The beginning of a new venture is always exciting and nerve wrecking. Here’s a list to put your mind at ease. We may have the required finances, we might have friends and family that might help out, but what is the best source that would suit your business type? Should you invest wholly with your personal finance also known as “bootstrapping” or should you be choosing from the different sources out there and explore your options? What are these other sources of finance?
Find the answers to all these questions from the following list of inventors and their advantages and specifics because what you need is the right investor not the best kind.
Friends and Family
When we set plans to start a business, we talk about this plan primarily to our friends and family. We take in their opinions and listen to the advice they give to build our business. So why not include them in your business?
Friends and family are any entrepreneurs prime choice as they have always been around.
- They know the potential of your business,
- they have seen the work you put into your business and
- they are the easiest to convince.
These are the people who believe in you and trust you the most. They might have the required funds and might be able to fully fund your business.
The other side of this investment party is that, taking financial help from family, can be a very sensitive issue. If things do not go as planned, there might be a lot of internal drama, that may even lead to families getting separated or your business falling apart.
Getting financial help from families also might lead to high involvement of these members within the organisation. You must be careful and see that both parties interests are aligned and will be able to work and function together.
Banks and Government Agencies
Banks and governmental agencies are not exactly investors. They merely provide the capital or other loans that you may need. The only interest or stake that this source has in your company, is your financial ability to pay back they amount along with interest.
Banks will help you take things off the ground and get things running.
Banks will require a well detailed business plan inclusive of all aspects of your business.
It would be easier to get a loan from a bank that you already have a relationship. All the procedures and processing might be easier.
The government of UAE is very supportive and encourages entrepreneurs. Due to this very reason, there are a lot of governmental agencies that offer a variety of services inclusive of financial services that would help you take your business further.
Just like the name, angel investors are perceived as angels in the world of start-ups. Angel investors generally offer smaller funding capital than venture capitalists, but they are more flexible with the terms.
They also offer pearls of wisdom and connections that you might need to take your business further. These investors can be found through events or online.
Venture Capital Firms
Venture capitals and banks are the first two names that would pop into any entrepreneurs head before they have their company setup in Dubai. Venture capitalists are a grown up version of angel investors.
They offer big cheques and bigger involvement. Their sole purpose is to get bigger gains and to do this, they need your business to become successful.
There is a negative vibe around VC and that is due to their reputation in the market. VC do help out with the start-ups, assist in the setting up eg: getting the trade licence UAE and business registrations Dubai, getting connections and assist with all factors that could provide for the growth of the business.
However, they also expect bigger interest and ROI rates. Bigger in the sense, much more than they invested. This might be one of the reasons why they do have a negative impression in the market.
This is a relatively new concept, that is fast growing in the investment field. Family offices were initially set up for high net worth families to keep track and manage their finances, investments, insurance, personal accounts and trust funds.
Now family offices have expanded and have opened their doors to more than one or two clients. Family offices now just don’t manage high income group families, but also offer capital to start-ups. Having a family office back you up has many benefits.
Unlike the other investors, family offices, sees your business as one with a long term future. Therefore their investment plans and game plan will be from that perspective. One must also select these offices carefully as the working experience can vary largely depending on whom you are working with.
Lastly, family offices, don’t only function in investment area, but are also professionals in legal, insurance, real-estate, business and tax disciples. They combine their expertise in wealth, assets, lifestyle, cash and risk management to help entrepreneurs with not only their business, but also personal finances and set them up for the future on paper. (financially speaking)
Accelerators and Incubators
Accelerators and incubators are more mentors and a much lenient version of VCs. Accelerators among the various applications and business projects they receive selects a couple of them and gives them a small amount of seed capital. In return, they except an equity share from your business.
They are given training by mentors within the accelerator program.
These mentors can be VCs, industry experts, startup specialists etc. Accelerators are mainly focused on growing and scaling of the business.
Incubators, on the other hand are interested in the innovative side of things.
According to an article on TechRepublic, “accelerator is a greenhouse for young plants to get the optimal conditions to grow, an incubator matches quality seeds with the best soil for sprouting and growth.”
Incubators help entrepreneurs give direction to their ideas. They help out from coming up with feasible ideas and making a business plan to getting a team and managing the team in the right way.
These are the various types of investors that could benefit and help in the progress of your business setup. These investors will be able to help you out with the locations (eg: freezone areas like DAFZA, or mainland area), your ideas, connections and other resources.
However, you need to analyse and explore your options further to find investors that are compatible with you and your ideas, to run a happy successful business organisation.