News Column

Crowdinvesting gets though to big-ticket funds

June 6, 2014

Manoj Nair Associate Editor



Dubai

Finding it difficult to coax your local bank to extend the overdraft facility? Or showing a marked disinterest in funding your business's cash flow requirements? Don't be at a loss try your luck with "crowdinvesting".

The chances are that if your business either start-up or in an early stage operation manages a convincing narrative of its prospects, investors from much further afield could be willing to look at it. "Crowdinvesting is creating much larger deal flows and there are big investors signing on businesses by putting up significant amounts of cash," said Chris Thomas, CEO of Eureeca, which is now just over year into its operations. "What crowdinvesting does is syndicate the conversation that businesses do to meet their funding requirements ... and going by the results so far in a quite successful way.

"Small businesses realise that in the off-line world trying to have 50 different conversations with banks or other lenders and then not having much to show for it is just not efficient."

To date, eureeca.com has built up an investor base of more than 5,000 including venture capital funds from Japan and South America and received applications from 400 plus businesses interested in raising capital. Seventeen of these applications have then been put out onto the crowdinvesting platform, with eight meeting their crossing their funding targets of between $60,000-$100,000 within a 90-day period. These eight were split equally between businesses in the UAE and Jordan. (There were a further four that did not meet the initial target.)

But is it the nature of this region that individual investors coming in park much larger funds than is the case elsewhere? "As crowdinvesting goes more mainstream, ticket sizes will get bigger," said Thomas. "That's when you tend to get, for instance, six investors coming with $1,000 apiece rather than 1,000 investors offering $100 each."

The biggest single investor funding that eureeca.com has been via media was for $61,000, while the average transaction size is $4,500. "When you realise that only 2 per cent of banks lend to SMEs and just one in five SMEs have a line of credit, it's clear that funding remains a major obstacle for such businesses," said Thomas. "What crowdinvesting does is level the field, even a little, at this stage of its development."

According to Roula Ghalayini, founder of PoupÃ


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Source: Gulf News (United Arab Emirates)


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