With the global financial crisis of the last few years more and more people and companies found it difficult to raise capital for their ideas and projects. The more conventional means of raising capital proved to be impossible for most. Banks were very risk-averse to provide credit and the rules and requirements of setting up investment funds make it very difficult and expensive to get funding. These developments spurred the creation of a new way of funding projects: Crowdfunding.

Crowdfunding is the practice of funding a project or venture by a large number of people. The people looking for funding usually publish their idea on a crowdfunding website where they pitch their idea or project. Typically investors are rewarded with the finished product that the company or person is looking the investment for, for example a watch company looking for an investment to fund a new type of watch will reward the investors with the watch when it’s finally produced.

Crowdfunding offers an interesting opportunity for startups to get the capital needed to actually start up. Some recent examples of successful crowdfunding projects are the funding of the game ‘ Star Citizen’ which so far has managed to raise $93.000.000 and the funding of the ‘ Pebble Watch” which raised $20.000.000.

These projects are usually funded by enthusiasts that want the proposed product to become reality. The return of investment of traditional crowdfunding projects is the proposed product itself. Crowdfunding projects normally do not offer the investors equity in the company or project itself. This concept itself seems to limit the audience of a successful crowdfunding campaign only to people who are interesting in the product or project. Investors are not rewarded with shares in the company so there is no financial gain to be had by them. This limits the potential group of investors which for the crowdfunding project of a startup.

Dubai is attracting many young entrepreneurs with start-up ideas in the hope to make it big here. Naturally the crowfunding movement took off in Dubai as well. There are now companies facilitating equity based crowdfunding, eg by providing a platform for crowdfunders to invest in startups, while they perform the due diligence and sit on the board as independent directors ensuring the interests of the crowdfunders are protected. Come and join the crowd!



You might also be interested in:

• Six things to understand about setting up a business in Dubai.
• Discover how you can use the RAK Offshore company as a holding company.
• Interested in buying real estate? Can a company buy a property in Dubai.
• Learn about the different offshore companies in the UAE.