Secret financial tools that MENA entrepreneurs can use to attract investors

The community of entrepreneurs in the Middle East and North Africa, better known as MENA, has been favored over the past few years thanks to government policies and regulations that have encouraged every day investment and the rise of entrepreneurship.

According to Fadi Ghandour, founder and chairman of Aramex, “the rise of the digital economy has turned the region into the site of a remarkable market opportunity that, if tapped, would take it on an entirely new economic trajectory.”

However, entrepreneurs are facing many challenges in the region today, for example, raising funds. When searching for new investors, a secret tool that the startups can use is the income statement, which is one of the three primary financial statements every business needs to report its economic performance.

Want to attract investors to your project? Keep reading to find out how to do it and which tools you can use.

How to be an investor’s magnet

According to a recent MAGNiTT report, the current entrepreneurial activity of the MENA region has the following characteristics:

• Most of the founders are in their early 30s.
• An investor’s network is the #1 priority for fundraising startups. Actually, 63% say that the investor’s network is the top reason for choosing a lead investor.
• Most startups will look for regional & international investors for future rounds.
• 47% claim it will be “moderately challenging” to raise their next investment round.

Some of the most important criteria when looking for a lead investor are: network connections, deal terms, long-term funding, good character and expertise. But, how MENA entrepreneurs can attract investors to their project? Some recommendations are:

1. Look for investors who get involved in your idea or project from the beginning.
2. Have clear communication with the investors and keep them informed in a clear and precise manner about the business performance. This will also allow investors to help you overcome any obstacles the startup might have.
3. Keep past investors close and informed. You never know when you may need additional financing. 

Where to find the investors

Some of the places where entrepreneurs in the MENA region can find investors are:

• MENA Angel Investor: They are a team of private equity investors that support entrepreneurs throughout the Middle East by providing new business funding in Dubai, Saudi Arabia, Oman and Qatar. Their contribution includes assistance with strategy formulation, market penetration and key introductions.
• 500 Falcons: This is a MENA-focused fund that is a part of the global 500 Startups network. They invest directly in pre-seed and seed-stage startups, as well as follow-up rounds, through its $33M Falcons fund.
• Friends and family: According to Entrepreneur, this is the most popular way that pre-seed deals happen around the world. A whopping 82% of early startup funding originates from founders’ families, friends and personal networks, according to Small Business Trends.

What investors want

Get ahead and take note on the key indicators that investors and lenders will pay attention to before investing in a business. Keep in mind that if you are prepared and you know your numbers, you can encourage them to invest in your startup.

• Cash Flow: A cash flow statement provides a snapshot of the cash moving into and out of a business over a particular period of time. Investors use the cash flow because it is a sign that an entrepreneur can deal with unexpected problems and capitalize on new opportunities.
• Income Statement: Also known as the profit and loss statement, it is used to determine the profitability of a business over time. In a few words, it is a report that summarizes a company’s revenues and expenses over a specific period of time and it’s the best indicator of how the business is doing and how it can improve. It also helps entrepreneurs give a good impression to prospective investors.
• Margins: Gross margin is basically a measure of how much money a business has left over after all the fixed and variable costs of production are subtracted from its net sales. Investors compare the margins of a business against the industry standards to get the best investment opportunity.
• A solid business plan: A business plan is a document used to meet the needs of both venture capitalists and investors. A solid business plan does more than just inform investors about what your company does; it also demonstrates that you are serious about your business and that you’ve given thought to your plans to make money.

Thanks to the rise of the digital economy and the internet penetration, which increased by 294%, the MENA region has become a favorable place for entrepreneurship. However, raising funds has always been a challenging task for entrepreneurs, even in the MENA region. It is important that you know your numbers and you use them to prove how well your business is doing.