Dubai: Starting a business is not an easy feat by any means, especially with regards to finances. Self-funding can only go so far, even with healthy returns or profits from the start-up.
With so many fresh entrepreneurial ideas surfacing during COVID-19, the race to attract investment intensifies, particularly for those not able to self-fund for the long-term.
While a knowledge base of business fundamentals is essential to keeping your start-up ahead of your competition, being prepared to deal with hurdles is paramount to attracting investors and stakeholders.
Here are some tips to attracting new investment or funding when you and your start-up needs it.
Entrepreneur Tip #1: Invest in a market research campaign to improve your brand’s visibility
There are several ways to get ahead of the game when it comes to securing funding for your new start-up. The focus first should be the brand.
A brand is bound to be successful if the target audience or customer base is currently looking for a solution for an existing or persistent problem.
As building a brand for a local community won’t attract enough investment, knowing how a global audience can be reached with the product or service can ensure external funding to keep growing.
This is why investing in a market research campaign prior to developing the product or service will help build the brand’s foundation and prospects to excel in the long run.
The role of a market research campaign is to know the product or service and its positioning in the market, to determine which market segments to target, to understand the customers' perceptions of the product or service and to gain perspective on how a product or service fits into their lifestyle.
Insight Scouts, Eksen, Bridge Maker, C&O Marketing, Accel Knowledge are the names of some of Middle East- and UAE-focused market research firms operating in the GCC region.
Entrepreneur Tip #2: Entertain all potential investor questions with an airtight business plan
Having internal processes and a reliable business model in place is a must for any venture or start-up seeking funding. Questions from investors cannot be avoided, even if they point to any minor details.
This is fair, considering they are putting not only their money but their trust in you and your venture. Entertain all questions, but also ensure that the business plan is airtight with minimal room for doubt.
A simple yet detailed format of a business plan is required to keep investors interested. It is imperative to include all the key points in an ‘executive summary’, which is laid out at the start of a plan for the investor to understand easily.
Incorporating numbers (like how much money was made, what was the profit margin etc.) that show success of your business to date, as well as any assumptions (like revenue or profit forecasts), is crucial to attract and maintain investor interest.
Investors are often seen as mere means to start-up capital or funding, but it is important to get to know their view of the product or service.
Should they have criticisms of the product or service, take it into account and incorporate it into future strategies and prospect proposals to strengthen the product or service’s brand and market defence.
An advice to keep investors informed is update them on the status of funding, how new capital will be used in the start-up with a plan on how it will attract customers, and where you expect the investment to be before closing a round of funding. The transparency helps manage expectations as well.
Entrepreneurial Tip #3: Set up financial forecasts to help understand cash flow, spending patterns
While a financial track record and business plan is likely the most basic aspect in building a start-up and attracting investors, setting up financial forecasts help understand patterns in cash flow and spending.
This should be set up to be completed monthly, for a year or two at least, which would help predict seasonal fluctuations in your start-up’s finances.
A financial forecast is simply another asset that shows promise of the product or service to potential investors. A basic balance sheet, profit and loss account, and cash flow statement at the very least are essential to present to investors.
A basic yet obvious factor to account for is how well the product or service will do to make money through customers, as opposed to investors. If a product or service relies solely on an investor’s funding, it isn’t fit for the market.
There needs to be evidence that the product or service has done well beyond the vindication achieved by investments received through crowdfunding platforms and can sell in the real world.
This not only helps to build a reputation for the product or service, which in turn lures investors, but also shows potential sponsors that their trust in the product or service is not misplaced.
Furthermore, acquiring customers will provide a chance for real product or service feedback – be it positive or negative. In essence, it’s free and real-time market research!
Entrepreneurial Tip #4: A marketing strategy will call for the need for an ‘accelerator’ program
As the purpose is to build your brand and attract investors, a marketing strategy will build a reputation for your product or service that gives the start-up and its entrepreneur a leverage with investors.
But alongside securing funding, there are many other factors to consider when starting a business. From building a minimum viable product or service, to hiring a team, it is crucial to keep on top of the minor details to ensure nothing slips through the cracks.
This is why joining an accelerator program gives developing companies access to knowledge, network, mentorship, investors and other support that help them to validate their financial assumptions and growth forecasts.
They are programs of limited-duration – lasting about three months – that help start-ups during the launch stages by provide a small amount of funding, plus working space.
Incubators ‘incubate’ new business ideas with the hope of building out a business model and company.
They too assist start-ups with the preliminary stages by providing free or low-cost workspace, mentorship, expertise, access to investors, and in some cases, working capital in the form of a loan.
Both programs are similar in how they work, but while accelerator’s primary focus is to scale a business, incubators are often more focused on the business idea or how to innovate the start-up. Accelerators also aim to get start-ups ready for investment more quickly than traditional incubators.
Some examples of start-up incubators in the UAE include Dubai Technology Entrepreneur Centre (DTEC), Astrolabs (partnered with the Dubai Metals & Commodities Centre (DMCC) and FinTech Hive by the Dubai International Financial Centre (DIFC).
Some accelerators in the UAE include Dubai Smart City Accelerator, Dubai Future Accelerators, Impact Hub, In5, which has had partnerships with the Dubai Institute of Design and Innovation (DIDI) and the Dubai Design and Fashion Council (DDFC), and Abu Dhabi’s Flat6Labs, among many others.