17 October 2012
Setting up a new business venture is a dream for lots of people; but unless you're already a millionaire, finding cash to fund your new business is going to be difficult. Banks are increasingly unlikely to loan cash to businesses without a significant track record and unless you're a completely online operation, rents can be difficult to manage.
Former investment banking friends Christopher Thomas and Sam Quawasmi had their own Eureeca moment and have formulated a crowd-investing system that raises the cash businesses so readily need. They both quit their jobs around a year ago to focus on this venture. Thomas relocated from Brazil where he ran a number of companies and Quawasmi left his job as an investment banker in the DIFC.
Most people have heard of crowd-sourcing and crowd-funding, where people, organisations and businesses raise money for causes, in exchange for products or services. But have you heard of crowd-investing?
The Eureeca system allows investors to invest a minimum of USD 100 with no maximum, in exchange for an equity stake in the business.
"The number one reason that businesses fail [worldwide] is lack of access to capital. That obviously affects SMEs. When we looked at the statistics we found that when they raise capital, they do 90% of their hiring," Quawasmi told Zawya. "That in essence solves a broader problem, which is that it helps the economy grow."
For a company looking to raise money through crowd-investing site Eureeca, there are three main stages. First, they need to apply with a business plan and documents that a company would traditionally use to raise funds offline. These documents go to the application committee that identifies if they are in order and whether the prospectus is "solid enough". After the application committee passes it, the paperwork will then go to a third-party compliance agency that carries out all the legal checks necessary.
After these processes are complete, a company's ready to be featured on the site and invite investors to part with their cash in exchange for equity. The company also decides how much information they want to share with the potential investor 'crowd'.
The featured company then has a three-month window in which to raise the amount specified. Unlike some other crowd-funding schemes, if the company doesn't reach its target in that time frame, everyone gets their money back.
Companies also gain feedback from users on the site.
"With crowd-investing, you've got a three-month, ready-made advisory panel from the moment you go online. They can assess your company, identify weaknesses or strengths in your business and comment on those," Thomas said.
"If you have the right mind-set, it's an incredibly powerful tool to get your message out there and that's priceless. We don't have that market validation opportunity under normal fund-raising processes," he said.
The site also offers the feedback of a panel of experts, from accountants and lawyers to venture capitalists that give registered companies advise and pass on their expertise. Registered companies can also offer their own services to these expert third parties.
The site's concept also encourages open forums and discussions and will include online social networking features. Investors can 'share', 'follow' entrepreneurs and other investors (to see what they invest in next) and also embed information on their own sites as well as have links to trusted external social profiles such as Facebook and LinkedIn.
"Once you have raised the money via the crowd, you then have an army of ambassadors - individuals that are selling your product to their friends, selling your message to their families, to get your message out there. The virality of those investors is incredibly powerful. In this day and age, we rely so much on that," Thomas said.
After a soft launch in July, Eureeca is set to fully launch in the last quarter of this year. In the spirit of crowd-funding, Thomas and Quawasmi also raised funds through their own personal 'crowd' to start up Eureeca. They're initially launching in the MENA region, but will look at expansion to other regions in the near future after having enquiries from European and Asian territories.
"The business is great fun and we're in an industry - we're not a me-too business. We're not setting up another shoe shop or sandwich shop. It's an incredibly important business that's going to drive a lot of growth as it develops," Thomas said.
The site currently has 150 registered investors and 80 people on its panel of experts.
Related story: Crowd-investing: Mideast tries new ways to raise business finance in a post-financial crash world
© Zawya 2012
Setting up a new business venture is a dream for lots of people; but unless you're already a millionaire, finding cash to fund your new business is going to be difficult. Banks are increasingly unlikely to loan cash to businesses without a significant track record and unless you're a completely online operation, rents can be difficult to manage.
Former investment banking friends Christopher Thomas and Sam Quawasmi had their own Eureeca moment and have formulated a crowd-investing system that raises the cash businesses so readily need. They both quit their jobs around a year ago to focus on this venture. Thomas relocated from Brazil where he ran a number of companies and Quawasmi left his job as an investment banker in the DIFC.
Most people have heard of crowd-sourcing and crowd-funding, where people, organisations and businesses raise money for causes, in exchange for products or services. But have you heard of crowd-investing?
The Eureeca system allows investors to invest a minimum of USD 100 with no maximum, in exchange for an equity stake in the business.
"The number one reason that businesses fail [worldwide] is lack of access to capital. That obviously affects SMEs. When we looked at the statistics we found that when they raise capital, they do 90% of their hiring," Quawasmi told Zawya. "That in essence solves a broader problem, which is that it helps the economy grow."
For a company looking to raise money through crowd-investing site Eureeca, there are three main stages. First, they need to apply with a business plan and documents that a company would traditionally use to raise funds offline. These documents go to the application committee that identifies if they are in order and whether the prospectus is "solid enough". After the application committee passes it, the paperwork will then go to a third-party compliance agency that carries out all the legal checks necessary.
After these processes are complete, a company's ready to be featured on the site and invite investors to part with their cash in exchange for equity. The company also decides how much information they want to share with the potential investor 'crowd'.
The featured company then has a three-month window in which to raise the amount specified. Unlike some other crowd-funding schemes, if the company doesn't reach its target in that time frame, everyone gets their money back.
Companies also gain feedback from users on the site.
"With crowd-investing, you've got a three-month, ready-made advisory panel from the moment you go online. They can assess your company, identify weaknesses or strengths in your business and comment on those," Thomas said.
"If you have the right mind-set, it's an incredibly powerful tool to get your message out there and that's priceless. We don't have that market validation opportunity under normal fund-raising processes," he said.
The site also offers the feedback of a panel of experts, from accountants and lawyers to venture capitalists that give registered companies advise and pass on their expertise. Registered companies can also offer their own services to these expert third parties.
The site's concept also encourages open forums and discussions and will include online social networking features. Investors can 'share', 'follow' entrepreneurs and other investors (to see what they invest in next) and also embed information on their own sites as well as have links to trusted external social profiles such as Facebook and LinkedIn.
"Once you have raised the money via the crowd, you then have an army of ambassadors - individuals that are selling your product to their friends, selling your message to their families, to get your message out there. The virality of those investors is incredibly powerful. In this day and age, we rely so much on that," Thomas said.
After a soft launch in July, Eureeca is set to fully launch in the last quarter of this year. In the spirit of crowd-funding, Thomas and Quawasmi also raised funds through their own personal 'crowd' to start up Eureeca. They're initially launching in the MENA region, but will look at expansion to other regions in the near future after having enquiries from European and Asian territories.
"The business is great fun and we're in an industry - we're not a me-too business. We're not setting up another shoe shop or sandwich shop. It's an incredibly important business that's going to drive a lot of growth as it develops," Thomas said.
The site currently has 150 registered investors and 80 people on its panel of experts.
Related story: Crowd-investing: Mideast tries new ways to raise business finance in a post-financial crash world
© Zawya 2012
