It’s not an easy gig for entrepreneurs in the Middle East. The banks won’t lend, it’s tough to find investors, red tape is exhausting, and even when you have made a decent fist of your company, the costs associated with going public are colossal.
The irony here, of course, is that small and medium sized businesses (SMEs) are the bedrock of any economy. They are also by far the biggest private-sector creator of jobs, which is particularly significant in a region where millions of young people are entering the job market every year, with only a small percentage managing to actually find work.
So it’s somewhat surprising that regional governments have been relatively slow to see the importance of the SME sector, with plum public-sector contracts generally handed out to the biggest firms. One man that’s hoping to change all that is the much-travelled Dr Nasser Saidi, familiar to those in UAE as the former chief economist of the Dubai International Financial Centre, and a well-known face in Lebanon due to stints as minister for economy and trade, and minister of industry.
Since leaving the DIFC, Saidi has been working on two separate projects, both of which will hopefully do much to help stimulate entrepreneurship in the MENA region. One of those is Eureeca, a crowdfunding platform that exited beta in May, and is now in full gear.
“We’ve forgotten what markets are supposed to be about,” Saidi, who is vice chairman of Eureeca, says. “As investors, we go into exchange-traded funds, somebody takes a decision for us… and we don’t really think about what the companies are doing.
“Here the difference is that you do care, and it’s as if you are part of the company. So you’ll start following them. How many people follow GM, if you’re an investor? You’re one out of maybe hundreds of millions. And your decision makes no difference. For these small companies, it does make a difference, and it’s a bit like establishing a personal relationship.”
Eureeca is a disarmingly simple concept. Companies — whether start-ups or more established SMEs — that are hunting out capital lay out their pitch for a set amount of cash on the Eureeca website. Curious investors have 90 days to question company owners about their product and business strategy before deciding whether they wish to provide funding of $100 or above. If, at the end of the 90 days, the company has hit its target, then it will keep the cash. Eureeca then creates a special purpose vehicle (SPV) which then becomes the investor in that firm.
“So although you might have 500 investors and each of them put in $1,000, the SME doesn’t have to deal with that firm,” explains Saidi. “They all get a share of the SPV, and the SPV then takes a stake in the company.
“It’s a very efficient process — otherwise you would have to register 500 shareholders, and if you were based in the UAE, that would be a nightmare.”
If, on the other hand, the company fails to raise the full amount, then it gets nothing and the money is then returned to the investor. Saidi points out that in a world where capital is scarce, this method ensures that only the best pitches get funded. As it’s less than 90 days since the full launch of the platform, no-one has yet completed the process, but investors from as far afield as Latin America, the Far East and Africa have all expressed an interest.
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