There are various forms of financing. Which one is the best for your company?

A couple of weeks ago the Dutch Chamber of Commerce announced the number of newly started companies in the first quarter of 2018.

Guess what: it was the highest number in five years’ time and there were 10% more companies opened compared to the first quarter of 2017! And what does a higher number of companies imply? More competition for available capital! So, are you looking for financing for your firm? Well, don’t worry too much…

There is more than enough funding available in the Netherlands. It won’t hurt though to do some research into which forms of financing exist. This will help you choose the source of funding that suits best with your situation and company stage. This in turn increases the chances that you will successfully raise funding. The overview below will help you make the best choice.

12 sources of finance for entrepreneurs!

1-     The founders

Explanation: have some savings left yourself? Just received a nice bonus? Why not invest it in your own company! You don’t necessarily have to invest in terms of cash. If a co-founder or a partner invests his/her hours in helping you start your business next to his/her job that is also an investment. Or what about a founder making an office, machines or a technology license available? All of these are sources of investment. Temporarily not paying yourself any wage is also an option.

When to choose this source of financing: founders can obviously invest in their own company at all times. However, you usually see this happening when the company has just been founded. When a company is set up, in many cases no revenues or external financing is available, while there are always some start-up costs to cover.

In terms of the size of the investment you can go all out (as far as your bank account allows you to). Advantage of this form of investment: it can be perceived as positive by an external financer that a founder has some “skin in the game” as well. Why would another person take the risk of investing in your company if you have never been prepared to take the risk yourself?

2. The 3F’s: family, friends and fools

Explanation: before you start approaching professional investors, it might be worthwhile to try to raise some funding within your network of family, friends and fools. These are often people from your family or social network who are close to you and mainly invest because they have faith in your idea or in you as a person/entrepreneur. As they are usually not professional investors you should not expect a professional assessment of your plans from such an investor.

When to choose this source of financing: this type of financing is often pursued to cover the costs of setting up a new company or to bridge the gap to a first round of seed funding. The advantage of this funding type is that it is a quick and cheap way of collecting cash, especially if you take into account the risk that the 3Fs take (which they are not always aware of themselves: hence “fools”).

Usually the amounts concerned with this type of investment are not too high and are typically repaid as a loan (with or even without interest) or are invested in exchange for a small equity share in the company. When the invested amounts, share percentages and the level of professionalism increase, then we speak of angel investing.

Angels/informals

Explanation: angel or informal investors are experienced entrepreneurs who have some funds available (often from previously exited ventures) and invest those in new companies to help other entrepreneurs succeed in their business. Angel investments start around €50,000 and can amount up to (more than) a million euros, as angels often invest together in groups.

When to choose this source of financing: go for an angel if you are looking for seed funding within the abovementioned range. Angels typically offer “smart capital”: so not just money, but also network and knowledge within specific sectors. Try to find an angel that fits with your company in terms of experience and sector knowledge. You can find two overviews of active angel investors in the Netherlands here and here.

4. Crowdfunding

Explanation: nowadays it is hard to imagine crowdfunding once didn’t exist in the Dutch (and international) financing ecosystem. With crowdfunding, the “crowd” finances the funding need of a company. Usually crowdfunding is performed via an online platform where entrepreneurs offer investment opportunities on one side of the platform and on the other side of the platform a large group of people invest small amounts to meet the entrepreneur’s investment need.

When to choose this source of financing: in general there are three types of crowdfunding: loans, pre-orders/donations and convertible loans. Are you looking for a loan, but is it hard to secure one from the bank because your risk profile is too high? Then try loan crowdfunding. Do you have a prototype available and do you want to test the product/market fit, but you cannot finance the production/delivery of the first batch of actual products? Then go for pre-orders/donations.

Well-known examples of suitable platforms are Kickstarter and Indiegogo. These platforms are mainly suitable for products/projects/gadgets aimed at the consumer market with a strong design element to them.

Convertible loans have the following advantages: 1) no shares are being issued, 2) valuation discussions are postponed until the moment the value of a company can be better determined and 3) it is an easier, faster and cheaper process than an actual share transfer. Leapfunder is an example of a Dutch crowdfunding platform that works with convertible loans.

Since the people that invest via crowdfunding platforms are not always professional investors, crowdfunding is better suited for propositions that are not too complex or technical and that are easily understood by the general public (that’s why it’s called “crowd” funding). Think for example of consumer products.

There are also crowdfunding platforms with a specific focus, so take that into account in your choice. Dutch crowdfunding platform Oneplanetcrowd for instance focuses specifically on sustainable projects with a positive impact. Here you can check out a list of crowdfunding platforms in the Netherlands.

5. Subsidies

Explanation: a huge number of tax/financial schemes (e.g. in the Netherlands: WBSO, InnovationBox, vouchers) and subsidies (e.g. Horizon2020, regional subsidies) exist. The aim of subsidies/schemes is typically to stimulate entrepreneurship, innovation/R&D or economic growth within a certain geographical area. That is why every region, every country and even the entire EU has its own subsidies.

When to choose this source of financing: ALWAYS, we can be very brief about that;) Subsidies are relevant during almost every company stage. From start-up to corporate, from freelancer to publicly traded company.

As mentioned before, many subsidies only focus on a certain geographical area and often there is also a specific sector focus. Therefore it is important to look for a subsidy that fits with your company. For an overview of available subsidies/schemes in the Netherlands, check out the website of the RVO.

Keep in mind that administrative and reporting requirements often apply to subsidy applications and grants. You need to be able to justify the costs for which you request a subsidy and sometimes it is mandatory to have this justification audited as well.

6. Venture capital/private equity

Explanation: private equity is the collective name for professional investment firms that invest in companies that are not publicly listed. Venture capital (VC) is a type of private equity which focuses specifically on risky investments in terms of early stage companies.

People often speak of private equity when investing in larger organizations that are existing for some time already. Venture capital on the other hand involves investing in growth capital of young companies. In general, VCs have a fund available of a specific size (e.g. € 100 million) that has to be invested within a certain period of time (e.g. 10 years) in a bunch of companies with different risk profiles to spread the risk across the portfolio. The aim is to sell the shares after a couple of years with a certain return/profit.

When to choose this source of financing: venture capital is mainly suitable for companies that have already passed the “seed stage” and are looking for series A or series B funding. This type of funding is therefore meant to help companies grow faster than when they would grow organically, for instance if a firm wants to internationalize.

VCs typically invest in the range of about €500,000 to €20 million. To raise funding from a VC a company’s product/market fit has to be proven already and steadily growing revenue streams have to exist (except perhaps in the medical sector). However, there are also venture capitalists with seed funds (starting at €200,000) that offer seed capital to companies that have not met the abovementioned criteria yet.

The advantage of VCs is that they can fund multiple rounds, where an angel or other seed investor is not always capable of doing so. VCs often also have a specific sector focus and good knowledge/network within this sector. For a list of VCs active in the Netherlands, take a look at this overview.

7. Debt financing: the bank

Explanation: even though there are a number of banks in the Netherlands that have started venture capital funds (including Rabobank, ING and ABN AMRO), banks are generally more risk averse than for example angels, seed investors and normal VCs. This does not mean that banks do not finance entrepreneurs, on the contrary!

However, they are more likely to invest in SMEs, in companies with lower risk profiles (than start-ups for instance) and when companies can offer collateral. For an early-stage start-up that does not fit in the focus of the VC funds, it can thus be difficult to secure funding from a bank. However, a number of banks in the Netherlands do have partnerships with crowdfunding platforms.

When to choose this source of financing: as mentioned, banks generally take less risk than, for example, VCs and angels. However, if you can provide collateral then the bank is a very good option. Are you thus looking for working capital financing, stock financing or financing to cover investments in buildings/machines, then the bank is a very good option to consider.

Companies generating stable income streams and that have been growing organically for a number of years (and are thus less risky) can certainly also turn to the bank. A big advantage of debt financing: you do not have to give away a part of your company in terms of equity, which means that in the long term it can turn out to be a much cheaper way of financing than for example securing funding from an angel investor or VC.

8. Factoring

Explanation: in short, factoring is a way of financing working capital by lowering the size of accounts receivable. Example: if you send an invoice to a customer, but it takes him/her 60 days to pay, then you can decide to ‘sell’ this invoice to a factoring company (against a certain payment of course).

The factoring company will pay for the invoice immediately (or provides you with a loan) so that you do not have to wait 60 days before the invoice is paid. A factoring company can also take over the risk that a customer does not pay.

When to choose this source of financing: first of all, it goes without saying that you must have clients in order to be eligible for factoring. If you do not have any paying customers, factoring is not an option. If you do have customers, factoring can be very useful if you have to deal with long payment terms.

Do you have large corporates as your customers? Then it can take a while for invoices to be paid and there is often not much you can do about it. In order to keep your working capital position healthy, factoring can be a good choice. Is accounts receivable management costing you a lot of time and effort? Do you often suffer from bad debtors? Then factoring could also be an outcome.

9. Leasing

Explanation: do you have to make large investments in assets such as computers and/or machines? Why don’t you lease instead of purchasing them? By leasing assets companies can spread payments over a longer period of time instead of having to fulfill the full payment of an investment upon the moment they decide to purchase an asset.

When to choose this source of financing: when a company is capital-intensive, meaning it is dependent on the use of (sometimes expensive) assets such as machinery.

10. Suppliers

Explanation: do you purchase a lot from suppliers? Then try to negotiate favorable payment terms with them. If your customers have long payment terms, for instance, you can try to agree to longer payment terms with your suppliers as well so that you do not run into any problems concerning your working capital. On the other hand, you could also try to discuss discounts in the event you pay your suppliers very fast.

When to choose this source of financing: choose this form of financing if you have good relationships with your suppliers or if you have a good negotiating position towards them (for example if you are a large/important customer for them).

11. Initial Coin Offering

Explanation: for an Initial Coin Offering (ICO), a company typically writes a whitepaper to pitch a certain business idea and asks the general public to finance the idea using Bitcoin and/or altcoins (other cryptocurrencies than Bitcoin). In return, the investor receives the new altcoin generated by the company during the ICO.

Usually this newly generated altcoin is at the center of the company’s business activities and thus leveraged in a way that increases its value. As soon as this altcoin becomes tradable, investors can resell it (and hopefully make a profit). The ICO is therefore very similar to an IPO (see section 12 below), but uses cryptocurrency instead of shares that can be converted into “normal money”. Here you can find an overview of cryptocurrencies currently existing.

When to choose this source of financing: it is possible to do an ICO as a non-blockchain company, but currently the majority of the companies that do an ICO are still blockchain/cryptocurrency companies. This is due to the fact that the new altcoin generated by an ICO often has a function within the company to increase its value. The speculation on the fact that the value of the new altcoin will indeed increase is what attracts investors.

12. Initial Public Offering

Explanation: the holy grail of financing: the Initial Public Offering (IPO)! An IPO is the public listing of a company, which means that it is the first time a company offers its shares to the general public. This means that practically anyone in the world (individuals or institutional investors) can invest in the company by buying shares at a certain value.

Before an IPO, a company is private, which means that it often only has a limited number of investors who have invested early-stage or growth capital. Think of the founders, angels and VCs for instance. Spotify just performed a public offering and there are rumors about the Dutch company Adyen performing an IPO soon as well.

When to choose this source of financing: for an initial public offering to be successful, a company must be able to demonstrate years of strong growth and its proposition typically includes a certain network effect/scalability. Growth can be defined in several ways. This can be turnover or profit, but also, for example, the number of customers or active users.

For example, Spotify is a loss-making company, but has been growing enormously over the past couple of years (in terms of turnover and users). A company also has to demonstrate transparency and confidence that this growth will continue in the coming years, because it has to win the trust of the general public that the value of the shares (which they buy today) will rise in the future so that they can make a profit on their investment.

For the investors who owned a share in the company already before the IPO, a public listing can turn out to be very attractive (financially). An IPO should not be underestimated though: it is a very costly process and results in many reporting requirements towards the public, imposed by strict government regulations.

source: ey

شهدت المملكة العربية السعودية في السنوات القليلة الماضية جملة من الإصلاحات الاقتصادية في إطار رؤية 2030 التي أطلقتها المملكة في عام 2016 "خطة ما بعد النفط" حيث انعكست هذه الإصلاحات على البيئة الاستثمارية من خلال اصدار حزمة من القوانين الخاصة بتنظيم الاستثمار والتجارة الى جانب العديد من المبادرات الاقتصادية والاجتماعية التي تشجع على الاستثمار وريادة الاعمال.

القى وباء كوفيد19 بظلاله على مجمل الحياة الاقتصادية- الاجتماعية في المملكة وأثار مخاوف العديد من المراقبين حول المستقبل الاقتصادي للمملكة في المدى القصير والمتوسط. نلقي في هذه المقال نظرة على وضع الاستثمار الجريء والشركات الناشئة في المملكة من خلال قراءة اهم ما جاء في تقرير "الاستثمار الجريء في المملكة العربية السعودية في النصف الأول من عام 2020" الصادر مؤخرا عن مؤسسة "ماجنيت"

المبادرات الحكومية

تركزت المبادرات الحكومية السعودية على الجانب الأكثر تأثيراً في عمل الشركات الناشئة إلا وهو الجانب المالي، ومن هذه المبادرات مبادرة مؤسسة النقد العربي السعودي لدعم الشركات الصغيرة والمتوسطة والتي تضمنت خمسة مبادرات من ضمنها تأجيل دفعات القروض، ومبادرة وزارة المالية التي منحت بموجبها تخفيضات على قيم فواتير الكهرباء، ومنح إعفاءات من رسوم الوافدين، بالإضافة الى تأجيل تحصيل الرسوم الجمركية ومدفوعات القيمة المضافة والضريبة الانتقائية. الى جانب المبادرات الحكومية العديدة المتعلقة بمسائل التمويل أطلقت مؤسسة "منشآت" مبادرة لتمكين المنشآت الصغيرة والمتوسطة من تحويل أنشطتها الى التجارة الإلكترونية، وهي الخطوة التي سوف يكون لها آثار وفوائد مستقبلية على تلك الشركات من ناحية تحقيق خطوة للأمام نحو التحول الرقمي والتعرف على بيئة الاعمال الرقمية.

تطور الاستثمار الجريء

يظهر النمو في الاستثمار الجريء في المملكة العربية السعودية بشكل جلي آثر حزمة الإصلاحات الاقتصادية التي بدأت بها المملكة في عام 2016، فلقد حققت المملكة نمواً في حجم الاستثمار الجريء فاق جميع التوقعات، فمن 7 مليون دولار في اجمالي قيمة صفقات الاستثمار الجريء في عام 2015 الى 67 مليون دولار في عام 2019 أي ان معدل نمو حجم الاستثمار الجريء في المملكة تجاوز ال850% خلال اربع سنوات فقط. اما عدد الصفقات الاستثمار الجريء فحقق نمواً بنسبة 325% ما بين عامي 2015 و2019.

وفي النصف الأول من عام 2020 ورغم الاثار السلبية الوباء كوفيد19 إلا ان قيمة الاستثمار الجريء قد فاق اجمالي قيمة الاستثمار الجريء في المملكة عنعام 2019 بالكامل حيث بلغت قيمة الاستثمارات حوالي ال95 مليون دولارا، كما ارتفعت عدد الصفقات من 35 صفقة للنصف الأول من عام 2019 الى 45 صفقة في النصف الأول من العام الجاري.

ومن الجدير بالذكر ان المملكة قد حافظت على المرتبة الثالثة في عدد الصفقات وحجم الاستثمار الجريء في الشرق الأوسط وشمال افريقيا خلف كل من الامارات العربية المتحدة ومصر.

القطاعات الخمسة الأولى

مازال قطاع التجارة الإلكترونية القطاع المهيمن من حيث عدد الصفقات وقيمة الاستثمار الجريء في المملكة إذ حافظ على المرتبة الأولى من حيث عدد الصفقات فستحوذ على ما نسبته 22% من اجمالي عدد صفقات راس المال الجريء و67% من اجمالي قيمة التمويل، وذلك بالرغم من التراجع النسبي في معدل النمو من حيث عدد الصفقات حيث انخفض بنسبة 15% عن النصف الأول من عام 2019.

اما في المرتبة الثانية من حيث عدد الصفقات فجاء قطاع التقنية المالية بنسبة 11% وبنسبة نمو 11% عن النصف الأول من عام 2019 وهي نسبة النمو الأعلى من بين القطاعات.

وفي المرتبة الثالثة أتى قطاع التعليم بنسبة 7% وبنمو 4% عن النصف الأول من العام السابق حيث يشهد الاستثمار في قطاع التعليم نمواً كبيراً، ولقد تأثر حجم النمو في النصف الأول من العام الجاري بجولة التمويل الاستثمارية لأكاديمية نون والتي بلغت قيمتها 13 مليون دولاراً.

في المرتبة الرابعة والخامسة جاء كل من قطاع الخدمات الاستهلاكية والموضة والجمال بنسبة 4% لكل منهما.

أعلى خمسة صفقات

حصدت شركة "جاهز" لتوصيل الطعام على أكبر صفقة للنصف الأول من العام الجاري حيث بلغت قيمتها 36.5 مليون دولار وهي ثالث أكبر صفقة تمويل تحصل عليها شركة ناشئة في الشرق الأوسط وشمال افريقيا في النصف الأول من عام 2020.

اما ثاني أكبر صفقة فقد بلغت 18 مليون دولار وكانت من نصيب شركة "نعناع" وهي شركة لتوصيل الحاجات اليومية ومواد البقالة أون لاين، فيما حلت صفقة التمويل التي حصلت عليها اكاديمية نون التعليمية والبالغة 13 مليون دولار في المرتبة الثالثة، اما في المرتبة الرابعة والخامسة فجاءت كل من شركة "Sary" لتجارة الجملة وشركة "ساعي" للوساطة العقارية بقيمة تمويل بلغت 6.6 و2.4 مليون دولار على توالي.

لا تظهر المعطيات السابقة التطور الحاصل في الاستثمار الجريء في السعودية خلال السنوات السابقة ومدى النجاح الذي حققته رؤية 2030 في هذا المجال فحسب لكن تظهر أيضا روح المبادرة التي يملكها رواد الاعمال السعوديين وقدرتهم على انتهاز فرصة وجود بيئة استثمارية حاضنة لريادة الاعمال، كما تظهر أيضا فعالية المبادرات الحكومة السعودية والفعاليات الاقتصادية في القطاع الخاص على تحويل المملكة لمحطة جذب لاستثمارات رؤوس الأموال الجريئة والشركات الناشئة المحلية، والقدرة على تجاوز الازمات، كما هو حاصل مع ازمة وباء كوفيد19، والمضي قدما نحو تطوير هذا القطاع من الاعمال.

قيد يهمك أيضاً: تقرير فانتك السعودية: حالة شركات التكنولوجيا المالية والتحديات والفرص التي تواجهها في المملكة

Egypt continues to be Africa’s largest recipient of foreign direct investment (FDI) flows in 2019, marking a 10.7% hike, despite the slump in FDI inflows to the entire continent to USD 45 bn (EGP 727.2 bn), Invest-Gate reports.

“FDI inflows to North Africa decreased by 11% to USD 14 bn (EGP 226.2 bn), with reduced inflows in all countries except Egypt,” read the United Nations Conference on Trade and Development’s (UNCTAD) “Global Investment Trends Monitor 2019” report, noting that Egypt posted USD 9 bn (EGP 145.4 bn) in FDIs last year.

UNCTAD highlighted that economic reforms undertaken by the Egyptian government have improved macroeconomic stability and boosted investor confidence in the country. Although FDIs were still driven by the oil and gas industry, investment in the non-oil economy was also taking place.

According to the report, communications, consumer goods, and real estate sectors have seen significant investments in 2019.

“Egypt ranked first in Africa in re-investing the profits of foreign companies by 41%, where the reinvested profits for multinational companies represent a remarkable share of foreign direct investment inflows to the economies of the countries of the continent,” it confirmed, pointing out that lowering profit expectations will have a tangible impact on investment flows to Africa in 2020.

UNCTAD revealed that global FDI flows are forecast to drop by as much as 40% in 2020, from USD 1.54 trn (EGP 24.9 trn) in 2019, bringing FDIs below USD 1 trn (EGP 16.2 trn) for the first time since 2005.

In addition, FDIs are set to decline by a further to 10% in 2021; and to initiate a recovery in 2022, the report concluded.

source: invest-gate

It would be an understatement for me to say that COVID-19 has changed the world and indeed the way many of us live. In Australia, though tragic in terms of the lives lost to date, we have been fortunate to avoid the significantly higher rates of infection and associated mortality that other nations have endured. As we have seen in the United States and Europe however, the key common thread has been the dramatic impact on local and global economies alike.

The reality is that many good businesses may not survive, and those that do will find their operations permanently changed. From small businesses in hospitality and tourism through to multinational entities, all businesses will need to reassess how they operate moving forward given the flow-on effects of global challenges such as unemployment and disrupted supply chains.

In the startup world, many have also been forced to put operations on hold or temporarily scale back their plans just in order to survive. But as we emerge from the crisis, some of these more agile small businesses and start-ups who have adapted to change may be better placed than larger less nimble incumbents to not only survive but thrive in this new world.

Evolving in Order to Prosper

While the federal government has begun implementing its three-step plan for how COVID-19 restrictions will be lifted across Australia, there will still be a lengthy transition period as global travel remains limited and other economies are at varying stages of recovery.

Startups by nature are growth minded – it’s part of their DNA. Solving problems, spending money on growth (also known as investment), and therefore creating jobs as a result, make start-ups a prime ingredient in our country’s plans for economic recovery. They adapt, they identify opportunities for change, and grow off the back of them. This will be vital for succeeding in the new, and as-yet-unknown, world we are emerging into.

But while making considerations around change, companies no matter how large or small should also keep sight of what matters and what drives them. Investor and entrepreneur Ray Dalio underlines the importance of this in his book Principles where he talks about developing strong foundational principals to guide decisions when faced with challenges and opportunities. In his book, Dalio also notes, “evolving is life’s greatest accomplishment and its greatest reward” and “adaptation through rapid trial and error is invaluable.”

Adapting to New Technologies

COVID-19 has been described by many as a catalyst for significant change. This is best illustrated in the rapid adoption of new technologies by companies in response to the changing economic and social landscape. It also demonstrates the need for companies to not only move faster to adopt new technologies but also to learn how to make decisions at pace. If you asked an Australian G8 university before the pandemic how long it would take for their entire operation to transition to an all online learning model, many would have estimated four to five years. When the crisis came, it took them a matter of weeks. If we look at healthcare with the introduction of widespread telehealth, the population has adapted and we will now likely see telehealth becoming a key component of our country’s much envied healthcare system.

Digital transformation is therefore no longer an option but a necessity. It has already been forced upon many organisations and their staff, and this momentum should be allowed to continue. Without a “reset button” –  companies will need to adjust and balance their risk aversion with the need to adopt technology to improve efficiency and ultimately deliver new ways of working.

Whether it be through addressing the needs of procurement or IT departments in organisations, the ability to move at pace and finding that right balance between risk and necessity will be a key asset to any organisation now and into the future.

Setting New Employee Expectations

The way we view work has likely changed forever.  Even as a temporary measure, remote working has opened people’s eyes and minds to a different way of operating. During COVID-19 lockdowns, people have had more flexibility and spent more time with family than ever before. As a result, employers must take this into account when anticipating what the needs and demands of an employee will be post-pandemic.

Entrepreneur and author Reed Hoffman wrote about the concept of future employers hiring someone for “a job to be done” rather than simply to fulfil a role. This is an idea that may likely come to fruition off the back of COVID-19. With a large number of employees working from home, employees are likely to have been held less accountable to what they’re doing, and hopefully more accountable to what they’ve achieved. For myself personally, I can’t see every single one of my hundreds of staff on Zoom every minute of the day, but I know they’re working well, and trust them to get the job done.

The future won’t be easy, but I am optimistic as we welcome the emergence of the “new normal” and how new ways of working will evolve. Startups provide a key ingredient to accelerate our country’s economic recovery with the opportunity for big business adapt a similar growth mind-set. Technology and innovation will sit at the centre of this shift, and companies will need to adapt if they are to not only survive, but prosper in this new age.

Investment in Middle Eastern fintech companies is expected to grow to around US$2 billion in venture capital by 2022, which will fund 465 fintech companies, an increase from $80 million that was raised by 30 fintech companies in 2017.

As a result of the coronavirus pandemic, the fintech scene has boomed in the past few months, with the world adapting to a new digital and economic environment. According to new research by financial consultancy deVere Group, the COVID-19 crisis has driven a gigantic 72% increase in the use of fintech apps in Europe alone. Meanwhile, fintech companies in Asia and the Middle East have also seen strong increases in the use of their apps.This growth comes as no surprise, since people are now having to rely on digital technology to work, communicate, and entertain themselves during the pandemic.

For the Middle East, the demand for e-commerce has particularly contributed to the rise of fintech in this region, with store closures moving purchases online. Indeed, although the COVID-19 crisis has encouraged fintech innovation to rocket across the globe, the Middle East continues to be at the forefront when compared to other countries. With one of the youngest tech-savvy youth populations, strong international talent, and significant funding from venture capital, the Middle East has the competitive edge it needs to accelerate innovation and consolidate its position on the global fintech stage.

The Middle East and North African region has the largest youth population in the world with two out of every three people being under 24. This equates to approximately 300 million young people in the region. This huge youth population presents an opportunity for the Middle East to be innovative, and to reconstruct their economy, with the number of fintech startups in the Middle East expected to exceed 250 this year. The youth are also more likely to embrace tech/digital products, presenting significant potential demand for fintech companies looking to emerge in the region.

What’s more, a young population translates into a digital native generation. According to GSMA Intelligence, a mobile industry trade body, the number of unique mobile subscribers is predicted to rise from 275 million in 2017 to 459 million by 2025. Smartphone connections are predicted to rise from 49% of all connections to 74% over the same period. This will be important for fintech companies to evolve in the Middle East.

Meanwhile, investment in Middle Eastern fintech companies is expected to grow to around US$2 billion in venture capital by 2022, which will fund 465 fintech companies, an increase from $80 million that was raised by 30 fintech companies in 2017. The Milken Institute Centre for Financial Markets reported that the fintech sector in the Middle East is growing at a compounded annual growth rate of 30% due to the acceleration of fintech and the adoption of technology in the region. The average deal size is currently at $2.5 million, with the UAE accounting for 47% of all fintech deals in the region in 2019.

Countries across the Middle East such as the UAE and Saudi Arabia are also receiving substantial support from their governments when it comes to developing the fintech sector. The largest fintech hub in the Middle East, Dubai established the Dubai International Financial Centre that launched a $100 million fund in 2017 to support fintech startups. In Saudi Arabia, the Saudi Arabian Monetary Association launched Fintech Saudi to develop fintechs in the kingdom as well as supporting fintech companies to join the sandbox, an experimental environment for fintech services.

A number of countries in the Middle East are particularly keen to attract international talent as a way of instigating fintech innovation domestically. For example, the UAE and Saudi Arabia have both established a visa system expansion scheme to make it easier for foreign nationals to reside in their countries. In addition, Abu Dhabi launched Tomorrow 2021 in 2018, a three year vision which focuses on attracting and retaining international talent. The outcome of these initiatives have resulted in many Middle Eastern countries to have populations made up of mostly foreign nationals. In fact, last year, there were 35 million international migrants in the Gulf Cooperation Council countries, transforming the region into an international talent hub.

The coronavirus pandemic has undeniably played a role in the rise of fintech across the world. The Middle East, however, still has an advantage in becoming a global fintech hub due to its large youth population, considerable venture capital funding, government support and international talent. With the MENA fintech market set to reach $2.5 billion by 2022, the Middle East is developing a fintech industry at a staggering rate.

source: entrepreneur

How to define an appropriate budget for digital transformation - one that’s realistic yet takes into consideration the aspirations of and opportunities available to your organization

This a difficult balancing act, and never more so than for digital transformation projects. Here, we share some tips to deliver you a budget that effectively serves your transformation aims, helping you maximize the impact of your initiatives.

With so many different moving parts, digital transformation projects require a rock-solid foundation from which to build - including a budget that accurately reflects the scale and complexity of the initiative, while remaining achievable and realistic.

However defining such a budget - not to mention getting it signed off - can be challenging. We’ve all heard the horror stories of projects going over budget, stalling, or even being abandoned altogether.

If you’re currently in the early stages of your digital transformation journey and want to avoid a similar fate, this post shares practical tips to put you on the right path from the start, covering some of the key considerations you’ll need to address to ensure your budget truly supports your organizational requirements and strategic goals.

8 tips for your digital transformation budget:

1. Involve everyone

You can’t involve everyone from across your organization in your budgeting process, and nor would you want to. However, where digital transformation is concerned it’s important to consider alternatives to those traditional budgeting approaches that have typically been managed on a departmental basis, with the financial director approving a high-level budget that is then distributed across the team.

These models simply aren’t viable today, when digital stretches across different departments, roles, and locations to touch all parts of the enterprise. Instead, the ubiquitous nature of digital calls for a collaborative approach that facilitates an overarching understanding of core business processes, to ensure that every element of these is factored into your budget. Without this holistic picture, you run the risk of creating bottlenecks that will draw investment down and away from the revenue-generating activities that matter.

2. Consider potential ‘hidden’ costs

Alongside the disparate requirements of the different business functions within your organization, there are almost certainly going to be additional areas that will need to be accommodated in your digital transformation budget. These can be easily overlooked, so be sure to undertake rigorous requirements gathering activities to uncover any supplementary demands.

For example, consider the following:

Infrastructure. How will your digital solutions be supported?

• Do you have any vital information/content that needs to be migrated from your existing systems?
• Is the investment required to meet relevant compliance and security standards?
• What skills and knowledge are needed to ensure your team can perform effectively?
• Change management. If your transformation is going to impact your processes, how will any necessary changes be rolled out?

… and not forgetting the costs associated with your requirements gathering activities themselves!

3. Create a shared vision

As mentioned in the introduction to this post, defining your budget is only part of the battle. You’ll also have to secure sign-off, meaning that those individuals in control of the purse strings need to be bought into your vision. It’s crucial therefore that you raise awareness of the need for - and benefits of - digital transformation at an early stage.

Even if you think this is already understood across your organization, it often isn’t the case. Indeed, as budgets are typically agreed in advance without any understanding of the complexity or dependencies involved it’s easy to assume a shared vision at the outset, only to find out further down the line that you don’t have the resources you need to move as quickly as you’d like, or achieve your desired results.

A dedicated ‘discovery’ phase can help you more clearly articulate your vision, and so communicate this to stakeholders - particularly if it includes the creation of low-fidelity deliverables such as prototypes and proofs of concept, which allow you demonstrate your ideas and objectives in a highly visual way, and provide increased confidence to help secure buy-in.

4. Demonstrate value

The key driver behind any digital transformation project should be to deliver value. If you focus solely on the features you want to be delivered without thinking about how they serve your overall vision, the project is unlikely to deliver the results you’re after. As you define your budget, then, think about the precise reasons why you want to undertake the work you’re planning.

This will not only help you justify your budget by providing specific examples of the benefits you aim to realize that you can reference - for example, streamlined processes, higher revenues, or a larger user base - but will provide a valuable baseline against which you can measure the success of your initiatives, and so inform any future programs of work and their associated budgets.

5. Facilitate agility

If you’re undertaking a digital transformation project, you’re no doubt very aware of the rapid rate of change being driven by technological advances and changing user behaviors. But is your budget also flexible and fluid enough to allow you to capitalize on new trends and market conditions in a timely fashion?

While many organizations have embraced more agile ways of working in their operational processes, the commercial elements of a project typically still follow more traditional approaches and areas such often focused on fixed cost, defined requirements, annual cycles, and allocated spend. It’s clear that a change in mindset is required to deliver the greatest possible value from your digital transformation initiatives - and the following tips explore in more detail some of the ways that this can be achieved.

6. Support change where required

While strict budget plans may offer high levels of predictability, they can seriously impact your ability to respond to change, and so leave you at risk of being overtaken in your digital transformation efforts by nimbler and leaner competitors. However, when introducing increased flexibility you’ll still need to provide the governance required by those allocating budget, who will be unlikely to want to relinquish control altogether.

One way to achieve a balance between these competing demands is to adopt a model that budgets for ‘epics’ (large, overarching projects) while moving the responsibility of more granular decisions away from budget holders towards those with a closer working knowledge of individual initiatives.

The very structure of your budgets can also be adapted, to give you a closer steer to reality. As the rate of change in the digital landscape continues to outpace traditional annual budget cycles, some organizations are choosing to plan two six-month budgets instead - increasing the frequency with which they can assess project deliverables and monitor the market for potential opportunities. This allows the budget to be more quickly reinvested in productive areas, and be halted where value isn’t being realized, to minimize waste and accelerate the rate of returns.

7. Allow for innovation

Another way of supporting change while still keeping budgets under control is to invest in dedicated ‘innovation’ projects. Offering the opportunity to try out new ideas on specific parts of the wider transformation piece, this kind of initiative allow you to prove the business case in a low-risk environment, and get a feel for the challenges and benefits associated with a project before committing significant resource.

You might also want to include a dedicated Research and Development (R&D) line in your budget, using this to explore various opportunities for innovation and disruption outside of the stricter frameworks and processes you may have in place elsewhere. By removing unnecessary overhead you can reap the rewards of increased velocity, and the first-mover status that often comes with this.

8. Keep it going!

Perhaps the most important thing to remember when budgeting for digital transformation is that it isn’t a single, distinct piece of work, but an on-going journey. While you likely won’t (and probably shouldn’t) try to capitalize on each new trend and technology that emerges, you will need to ensure your strategic roadmap aligns with the latest conditions and priorities, and have the necessary resources in place to execute this.

Adopting an iterative approach that encourages continuous improvement can prove extremely beneficial here. By focusing on regular deliveries and short feedback loops, this way of working will provide you with a model that’s ideally suited to the complex and evolutionary nature of digital transformation, which can then be adapted and extended beyond the initial launch to ensure you continue to deliver value at every stage of your journey.

source: smartinsights

COVID-19 sparked an unprecedented global health crisis around the world and ushered us to a ‘new normal’ way of working from home almost overnight. Not all companies were ready to adapt to this unexpected disruption, and business suffered. Many organisations faced massive structural changes and looked at alternative business strategies to sustain themselves through this global pandemic. But there is always an upside to every crisis – innovation leaders such as SAP have introduced innovative solutions specifically designed to help businesses in the post-COVID-19 global economy.

Winning in the new normal

We are a long way from business as usual these days, as many of us juggle work and home responsibilities, having video conferences interrupted by our kids, dogs barking and kitchen appliances whirring in the background. The way we live, work, play and consume has been turned upside down and most changes will not be reverted. According to a new study by Gartner, 74% of CFOs intend to permanently shift employees to remote working after the pandemic. We have been forced to embrace the new ‘future of work’ and we have quickly adapted to this change. But the question remains, how will businesses evolve? Many companies in the Middle East have already embraced the vast potential that a digital world makes possible. CIOs across the region have the vision and the appetite to accelerate digital transformations, tapping into technologies such as Cloud and AI to overcome the crisis we find ourselves in.

Indeed, countries in the Middle East, and particularly the GCC, were early adopters of cloud solutions, which has made it easier for them to quickly embrace the latest innovations. Last year a YouGov survey, conducted by SAP, showed that 88 percent of UAE companies increased their cloud spend in 2019, with 83 percent running partially or entirely on the cloud. It also found that 76 percent of IT decision-makers in the UAE agree that cloud is essential for integrating the benefits from Artificial Intelligence, Machine Learning, the Internet of Things, and blockchain.

Digitalisation enables new and improved processes and can help companies build resilience to reimagine their business post-COVID-19. In the coming months and years, organisations that can smartly integrate Artificial Intelligence with cloud, the Internet of Things and blockchain will see the biggest business benefit.

Customer experience, revisited

The COVID-19 pandemic has also brought about a renewed focus on enhancing citizen and customer experiences, especially as more services must be delivered remotely. Customer experience is especially important for industries such as banking and finance, retail, supply chain, logistics, and healthcare that need to transform how they engage with customers through digital platforms.

SAP recently held one of the largest technology events in the region, SAP NOW Middle East South, showcasing digital solutions specifically designed to help organisations navigate both the pitfalls and opportunities their business may face during the COVID-19 era and beyond. With over 2,300 registrations, and 600 visitors from the UAE, Oman, Egypt, Qatar, Jordan, Lebanon and Libya, it set a new record for SAP virtual events.

The number of attendees and the level of engagement across different countries and industries were incredible. Executives in the Middle East have always realised the value of digital transformation. The current circumstances have only amplified the need to prioritise it.

SAP’s global flagship conference, SAPPHIRE NOW, was also reimagined to go virtual for the first time. The event usually draws huge crowds every year in Orlando, Florida. Today, technology has transformed this conference into a massive complete digital experience, with over one million views and 200.000 attendees: more than 5 times the reach of the previous on-site version. Attendees could experience innovation through both live and on-demand sessions hosted by SAP leaders, Customers and Partners, as well as guests from some of the world’s leading companies like Porsche and Chobani.

To match customer experience demand and further help companies’ resilience, SAP has opened access to SAP Ariba Discovery for real-time procurement between buyers and sellers to maintain the supply chain. SAP has also opened access to TripIt Pro from Concur to manage safe, easy and changing travel itineraries.

Together with our partners, SAP and Qualtrics continuously collaborate to provide resources to governments around the world as they battle the rapidly evolving COVID-19 pandemic. This includes access to resources such as COVID-19 Pre-Screening and Routing, Dynamic Call Center Script, Healthcare Workforce Pulse, and Critical Care Protocol Solution.

In Germany, in less than 50 days of development, together with Deutsche Telecom, SAP published the Corona Warning App downloaded by 8 million citizens in less than 2 days.

Re-evaluating the future of work

COVID-19 jolted organisations into remote working, also necessitating a re-evaluation of skills relevant to rapidly changing technology. An educated and skilled workforce positively impacts the overall development of the economy, making it critical to assess skills gaps accurately and provide the necessary training to fill them.

There is an immediate need to upskill the existing workforce with digital skills as the region continues to transform digitally. According to a recent report by strategy&, the GCC countries will need to fill more than 3 million digital jobs by 2025. Some employers have been encouraging employees to re-examine their skill set and participate in remote trainings and coaching programs. Post-crisis, organisations will likely continue the reskilling trend to develop a workforce with the capabilities needed to anticipate and manage the unexpected.

In this together

Relationships are built when times are good, but they are put to the test when times are tough. SAP lives by its purpose today more than ever: to help the world run better and improve people’s lives. Customers and members of the community will not forget soon gestures of kindness and solidarity during these challenging times.

Considering the pandemic, for example, SAP recently launched TrackYourBed, a responsive, Web-based solution that indicates hospital bed availability in real-time. The company is currently exploring further investments in this and many other ventures as part of the SAP One Billion Lives initiative, a social intrapreneurship program that allows employees to use their skills to make a difference to their communities.

The COVID-19 outbreak has proven that companies can stand together for a common purpose, providing hope in a time of crisis, and opportunity in a time of change. The customer-first imperative must remain the building block for businesses across the region. Coupled with digitalisation, businesses truly have the power to reimagine the customer experience and capitalise on disruption to thrive in the new normal.

source: networkmiddleeast

Foreign direct investment (FDI) inflow into the UAE jumped over 34 per cent to $14 billion (Dh51.4 billion) in 2019 as compared to $10.4 billion (Dh38.2 billion) in the previous year following major investments by US private equity firms in Abu Dhabi's energy sector.

The UAE surpassed Turkey to become the largest recipient of foreign investment last year in the Middle East and also accounted for half of total investment that flowed into the region in 2019, according to World Investment Report released by UN Conference on Trade and Development (Unctad).

The large increase in FDI to UAE was largely due to major investments made to Abu Dhabi National Oil Company (Adnoc) assets.

The US-based asset managers BlackRock and KKR Global Infrastructure acquired a 40 per cent stake in Adnoc's pipeline assets for about $4 billion.

Italy's Eni SpA also acquired a 20 per cent stake in Abu Dhabi Oil Refining Company for more than $3 billion.

"Abu Dhabi has supported FDI inflows to the UAE for the past few years with its streamlined procedures and capacity in facilitating megadeals. In 2019, the emirate further strengthened its commitment to foreign investment by launching the Abu Dhabi Investment Office under the Ghadan 21 programme, a broad-based initiative to enhance the commercial ecosystem, including by cultivating an attractive and diversified environment for FDI," Unctad said.

It said the approval of the positive list for FDI in the UAE in April 2020 paves the way for full foreign ownership in many activities and could support investment flows to the country in the longer term.

While FDI outflow from the UAE also moved up slightly last year from $15 billion to $16 billion, an increase of 5.5 per cent.

Regional performance

FDI to Middle East declined by 7 per cent to $28 billion as against $30.1 billion in 2018. Just three countries - the UAE, Turkey and Saudi Arabia - accounted for the majority of inflows in 2019.

FDI inflows into Turkey slumped from $13 billion in 2018 to $8.4 billion last year, slipping into the second position after the UAE.

In the GCC, Saudi Arabia was the second largest recipient of foreign investment, receiving $4.56 billion last year as compared to $4.24 billion in the previous year.

Flows to Saudi Arabia increased for the second consecutive year by a further 7 per cent to $4.6 billion, mainly because of a few large M&A deals.

FDI to Bahrain fell by 43 per cent to below $1 billion in 2019. The main reason was the country's investment profile, which centres on light manufacturing and services, which are more sensitive to global and regional economic headwinds.

Regional outflows

FDI outflows from Middle East contracted significantly, from $50 billion in 2018 to $36 billion in 2019.

In Saudi Arabia, outward investment declined from $23 billion in 2018 to $13 billion, and firms in Kuwait divested $2.5 billion of overseas investments.

Major outward investments announced in 2019 included a $10 billion project by Saudi Aramco to develop oil and gas facilities in China and a $9 billion oil project by Qatar Petroleum to expand its existing facilities in the US, although it is unclear when these projects will be fully realised.

FDI inflow into the Middle East, 2019

UAE: $13,787m

Turkey: $8,434m

Saudi Arabia: $4,562m

Oman: $3,125m

Lebanon: $2,128m

Bahrain: $942m

Jordan: $916m

Kuwait: $104m

Palestine: $176m

Top global countries for FDI inflows, 2019

US: $246B

China: $141B

Singapore: $92B

Netherlands: $84B

Ireland: $78B

Brazil: $72B

Hong Kong: $68B

UK: $59B

India: $51B

Canada: $50B

source: investinabudhab