Econostrum | Economic News in the Mediterranean

"Business angels and crowdfunding can lift the barriers to private investment"

Written by Frédéric Dubessy on Thursday, June 22nd 2017 à 17:50 | Read 155 times

Interviewed by, Emmanuel Noutary, Managing Director of Anima Investment Network, recommends two tools to help entrepreneurs in the Mena region finance their projects: business angels and crowdfunding.

"Business angels and crowdfunding can lift the barriers to private investment" Why are start-ups in the Mena region (Middle East and North Africa) turning to alternative financing?

Emmanuel Noutary: These entrepreneurs complain about problems of access to finance. On the other hand, banks and investment funds report difficulties in finding quality and mature projects. Many creators do not have the managerial capacity to grow their business. There is therefore a lack of financing and support and companies are looking for alternative solutions.

What do you recommend?

E.M.: There are two tools that can remove the barriers to private financing for young companies: business angels and crowdfunding. Today, in the Mena region, few business creators benefit from contacts with private investors outside their family or friend circle. And even then, when they have the financial means to help them.

For different reasons, business angels and crowdfunding platforms can help develop the potential of entrepreneurs while offering a pooling of financing and thus a reduction of risk for investors. Over the past fifteen years, both of these alternative financing options have developed worldwide but have only recently emerged in the Mena region.

"The use of the diaspora is essential for crowdfunding"

Why use business angels?

E.M.: The business angel invests but also stands alongside the start-up's board of directors. He acts as a coach because he often belongs to the same sector of activity and can test the product. We advise public authorities to facilitate the creation of business angel networks. They can help create, maintain and manage these networks by providing them with human resources and premises at the very least, but they can also intervene with public funds in co-investment with the business angels. When a business angel puts in 100, the public authorities can commit 200. This is what happens in Provence-Alpes-Côte d'Azur with Provence Business Angels (PBA) and it works!

The public actors must trust the expertise of the business angels and accompany them. They invest their money and therefore show that they are interested in and believe in the project.

What is the contribution of crowdfunding compared to business angels?

E.M.: Crowdfunding democratises access to finance even further. There is no longer any need for a network. The promoter must commit to a real entrepreneurial policy. They have to think about their marketing and present their project well so that the public wants to invest. These are acquired skills that allow him to become professional.

At a second level, he must reach out to potential investors. A study by the INED (Editor's note: National Institute of Demographic Studies in France) shows that the proportion of graduates among emigrants from the Mena region is greater than that of their country of origin. 15% of them in France compared to 5% in their country of origin.
The use of the diaspora (Editor's note: Anima coordinates the Diafrikinvest programme aimed at directing the money of expatriates towards their country of origin), which by definition also has greater financial resources and makes greater use of new technologies such as the Internet, becomes essential here. We encourage governments to develop crowdfunding and to conduct communication campaigns in their country and abroad to promote this type of financing.


"Governments should facilitate the growth of crowdfunding platforms".

Doesn't the technology of the platforms become an obstacle?

E.M.: Crowdfunding can only develop in countries with good Internet access, secure e-payment systems and adequate legislation. Not being able to pay online and in euros are two blocking phenomena. This is the reason why many entrepreneurs entrust their project to a foreign platform. This hinders the development of crowdfunding in the Mena countries.

The law must therefore also be adapted to this type of financing?

E.M.: Crowdfunding platforms raise funds for a third party and present themselves as financial players. They should therefore be considered as part of the country's financial ecosystem and have the right to raise money, and even to raise money locally from abroad, especially from the diaspora. Governments need to trust them and make them affordable to young entrepreneurs. They show their ability to raise funds, which already proves competence. Public authorities can also facilitate the growth of crowdfunding platforms through tax incentives and by investing in seed capital.

Read also: Crowdfunding on the rise in the Mediterranean



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