The landscape for start-up funding has considerably transformed over the past few years as investors increasingly opt for highly feasible business models, industry leaders said at the World Conference on Creative Economy.
They reminded budding entrepreneurs to have a multi-pronged approach when attracting funds.
Start-ups in the creative and cultural sectors of the Middle East are facing a number of challenges developing their ideas into actual businesses. They have evolved over the past years in the sense that they never saw themselves as investors or business owners, but now technology has allowed them to scale their talents and monetise their propositions, the experts said.
“We need to build more sustainable models. The best form of financing is building a business model that allows you to be sustainable and to grow and scale your business,” Najla Al Midfa, chief executive of the Sharjah Entrepreneurship Centre (Sheraa), said at the WCCE at Expo 2020 Dubai on Thursday.
The Middle East's creative and cultural market is expected to witness a growth in economic activity and investment, especially in the UAE after it announced the key points of its national strategy for these industries this week.
The region's media and entertainment market was valued at $30.35 billion in 2020 and is expected to reach $47.01bn by 2026 at a compound annual growth rate of 7.4 per cent during the 2021-2026 period, according to Mordor Intelligence.
Investors today are also looking for more scale and reach, one of the most important factors they seek before committing to support a venture. For start-ups, in particular, subscription models are likely to attract more funding.
“Investors are interested right now in subscription models because that's the mode that brings money every month in the bank. They're really desirable right now compared to the old e-commerce model,” Saeed Al Nofeli, director at Dubai Internet City's in5 incubator, said.
The size of the global subscription or recurring billing management market was estimated at $5.12bn in 2020, projected to hit $5.94bn this year and expected to expand at a CAGR of 16.02 per cent to $10.77bn by 2025, ResearchAndMarkets data shows.
Investor interest in providing funds also varies depending upon which business model a company is based upon.
Leila Hamadeh, chief executive and co-founder of Dubai-based podcast network Finyal Media, said what obviously works in international markets may be difficult to replicate here in the region.
“What we discovered quickly is that fundraising for a creative entity whose business model is based on advertising is a challenge in the region; the advertising market here is undervalued compared to other markets,” she said.
Research from Imarc Group showed that the value of the global advertising market reached $647bn in 2020. It predicts that this will rise to around $875bn by 2026, at a CAGR of 5.2 per cent.
Crowdfunding is a viable option. As of June this year, people have raised more than $34bn worldwide using these platforms, data from Investopedia shows. It ranked Patreon, a US-based membership platform, as the best choice for artists and creatives, having attracted more than 200,000 creators and bringing in about $2bn in funds.
Big Tech companies are also lending a helping hand. In June, Netflix expanded its Hardship Fund to support film and television industries across the Arab world, an extension of its last year's emergency relief fund established along with the Arab Fund for Arts and Culture.
Securing that funding, however, comes with the responsibility of taking the next step of growing the business – which is the main reason funding was sought – eventually trying to sustain it, Mr Al Nofeli said.
“It's really important for start-ups not to celebrate the success of them raising funds, but celebrate that they have actually succeeded in their business models,” he added.
Fundraising, especially in the technology ecosystem, is such a vanity metric. The most valuable thing you can provide to start-ups, at the end of the day, is access to markets or customers
Najla Al Midfa,
chief executive, Sharjah Entrepreneurship Centre
They also cautioned up-and-running businesses not to concentrate on just a single source of income, as any slowdown in this metric without any reliable back-up plan can prove costly, both on the financial and reputational fronts.
“Creative entrepreneurs should not depend on just one stream of income. Funding might not be as easy as opposed to technology or other start-ups,” Manar Al Hinai, co-founder of Sekka magazine, said.
Attracting funds is a fundamental step, but this should not be considered as the most important thing that a start-up can gain because it is just the start of an entrepreneurial journey's long process.
“Fundraising, especially in the technology ecosystem, is such a vanity metric,” Ms Al Midfa said.
“The most valuable thing you can provide to start-ups, at the end of the day, is access to markets or customers. We should help them grow sustainable businesses rather than just connecting them to investors.”
What is blockchain?
Blockchain is a form of distributed ledger technology, a digital system in which data is recorded across multiple places at the same time. Unlike traditional databases, DLTs have no central administrator or centralised data storage. They are transparent because the data is visible and, because they are automatically replicated and impossible to be tampered with, they are secure.
The main difference between blockchain and other forms of DLT is the way data is stored as ‘blocks’ – new transactions are added to the existing ‘chain’ of past transactions, hence the name ‘blockchain’. It is impossible to delete or modify information on the chain due to the replication of blocks across various locations.
Blockchain is mostly associated with cryptocurrency Bitcoin. Due to the inability to tamper with transactions, advocates say this makes the currency more secure and safer than traditional systems. It is maintained by a network of people referred to as ‘miners’, who receive rewards for solving complex mathematical equations that enable transactions to go through.
However, one of the major problems that has come to light has been the presence of illicit material buried in the Bitcoin blockchain, linking it to the dark web.
Other blockchain platforms can offer things like smart contracts, which are automatically implemented when specific conditions from all interested parties are reached, cutting the time involved and the risk of mistakes. Another use could be storing medical records, as patients can be confident their information cannot be changed. The technology can also be used in supply chains, voting and has the potential to used for storing property records.
Need to know
The flights: Flydubai flies from Dubai to Kilimanjaro airport via Dar es Salaam from Dh1,619 return including taxes. The trip takes 8 hours.
The trek: Make sure that whatever tour company you select to climb Kilimanjaro, that it is a reputable one. The way to climb successfully would be with experienced guides and porters, from a company committed to quality, safety and an ethical approach to the mountain and its staff. Sonia Nazareth booked a VIP package through Safari Africa. The tour works out to $4,775 (Dh17,538) per person, based on a 4-person booking scheme, for 9 nights on the mountain (including one night before and after the trek at Arusha). The price includes all meals, a head guide, an assistant guide for every 2 trekkers, porters to carry the luggage, a cook and kitchen staff, a dining and mess tent, a sleeping tent set up for 2 persons, a chemical toilet and park entrance fees. The tiny ration of heated water provided for our bath in our makeshift private bathroom stall was the greatest luxury. A standard package, also based on a 4-person booking, works out to $3,050 (Dh11,202) per person.
When to go: You can climb Kili at any time of year, but the best months to ascend are January-February and September-October. Also good are July and August, if you’re tolerant of the colder weather that winter brings.
Do not underestimate the importance of kit. Even if you’re travelling at a relatively pleasant time, be geared up for the cold and the rain.
Indika
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
How to avoid crypto fraud
- Use unique usernames and passwords while enabling multi-factor authentication.
- Use an offline private key, a physical device that requires manual activation, whenever you access your wallet.
- Avoid suspicious social media ads promoting fraudulent schemes.
- Only invest in crypto projects that you fully understand.
- Critically assess whether a project’s promises or returns seem too good to be true.
- Only use reputable platforms that have a track record of strong regulatory compliance.
- Store funds in hardware wallets as opposed to online exchanges.
