USD 100m within two years.
If you leave investors with uncertainty around key figures, you’ll struggle to secure funding. Or if they do decide to take a risk with you, they might offer such unfavourable terms that the funding isn’t worth accepting.
For example, you might have to give away too high an equity stake in your business – which ultimately could see you lose control and be unable to make decisions freely.
Securing funding can be a fantastic way to drive growth– and it’s never been easier in the UAE as the business environment continues from strength to strength. Follow this four-stage roadmap and you’ll increase your chances of getting the funding you need to realise your business ambitions.