The Jobs Act is easing restrictions around US venture capital funding but, despite the introduction of AngelList Syndicates, truly crowd-sourced funding remains prohibited. That’s not the case in the Middle East where a platform called Eureeca is helping startups from the region raise funding from members of the public anywhere in the world.
I met the company at the Dubai Tech Nights event during the recent Geeks On A Plane trip* to the Middle East, and was intrigued by the world’s first global crowd-investing platform, which launched out of beta back in May.
Eureeca borrows some cues from Kickstarter, the popular crowdfunding platform for products, with its approach. Businesses that are accepted to Eureeca have a 90-day ‘window’ in which to raise their designated funding goal.
Investors, who must be aged over 18, can put in as little as $100, though each company sets its own minimum investment threshold — and the higher the minimum, the greater the chance of quality investors. As with Kickstarter, all money is returned to investors if a project fails to reach its target in time, while those that do hit (or exceed) their goal provide the agreed equity to their backers.
There are currently seven companies listed on Eureeca: ranging from OpenDayz, which has 88 days to raise $60,000 for its fashion-focused social marketplace, to Nabbesh.com, a skills marketplace for the Middle East that already hit its $100,000 target via 23 investors, who will share 6.67 percent equity.
Ibrahim Tadros, head of sales and business development at Eureeca, tells TNW that more than 600 companies have applied to be listed on the platform, but research and due diligence whittled the figure down to around 60. To date, nine companies have been featured so there are plenty more deals to come.
Explaining the selection criteria, Tadros says businesses “have to exist and be operational” and are those that have graduated the “the tough startup phase” and are seeking cash to grow to the next level:
“Mostly we find that the best fits are consumer-facing businesses that have an existing network they can leverage during their fundraising campaign. All the businesses currently on Eureeca have existing networks and large subscriber bases — Foodlve, for example, has over five million unique visitors a month.”
The average funding target is between $50,000 – $250,000, and companies typically part with around 10 percent equity. Tadros says the average investor puts in around $5,000, but the figure varies from project to project.
These stats suggest the platform is performing as a valid stand-in for a seed (or bridge) round, with the added benefit of (potential) publicity and a diversified set of investors. Interestingly, some of the companies on Eureeca came out of regional accelerator programs — like Jordan’s Oasis 500 or Tahrir2 in Egypt — which adds further credit to Eureeca as an option for seed-stage startups.
Tadros says the team has been pleasantly surprised with the reception it has received from the existing community.
“We initially were not sure how VCs, incubators, angels and others would respond to crowd-investing, however what we have found is that they all find a way for it to fit,” he explains:
“Incubators have really encouraged their startups to take on crowd-investing as a great way for them to continue to grow and scale. VCs as well have been very supportive — they have come to us with a list of startups that are too early-stage for them, or have even wanted to co-invest where they have a portfolio company that they want to reserve a portion of the investment for the crowd.”
Eureeca is open to startups from
the Middle East only anywhere, and investors — who are vetted before being able to invest — can (and do) come from across the world. (Update: Eureeca tells TNW it is talking to “companies based in several countries in Europe and South America.”)
“We have had investors from over 20 countries globally, including the UAE, Saudi Arabia, Jordan, Kuwait, Belgium, the UK, Italy and Singapore,” Tadros reveals.
Each part of the word has unique legal and culture issues, but there’s plenty of food for thought for the US, and indeed global, investment community here. The startup funding scene in the Middle East is less developed in the other places, but angel investment and accelerator options are growing — thus Eureeca is an interesting channel that is just getting started.
*Disclosure: 500 Startups paid for my travel and accommodation during the Geeks On A Plane trip… they have no input into what I write about. Even if they did, I wouldn’t listen :)
Headline image via 401(K) 2012 / Flickr