Chris Thomas, co-CEO and cofounder of equity crowdfunding platform Eureeca, has sat at both ends of the proverbial funding table. He has had to raise money as an entrepreneur and also select the right businesses to fund as an investor. When Thomas and cofounder and co-CEO Sam Quawasmi launched Eureeca, with offices in London and Dubai, the goal was to create a premier league of sophisticated investors and match them with entrepreneurs in the region seeking early-stage investment.
Unlike other crowdfunding platforms, Eureeca specializes in equity investment. If crowdfunding is the umbrella term for debt funding or reward funding, crowdinvesting describes the equity side of crowdfunding. At Eureeca, entrepreneurs and investors are put through a stringent vetting process before it is determined who can join the platform. For its first class of companies, Eureeca chose 60 businesses out of 3,000 applicants. With more than 14,000 active investors, the average investment amount is $5,800.
Calling the platform an “end-to-end funding solution,” Thomas said Eureeca gives entrepreneurs “both the tools and the knowledge they need to maximize the chance of raising money.” Meanwhile, it gives investors “a chance to understand how to invest, because if they understand and invest, they are probably going to invest more, [granting] entrepreneurs access to more investment opportunities.”
As the first company to obtain a crowdfunding license from the Dubai International Finance Centre, Eureeca – in the person of Thomas – laid out for Wamda everything from the right time for entrepreneurs to crowdinvest to what they should expect from the process.
Investors are waiting for new opportunities. Investors are coming to us and asking for guidance on accessing interesting businesses or asking the right questions to these businesses because they are bored of investing in alienating stocks like Google or Facebook. They want to invest in local ventures, like a yoga studio or a nursery. There’s an immense pent-up demand.
Crowdfunding should not be your second or third choice. It should be the first place you go to try and fix your funding requirement. In the Middle East, the concept is still being socialized. Crowdfunding is essentially the online mechanism for raising money. If you are raising $100,000 or $10 billion, join a platform to see what they can do and you’ll be surprised at the support. By bringing the fundraising online, you reduce the amount of time and effort you put in and increase your reach to potential investors, including access to crossborder investments.
It works best for businesses with a consumer-facing element. People need to have an emotional connection with your business. It’s not going to work for a steel factory in Ras al Khaimah [an outlying emirate in the UAE]. If you have a product that’s already being distributed and there are people who know and love your product, they are the ones that can be converted from lovers of your business to investors in your business.
It’s perfect for non-traditional businesses. Some businesses can never raise money through traditional routes because they fly beneath the radar. No VC is going to invest in a yoga studio, because there are 500 of them. Many businesses with great ideas and great opportunity just can't get the money to expand, grow, and scale. Crowdinvesting platforms bring businesses online and give them a megaphone to shout loudly to mobilize people who know and love their product, and enable them to invest in your product.
Regular fundraising prep applies. Be sure that you have a strong network and that you are constantly building your contact list. Don’t waste your interactions. Find those who can refer you to investors. Your business plan should be readily understandable, because a potential investor can click away from something much quicker than from someone's face. When you are trying to pitch online you need to have a succinct message. Find your lead investor, because everything is about validation. They have got to have raised money before they have come on. The simple reason for this is that nobody eats at an empty restaurant. No matter how good the food is, if you walk by an empty restaurant you are not going to go in.
If you are not ready to raise, then don’t. If you are not at a point where you are building traction and are ready for growth, it’s not the right time to raise money. If you are two months away from running out of money, it’s not the right time, because you have no other choice. That is going to work against you in terms of raising because the end is nigh. Every investor can smell that and will use that to their advantage. You need to show growth momentum when you begin raising. So start a lot earlier than you think you need to. The best time to start is always six months ahead.
Asking for investment is different from other fundraising. There are two key ways you ask [people] to invest in your business. One is debt or peer-to-peer lending, and the other is equity. With the former you are persuading the lender that you are going to be able to pay back the money. With equity, you're going to have to persuade someone that not only you are going to stay in business, but you are able to grow the business significantly. The base is going to be much higher when raising equity crowdfunding than any [other kind].
Speak to other entrepreneurs. The one thing about entrepreneurs is that they are very social in the community they are in. Whenever an entrepreneur raises money at Eureeca, we introduce him to alumni who can explain where he went right or wrong and the best way to raise. We have heard every conversation and every objection possible. Investors usually ask the same questions in different ways. The entrepreneur needs to figure out his business and be able to assure the investor [that] he’s thought about the possible problems, that he’s started fixing them, or at least he’s working on fixing them.