Looking for early-stage funding?

Raising money has always been difficult for startups, especially when you are just starting out. It is just you, your team, and a prototype product that you have created. However, investors are usually looking for an already established product or service that has already gained some traction in the market. In other words, they want to see validation from your customers that your product is helping them, and that they would be willing to spend money on it.

But, who are the investors that are willing to take a leap of faith with you, in order to get your early stage startup off the ground? This article will focus on these exact investors, who are willing to write one of the first cheques into your company and aid you along the way – family and friends, angel investors and angel groups, accelerators, and venture capital firms.

1. Family and friends

Before raising any outside capital, founders usually put their own money on the line in order to build their product or service. You will be in a much better position for fundraising purposes if you can show that you have already built a sustainable product that has seen some market validation, which will increase the likelihood that you are able to raise funds.

However, most people do not have a large amount of funds available to start their own business, as it is a capital and time intensive endeavor. Hence, it might be a good idea to turn to family and friends – who already know you for a longer period of time, and can vouch for your abilities – to invest in your business. They are often more willing than outside investors to take the leap, as they have known you for a longer time.

2. Angel investors and angel groups

After having built your prototype and go-to-market strategy, angel investors and angel groups are often willing to invest in your startup. Angel investors are not full-time professional investors, but rather wealthier individuals that invest in startups on the side. They might be higher ranking employees at well-known companies, or previous startup founders that have exited their own startup, and have money to invest.

Angel groups, on the other hand, are institutions that allow multiple investors to co-invest in your business. Great examples of these, in the region, are Dubai Angel Investors, VentureSouq, Cairo Angels and WOMENA. Again, these angel groups and individual angel investors are often the first cheque that you will receive.

3. Accelerators

Aside from the individual and institutional investors, accelerators provide a slightly different investment model. Unlike other investors like angels and venture capital firms, they do not invest on a case-by-case basis, but rather take in a so-called cohort of startups, which they then accelerate. During the acceleration process, they provide startups with some starting capital, as well as hands-on guidance and training from industry professionals. Accelerators focus on early-stage startups for that exact reason, as early-stage startups require guidance in a variety of different ways. Well-known accelerator programmes in the region include Flat6Labs, TechStars, and StartupBootcamp.

4. Venture Capitals

Last, but not least, are venture capital firms. Usually, venture capital firms are associated with slightly later-stage investments, as they invest in well-known startups such as Careem, Souq.com and Fetchr. However, some venture capital firms have a mandate that includes early-stage startups as well, and will co-invest alongside angel investors and angel groups.

Venture capital firms are professional institutions that focus specifically on startup investment and startup growth, for which they have a large support network of institutions and partner services. Through this large network and in-house expertise, venture capital firms are able to aid your startup with go-to-market strategies, business models, marketing, hiring, and many other things, which is why many startups choose to opt for venture capital funding during their journey. Well-known venture capital firms that invest in early-stage startups are 500 Startups, through its local 500 Falcons fund, and Arzan Venture Capital.

All these investors, be it family and friends or professional ones like venture capitals, they are willing to invest in your startup early on, but that does not necessarily mean that they will. You will have to have a solid business plan in place, along with the amount of money that you would need to execute this plan. When you have that, and show your genuine passion for the project that you are working on, many of these investors are willing to take the leap of faith and support you on the journey to create the next unicorn in the Middle East.