Crowdfunding – The Key to Inclusive Investment in MENAPT

Crowdfunding is a fundraising practice to collect chunks of funds from a large pool of individuals who come together and support a specific aim or project, mainly through electronic portals, and involving various sectors, including seeking capital for startups, political and social campaigns, and charity works. 

In recent times, crowdfunding has emerged as one of the effective tools to prevent innovative ideas with the potential to shift paradigms into vain. This financial tool is transforming the landscape of fundraising for startups, especially in the MENAPT region (Middle East, North Africa, and the Persian Gulf).

In tough economic situations and declining interests of VCs in early-stage startups, this innovative method gives breathing room to small self-started ventures by gathering financial support from a large group of individuals through electronic platforms, enabling entrepreneurs to turn their ideas into reality.

This article aims to help early-stage startups and entrepreneurs learn and explore diverse options of fundraising in the form of crowdfunding, its increasing popularity, and how FinTech, EdTech, HealthTech, LogTech, Sustainability Tech, and some other booming trends of tech startups in the MENAPT region can leverage this option to ensure survival and accelerate growth.

The Rise of Crowdfunding

The surge in crowdfunding’s popularity is apparent in the overwhelming number of campaigns conducted in recent times. However, for startups in the MENAPT region, crowdfunding has emerged as one of the most promising options for early-stage startups to build the prototype of the solution and early revenue plan around the idea. This helps in building enough support to garner the attention of the potential investment from Venture capitalists or Angel Investors.

Diverse Methods of Crowdfunding

Crowdfunding has become a particularly attractive avenue for securing the necessary capital to bring innovative ideas to life. Following are some of the most recommended options for crowdfunding for startups:

Debt Crowdfunding

It consists of Peer-to-peer (P2P) lending or invoice financing, where contributors are in one way or the other, lenders to a project or business. 

Equity Crowdfunding

It is different from traditional crowdfunding in that by investing their capital, individuals get a real stake in the ownership of the business. This is a higher level of commitment than regular crowdfunding transactions. Startups often resort to equity crowdfunding because this option is popular with businesses aiming to raise funding and develop their equity ownership structure. 

Reward-based Crowdfunding

This type of crowdfunding is a different approach where supporters contribute to a particular project or event and are awarded with non-monetary items. Instead of financial returns, backers get something that they will enjoy. This form of crowdfunding can mostly be found in creative projects and product launch cases, which allows creators to connect with their supporters by providing valuable gifts.

Venture Capital vs. Crowdfunding

Unlike crowdfunding, venture capital (VC) involves huge sums from institutional investors. Crowdfunding platforms such as Seedrs or Crowdcube give a chance to invest as small as $100, unlike VCs that require massive investments. On the other hand, the type of due diligence that VCs use in accessing elite deals may be traded off for an opening up of numerous opportunities for crowdfunding.

Mind The Funding Gap: Challenges in MENA Tech Growth

The MENA region has seen astonishing growth in the technology ecosystem in the past years. Many technology ventures were pushed into positive paths by early-stage investors. Nevertheless, among the mentioned companies, there is a significant problem that manifests as they get into growth phases – approximately twenty billion dollars of venture capital for mature-stage development. It leaves a gap that can undermine this tech sector momentum, especially when there are limited jobs available in the market. 

Tech journey in  MENA over the last five years had institutional backing and saw more than 2000 startups funded with over $9.0 billion in equity. Significantly, over 220 viable firms have raised Series A funding and above, which ushered the area into the maturity stage.

There is a large funding gap despite the fast-rising number of expansion-stage organizations. It is ten times costlier than the early stage’s growth-stage segment. Surprisingly, the risk profile of growth-stage. ventures are relatively low, thus making them viable options for investors who are ready to inject large sums of money.

The primary issue at this stage is that the average assets under management (AUM) at growth stage funds are much larger than at the early stage of the funds. So, it needs a lot of money to build up, and that is borrowed from institutions like sovereign wealth funds and other pension funds. Although these institutional investors prefer successful exit tracks, MENA growth stage funds are young and challenging.

Crowdfunding the Future: A New Avenue for Tech Development

That’s when crowdfunding emerged as a global solution to break this circular dependency. Crowdfunding can be used to create a level playing field for investment in technology ventures by allowing different types of investors to participate. This aligns with principles of inclusivity and innovation, opening a new era of tech investment in the MENA region.
The governments are very crucial because they support the crowdfunding ecosystem. The flow of capital to growth-stage companies can be encouraged by initiating activities aimed at crowdfunding, legal regulations protecting investors and incentives to crowdfunding platforms. Aside from the monetary support, this government support is indicative that the state is dedicated to the thriving of the tech environment.

Globalizing Finance – The Borderless Influence of Crowdfunding Platforms

Crowdfunding is not just a local phenomenon but a worldwide chance. It has been shown by platforms such as Kickstarter and Indiegogo that collective investment is compelling. On these platforms, people with different contributions can afford to invest in these projects. Governments of other nations should also create regulatory frameworks that will ensure investor protection while still providing room for the flexibility necessary for crowdfunding platforms to work.

In addition, the union of crowdfunding and technology is revolutionary. Transparency and security in blockchain technology deal with the problem of fraud and misappropriation of funds. Smart contracts can offer automated investment processes hence being efficient and transparent.

Ultimately, crowdfunding offers the chance to fill investment gaps, particularly in developing markets like MENA encountering growth-stage funding difficulties. Governments, institutional investors and crowdfunding platforms must work together to create a favourable environment. Crowdfunding will help to solve the issue of funding gaps, as well as provide the global community of investors a chance to participate in the subsequent generation of technology breakthroughs.

Innovate, Fund, Thrive – MENA’s Journey to Global Tech Prominence

The MENA region has an opportunity to take advantage of the global crowdfunding revolution and unlock its full tech potential. MENA can address these funding challenges and foster an inclusive culture for participation in the development of its technology sector by leveraging the collective strength of the crowd. Effectively embracing the global possibilities associated with crowdfunding may result in a total revolution of technology investment in a way that is more inclusive, cheaper, and effective for world economies.

Dastak’s Part in Your Crowdfunding Needs!

Crowdfunding has proven to be a game-changer for startups in the MENAPT region, offering a flexible and dynamic means of raising funds for innovation. Whether through debt crowdfunding, equity crowdfunding, or reward-based crowdfunding, entrepreneurs can access capital, shape ownership structures, and build meaningful connections with their supporters. 

As the crowdfunding landscape continues to evolve, startups in MENAPT are well-positioned to leverage this funding option to propel their groundbreaking ideas into reality. And, Dastak is here to connect you to leap into the arena of MENAPT with your tech startups. Interested in learning how can we assist you, here’s the link to book a meeting with our Fundraising experts.

Start Scaling with Dastak!