To many it will be surprising to know that some of the largest investments in businesses is happening in the Middle East, especially in Dubai.
Dubai is where the action is and simply by looking at the magnificent construction taking place in Dubai, one can easily conclude that Dubai is attracting a very large investment - not simply by Middle Easterners but by Americans and Europeans alike.
However, before exploring the venture capital market of the Middle East, one should first understand the basics of Venture Capital, which this article attempts to explore briefly.
To newcomers, an understanding of 'venture capital' can be quite daunting. This is especially so given the growth in recent years of a related form of capital raising and investment - known as 'private equity'.
In short, venture capital is the investment made in your business by professional and institutionally backed investors. This can either be in the form of an investment made by a venture capital firm, or by a fund that has been created especially for the purpose of investing in organizations like yours. In return for agreeing to invest in your organization, the venture capital organization or fund will normally take an "equity position" in your organization - in other words, they will become stockholders. In a number of cases, they will also want to take on some form of management supervision role; for example, by having representation on the board of directors.
What separates venture capitalism from private equity is that in the case of venture capitalism the investment made is in a relatively new company with little or no history. As a result, mainly, it is more difficult for this type of business to attract "seed money" by which to grow the business. This is where venture capital steps in - it is more willing to invest in high risk start-up organizations.
There are more venture capital firms today than at any other time in the history of venture capitalism. These companies mainly concentrate in specific areas in which they have expertise knowledge. Traditionally these have concentrated on, or around, the areas of new and innovative technology. For example, a lot of the dotcom bubble that occurred around the 1990s can be traced back to venture capital firms and funds who invested in the start-ups of numerous Internet companies and then "took them to market", i.e. IPO, as soon as they could. Investors in such IPOs subsequently found that the investments were over-valued and the business either went bust or saw considerable devaluation in its stock price.
While technology still remains a popular choice among venture capitalist, it no longer holds the allure it once did. Now venture capitalists are willing to look to a whole range of different start-ups in order to find the profit returns they are looking for on their investments.
One common thing that most businesses looking for venture capital have, is a niche product that is likely to be popular in the market-place; such as, new service, media and / or technology.
As such, almost any organization these days can attract venture capital to help it expand its operations.
Probably the fastest way to approach a venture capital firm is to get them to approach you. The quick way to achieve this is to spread the word that you have a wonderful new product or service or idea and that you need new capital in order to expand the business. Word of mouth spreads fast in financial circles and if one's organization numbers hold up, they will find that it will not be long before someone approaches to invest in that organization.
You should also know that one quick way of getting some idea of whether or not your business can attract a venture capital firm, and to assess whether the venture capital organization may be interested in your organization, is to appoint a financial consultant that has previous experience in raising venture capital. Although this is unlikely to be a cheap alternative, it may well be the most effective method of trying to approach a venture capital firm, as the venture capital firm will probably think your business is more serious in its intent to raise venture capital if it appoints a financial advisor / consultant with a past record in this area whom the venture capitalist can trust.
Finally, there are certain helpful almanac sources of venture capital firms worth taking a look at if you have no direct experience in this area and you have not appointed a financial advisor / consultant to assist you. Two noteworthy almanacs are "Pratt's Guide to Private Equity Sources" and the "National Venture Capital Association".
By: Abdullah