Dubai: The floodgates have not exactly opened up, but local online start-ups are now finding external funding support is available, if they look closely enough and if they have a track record to show. The easing up of funding help comes at a time when a raft of online ventures have gone live in the last six months in the UAE.
TravelerVIP.com, which styles itself as an online travel club and launched in Dubai last year, has just confirmed $1 million from its seeding round. The new funding is led by Beco Capital, a venture capital firm, and a consortium of angel investors.
Last September, the fashion portal Namshi.com, which launched in 2011, secured $20 million from JP Morgan and Blakeney Management in one of the bigger funding plays in the region’s online space.
But industry sources are divided over whether it has suddenly turned easier to pull in outside financial support. While the online universe has seen its fair share of new entrants, there have also been some notable busts, especially among daily-deal portals. That has stayed investors’ hands from dipping too deep in the online pool.
“Third-party funding support in the region is somewhat limited, especially in the online and e-commerce sector,” said Rabih Ghandour, CEO of Wamli.com, which specializes in design-intensive products and launched late last year.
“It exists, yes, but it is subject to a substantial amount of due diligence. In addition, it involves specific skill-sets when it comes to the people working in this industry and it tends to, therefore, become niche.”
Promoters of recent start-ups have dipped heavily into own funds – as was the case at Wamli.com - or, if they could, tapped a small pool of angel investors, which was what happened at Desado.com, another recent launch.
The promoters’ overriding intention is to get the business up and running and thus, hopefully, create proof of viability to interest likely funding at a later date. But it is not as easy as it may sound.
But once the proof is put up, connecting with an investor is much more likely. This is what happened at TravelerVIP.com, which initially went live with private sales that offered members up to 50 per cent discounts at luxury hotels. It has since expanded the service to include a collection of more 1,000 hotels that are curated by its Arabic and English editors and come with perks such as Wi-Fi or complementary upgrades and a lowest rate guarantee.
Mohammad Chbib, founder of Desado.com, which specialises in home décor and designware, is excited about the shift in dynamics when it comes to third-party funding of online ventures.
“Historically, as the Middle Eastern investor scene had focused mostly on real estate and foreign blue-chip company investments, the refocusing on local talents and start-ups has taken a certain amount of effort in terms of changing the investor mindset,” said Chbib.
“I wouldn’t say the requirements have become more stringent, but people are gaining more experience as the sector continues to mature. They are getting more comfortable with the idea and proof of its success lies in the fact that the region has seen a couple of good growth and exit stories — a strong confirmation that a concept has been successfully implemented.”
Some individuals – the so called “super angel investors” — take investment decisions quickly when they like an idea and the team of entrepreneurs and decide to back it fully. Others prefer a more cautious approach that involves looking more at the feasibility of the business plan as well as the background of the co-investing parties.
“No one way has proven to be more successful than the other,” Chbib said.
That may be, but promoters of online start-ups can take heart from the fact that funding resources are there at the very least. All they need to focus on for the present is to get their portals up and running in the way they should be.
The region’s web universe is there for the taking.
