We wish running a startup was like eating cake, but we know it is more like baking a complicated French pastry. It is a fact that most startups fail in the first 1 to 2 years. The long list of reasons includes inadequate market fit or lack of demand. However, the lack of funds stands out the most and is the root cause of other reasons.
That’s why seed funding for startups is essential to help them kick start their journey, especially in growing startup hubs like the UAE, and secure more funds in the later stages. But how does an entrepreneur raise seed funding when they might not have a product to demonstrate? Worry not; we are here to help you understand how to raise seed funding for your startup in the UAE!
Before we start with ‘how to raise seed funds,’ let’s focus on ‘where to raise seed funds.’ Seed funding is a high-risk, high-return investment; a few are willing to take the risk. Therefore, it is crucial to understand your sources for seed-stage startup fundraising to create appropriate strategies.
What are the sources to raise seed funding for startups in the UAE?
There are diverse sources for seed-stage startups to raise funds.
Angel Investors:
HNIs who invest in seed-stage startups for equity shares and offer expertise to boost startup growth. For example, Dubai Angel Investors and Falcon Group help you network with angel investors.
Early-stage VCs:
Some early-stage VCs specialize in supporting early-stage startups with high-risk investments. A few early-stage VCs in the UAE are Global Ventures, Wamda Capital, and BECO Capital.
Incubators & Accelerators:
The UAE incubators and accelerators provide a supportive environment, guidance, and resources like funding for startups to grow. Hub71 is one of the top incubators in the UAE.
Government grants:
The UAE government actively supports startups through grants and funding programs without equity dilution. The Mohammed Bin Rashid Fund (MBRIF) and the Abu Dhabi Investment Office (ADIO) are a few government programs and initiatives.
Crowdfunding:
Startups with strong community presence can raise capital through crowdfunding. Eureeca and Beehive are popular crowdfunding platforms in the UAE.
Corporate funding:
Corporate venture funds, strategic partnerships, and industry-specific accelerator programs offer startup seed funding, resources, and market access to early-stage startups.
How do you approach investors for seed funding in the UAE?
Convincing UAE investors to invest in your startup at the seed stage can be tricky, especially in the growing UAE startup ecosystem. However, a few tips will help you improve your probability of securing seed funding for a startup!
Build a scalable business model.
The early-stage startup might lack the numbers to prove the legitimacy of their startup. However, what they can prove is their path to achieve their goals. Whether securing revenue or tapping into the target market, the startup must demonstrate a preferably scalable startup business model they’ll follow for long-term profitability. A realistic business model will help you convince the UAE investors better.
Create an efficient pitch-deck
Your pitch is the only chance to impress the investors and get them to take a chance with your startup. Investors spend only 2.7 – 3 minutes viewing a pitch deck and listening to your pitch for around 20 minutes. However, the attention span of investors can vary. Therefore, keep it precise.
For seed-stage startups, the pitch must describe the problem, your unique solution, and the market opportunity. Focus on creating a precise version of your business model and revenue strategy. Highlight the startup valuation (from thorough research), market traction, and achievements you have gained in the pre-seed stage, showing that customers are willing to engage with your startup and that investors will get good ROI. Put your funding request and the equity dilution you offer at the end of the pitch.
Highlight market research
Investors want data-driven insights that validate the demand for your product or service. Conduct thorough market research and present key metrics like target audience size, competitor analysis, customer traction, and scope of market expansion.
Participate in pitching competitions.
When in the early stage, the pitching competitions can help you raise funds, establish market presence, and connect with potential investors. The pitching competitions also help you validate your idea with advice and review from industry experts and fellow entrepreneurs to improve your business model and market your startup. A few popular startups pitching competitions in the UAE
are Make It In The Emirates (MIITE), GITEX Future Stars, Supernova Challenge, and Green Shoots Startup Pitch Competition.
Leverage networking events
The networking events are the best place for startups seeking seed funding. Whether you want to raise pre-seed funding or seed funding, you must attend startup events in the UAE to understand the UAE startup ecosystem and market trends and build your brand presence. Events like the International Investors Summit (IIS), Dubai Startup Networking Event, and more help you make a network in the UAE to expand your business and find potential investors. Furthermore, they help you learn more about the startup ecosystem of UAE and how you can benefit from it.
Get acquainted with investors.
Building relationships with investors before pitching for funding can increase your chances of success. Engage with them through social media, industry panels, and investment forums to understand their interests and investment criteria. Use this information to create a customized pitch to increase the chances of securing the funds.
Conclusion
Understanding the investment sources and a strategic approach is essential to raising startup seed funding. While you can raise funds from sources like angel investors, VCs, incubators, crowdfunding, and government, each has pros and cons to evaluate before choosing one that’ll benefit you. Leveraging pitching competitions, startup networking events like the International Investor Summit, and building strategic relationships with investors can help you in startup fundraising. Focus on refining your pitch and pitch deck to make the best of the 30 – 40 minutes you’ll get to pitch your startup!
FAQs
1. What is seed funding for startups, and why is it important?
Seed funding nurtures startups in the early stages to conduct market research, develop products, and start basic operations. It is vital for the growth of the startup from the idea. The seed funding enables the startup to bring the business model to life. The seed capital allows a startup to develop the MVP, hire key team members, and get customer traction through initial marketing. In the UAE, seed funding is vital in fostering innovation, allowing startups to compete in a dynamic and highly competitive business environment.
2. What’s the difference between pre-seed funding and seed funding?
Pre-seed funding is used to validate the startup idea and create a pro-type. The pre-seed comes from savings, personal funds, and friends and family. It is the earliest funding for the startup to convert their idea into a business model. Seed funding is the first external funding raised to start operations like production and marketing to enter the market. Pre-seed funding focuses on ideation and initial testing; seed funding supports business expansion and market penetration.
3. How do you qualify to secure seed funding for a startup?
Qualifying for seed funding can be tricky, considering the early stage of the startup. Therefore, investors need more data to make decisions. The startup must demonstrate a high-value proposition through the market traction, demand, and the idea’s scalability to expand quickly and generate revenue. Create a pitch highlighting your scalable business model, market demand, the strength of your team, and realistic financial forecasts. Attending startup and pitching events can give you exposure and the opportunity to connect with potential investors.
4. Can international startups raise seed funding in the UAE?
International startups can raise seed funding in the UAE if they comply with local business regulations and register their startup legally. Many UAE investors are open to funding innovative global startups with high growth potential. Setting up a UAE-based startup, joining an incubator or accelerator program, and networking with regional investors increase the chances of securing funding. Additionally, government initiatives and free zones make it easier for foreign entrepreneurs to access investment opportunities in the UAE.
