Regional start-ups struggle to get ‘smart money’ from investors

Entrepreneurs in the region are still facing a challenge to get investment for their start-up companies, according to the founder and CEO of online marketplace Mini Exchange.

Speaking to Gulf Business on the back of a $3m investment round at the end of last year, Sarah Jones believes securing funds is still a hurdle for entrepreneurs looking to get their initiative off the ground.

“I do think it’s still a challenge in this region to get smart money quickly and have access to that – especially when you don’t have a proven business model,” she said.

“I think there’s probably less risk appetite here than there is in other parts of the world, with people wanting to invest more in a proven business model than in a start-up.”

Mini Exchange’s latest investment will go towards expanding into new countries including Kuwait and Qatar, launching an English and Arabic app, and growing the team which has already gone from four to 24 people in 12 months.

Jones believes the company’s track record and existing foreign investors made it easier to secure the funds.

“I think that this round was easier because we’ve done a good job over the past year, so we had the follow-on funding from our original investors.

“Also, having UK investors gave Middle East investors more confidence – they are sophisticated and well known investors, so I think that definitely helped.

“But I do think that raising solely from this region is a challenge when you’re starting up because there isn’t really a lot of seed capital money here.”

Launched in 2014, Mini Exchange started life as a platform for parents and brands to sell high-end kids wear items. But following a $1.1m funding round in 2015, the company diversified and grew into a marketplace of around 850 brands and 44,000 products catered to mothers and children including fashion, beauty, house and home items and toys. It also features a blog and online community.

And while Jones acknowledges that various start-up challenges persist, the region’s entrepreneurial ecosystem has developed enormously since the company was born.

“There’s a lot of red tape in terms of starting a business and the capital that’s needed – whether that’s setting up a company, getting visas, getting an office, and so on.
“It’s a challenge out here that isn’t necessarily in other parts of the world.

“However, once you are set up I don’t think it’s an incredibly hard place to operate. And in terms of the entrepreneurial spirit here, it has grown dramatically over the course of the past couple of years.

“The angel networks, the accelerators that are available, the events, and so on. I speak now at a lot of events that didn’t exist at the beginning that I would have loved to attend – hearing some of the horror stories you go through at the beginning.

“I definitely think that it’s now an environment where people are coming and it’s where a lot more talent is coming.”