Crowdfunding in Mena region finally starts to take off

Crowdfunding sites have mushroomed in the Middle East and North Africa in recent years but while there have been many success stories the industry is not without its challenges.

The founders of Aflamnah Vida Rizq, left, and Lotfi Bencheikh. Jake Badger for The National

It took a few years of fits and starts, but the crowdfunding market is starting to crack open across the Middle East and North Africa.

More individuals are launching projects from this region and attracting a broader array of funders, who typically earn rewards or, sometimes, equity for the money they put in to back new products, services or ventures. The number of online platforms that link project creators and their pitches to individuals has grown in recent years and now includes Yomken.com, Aflamnah.com and Eureeca.com, among others.

Last month, Mawwell.com joined the fray with individuals in the UAE looking to garner funds to create a music album, travel app and online game.

"Crowdfunding isn't just the latest business fad to hit the Middle East," Jason Best, the principal for Crowdfund Capital Advisors, wrote in a recent issue of Voices, a publication from the global consulting firm McKinsey. "In a region where capital markets remain underdeveloped (with limited venture capital and public offerings), it's a powerful financing tool that could empower a new class of entrepreneurs and investors."

Overall, the money raised by crowdfunding platforms was forecast to reach US$5.1 billion last year, up 81 per cent from 2012, according to market data from Massolution, a consultancy that specialises in this market. While representative figures for Mena are hard to come by, experts say the amount contributed to crowdfunding sites within this region has been rapidly growing — with fees to platforms sometimes running $100 per project, plus 6 to 7 per cent in fees for money raised.

When Aflamnah began about 18 months ago, the UAE-based site focused on Arab filmmakers and had only 14 projects that earned funds. Today it has hosted 70 projects, expanded beyond the film sector and raised around $300,000, including more than $10,000 for the movie When I Saw You, which went on to become an Academy Award qualifier, an official selection at the Cannes International Film Festival and a winner at the Abu Dhabi Film Festival.

All told, more than 30 per cent of projects listed on Aflamnah have exceeded their goal, which is on par with markets in which crowdfunding is more mature, says Vida Rizq, one of the company’s co-founders.

“We have seen a significant increase in amounts people are able to raise per project and in the number of projects that are crowdfunding,” adds Ms Rizq.

Eureeca, another UAE-based company, works a little differently in that it is a crowdinvesting platform. The site raises funds from retail as well as larger investors from around the world in exchange for an equity stake in a business, and it has listed more than a dozen ventures since it launched last June — helping them raise close to $1 million in sectors such as fashion and e-commerce.

“When I started in this industry two-and-a-half years ago nobody knew about crowdfunding,” says Christopher Thomas, Eureeca’s chief executive and co-founder. “Now, there’s more and more noise being created around crowdfunding and investing, and it’s hitting an exponential curve.”

Even so, this sector does continue to face certain challenges.

Some individuals are still unaware of exactly what crowdfunding or crowdinvesting is, or they are unable to make online payments in certain countries. Others want to post a project but avoid doing so because they worry that others might steal their concept.

In Egypt, Yomken started about a year ago with just six projects aimed at helping owners of small industrial workshops, including glass blowers and machinists. The non-profit organisation has since struggled to gain traction during a politically and economically tumultuous time and has spent much of the past year reorganising itself internally.

But, now Yomken plans to roll out a new version of its platform during this year’s second quarter with about 20 additional projects. “There is gradually increasing political interest for the model and we are happy with this,” says Tamer Taha, the founder and chief executive of Yomken.

To help drive ancillary revenue, some sites are expanding their offerings.

Yomken, for one, has begun consulting within the innovation management space, while Aflamnah recently added script translation services. The company also plans to launch an offering that makes film trailers to help people pitch their videos online in certain countries.

Such moves could help avoid the fate of other platforms, which already seem to have shut down.

Flooosy.com, which launched in 2012 and pitched itself as the “first innovative portal dealing with crowdfunding in the Arab region”, currently has a unobtainable website. The site’s founder did not respond to a request for comment.

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