Explained: How will the new crowdfunding decision boost the UAE start-up ecosystem

The approval of the exemplary crowdfunding decision by the United Arab Emirates (UAE) Cabinet has been an important topic of discussion since its announcement. The new set of regulations allows both the public and private sector to engage in crowdfunding activities to raise capital for their businesses.

The new strategy is being deemed as a milestone decision that is about to change the start-up and entrepreneurial ecosystem in the UAE. It is designed to create avenues for the private and public sectors in the country and allow them to support financing for their innovative business ideas. The announcement was made by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister of the UAE, and Ruler of Dubai last month and instantly caught the attention of the business community worldwide.

The decision is an important step, especially given the popularity and acceptance of it as a funding option globally. Recent research has shown that the crowdfunding market is projected to grow to $300 billion by 2030 and that a successful crowdfunding campaign raises an average of $28,656.

كما اعتمدنا في مجلس الوزراء اليوم إجازة ممارسة نشاط التمويل الجماعي Crowd funding وبأن يكون له مشغلين من القطاع الحكومي والخاص .. التمويل الجماعي من أفضل الوسائل لدعم تمويل الأفكار الابتكارية التجارية الجديدة .. وسيفتح باباً للشباب ورواد الأعمال في تمويل أفكارهم .. pic.twitter.com/7PEfmozn0z

— HH Sheikh Mohammed (@HHShkMohd) March 21, 2022

So, what is this financing alternative all about? Crowdfunding enlists the public to help fund innovative and disruptive ideas for enterprises and new companies. Individual and institutional investors and their intermediaries can now fund a start-up idea in the UAE. A large number of people, investors, and institutions can pitch in to get a concept started, pump in funds to materialise manufacturing, or help a company take the next step in its entrepreneurial journey.

Let us now look at some of the benefits this new government decision brings to small and medium-sized businesses and their role in further strengthening the already burgeoning entrepreneurial ecosystem.

1. A boost for innovative ideas

Crowdfunding will now allow many innovative ideas to test the waters and jump into the business world. As an easy financing option, it allows disruptive and out-of-the-box ideas to overcome the challenge of financing, which is cited as one of the major reasons for many business ideas’ failure even before they start. So, if you have been working on something innovative in the UAE but have always been afraid of taking that first step, now is the time.

2. Financing option that works

In the UAE, with the new crowdfunding strategy, aspiring and potential entrepreneurs now have a chance to make their ideas work. Crowdfunding is also a much more effective way to raise capital than traditional funding options. For an early-stage firm, especially, while the focus remains on growing the business and securing the base funding, it is hard to have the time, resources, and attention to devote to the grind that traditional financing requires. On the flip side, setting up a crowdfunding campaign on online platforms is significantly more effective. 

3. Support to new SMEs

Given the benefits, crowdfunding is an incredible support to SMEs. The UAE’s SME ecosystem, coupled with all the other support the country offers in terms of infrastructure, world-class technology, and visionary leadership, is all set to see extraordinary growth in the coming years.

4. Financing that doubles as a marketing exercise

The fact that you have a huge number of people funding your idea online, means that you get to spread the word at a pretty early stage. This allows you to cover the basics and foundations of marketing for your start-up. It is also a good way of knowing the overall response your idea might get in the market before it is actually launched.

Are you thinking of taking the first step? Do you have any more questions about crowdfunding and how it can help your business take off? Let us know and we’ll be happy to assist you.