Dubai: By offering equity in crowdfunded ventures, the stakes have indeed been pushed higher for investors and the businesses alike. But what would constitute a proper valuation for a business that is still in the very early stage of its operations?
“Proper valuations in all start-ups are difficult for reasons that are well-known,” said Vishnu Deuskar, managing director at Salvus Advisors JLT, a specialist consultancy. “Inevitably, a large element of subjectivity and faith comes in as the probability of success is low and dependent on the entrepreneurs ability to execute, even if the underlying business proposition is good.
“It is tougher for investors to get proper valuations in crowdfunding due to the large number of investors who cannot individually access information or do due-diligence in order to create their own valuations or negotiate the final price.”
To create the requisite transparency levels, Eureeca requires that those listing on the crowdfunding platform must mention the level of equity on offer and the criteria for this must be described in an investment term-sheet that accompanies the funding proposal listed by the business online.
Meanwhile, a new mentoring platform has just come into being in Dubai. The High Performance League (HPL) organizes companies into teams featuring complementary SMEs twinned with larger corporate entities. These teams are then placed in leagues.
“Such a structure enables each SME to collaborate to leverage the skills and connectivity of its fellow team members, while the league structure drives the competitive spirit that holds the teams in place,” said a statement issued by HPL. The likes of Abraaj Capital and Aramex have confirmed their support for the league.
“The big idea here is to bring the spirit of sport and its competitive dynamic to business and leveraging the ‘Hawthorne’ visibility effect to drive leadership, innovation and collaboration, the three pillars of business performance,” said Omer Ghani, founder of HPL.
