Eureeca: Changing the Equity Crowdfunding Market Through Regulation

Funding is the key aspect in the initiation and growth of a business, and strong economic support forms the foundation of a company. More often than not, small companies or startups are short of finances hindering their growth prospects and scalability. With a solution to resolve the funding issues that companies face, Eureeca was established in 2013 by co-founders Chris Thomas and Sam Quawasmi as an equity crowdfunding platform that allows startups and small businesses to raise capital from a group of investors in exchange for equity. As Chris shares his success story with us, we are thrilled to have the opportunity to publish his inspiring insights as a source of motivation for business owners, entrepreneurs and every person who has a dream to succeed.

Initial Challenges of a Growing Business

The idea behind Eureeca was to offer a transparent, cooperative and cost-effective way for growth-oriented businesses to get access to much needed expansion capital through a robust digital infrastructure. Equity crowdfunding has the potential to foster greater financial inclusion and to facilitate lending in support for SMEs and growth-oriented businesses. The impact – especially for emerging markets like Middle East and North Africa (MENA) that rely on job creation to nurture the upcoming workforce – is more jobs, given that 90% of hires are made after a company receives financing.

Like every other company, Eureeca too had to face a few challenges. Regulation for equity crowdfunding is unchartered territory in the emerging markets. One of the main challenges is that the process of fine-tuning the details of the regulatory environment takes time and effort, and collaboration from many entities working towards safeguarding the interests of both the businesses that are seeking funding as well as the investors.

The industry needs to develop in a safe and sound manner and countries need to adapt their regulatory, supervisory and consumer protection framework to address the unique risks equity crowdfunding. Eureeca is pioneering these changes by continuing to work closely with regulatory authorities and governments across the Middle East and Southeast Asia to ensure that the industry as a whole moves forward in the right direction, within the most appropriate legal framework, to ensure that all parties are best protected.

In an ongoing effort to educate regulators in emerging markets, Eureeca is working in cooperation with relevant authorities in other emerging markets to set up appropriate regulatory frameworks within each country that will enable equity crowdfunding platforms to set up business in a safe and secure manner.

Market Domination

Eureeca was launched in Dubai in 2013, and has grown into a cross-continent platform globally, having received regulatory approval from the UK’s Financial Conduct Authority (with a Branch Office in the Netherlands authorised by the Netherlands Authority for Financial Markets and a Representative Office in Dubai authorised by the Dubai Financial Services Authority) and the Malaysian Securities Commission.

From its offices in Dubai, London, Kuala Lumpur, and Amsterdam, Eureeca offers high-yield potential investment opportunities from the Middle East, Europe, and Southeast Asia to its investor network who range from casual and angel investors to institutional firms. Businesses raising funds can leverage this network for capital, strategic connections, and expansion into new markets.

Since its launch, Eureeca has grown to an active investor base of 25,053 from 36 countries with an average investment size of US$5,800. Eureeca is designed to host investors of pretty much all profiles, from casual retail and active angel investors to institutional investment firms such venture capital funds – all of which are looking to buy equity in growth-oriented businesses of the future.

Equity crowdfunding, the model used by the team at Eureeca, allows investors of nearly all profiles to buy equity (shares) in growth-oriented private businesses. These can be from any sector and they currently have clients from retail to technology and everything in between.

Eureeca’s international investors effectively become co-owners of the business and are naturally incentivized to help it succeed. In simple terms, it allows startups and growing companies to get funding from people who often bring more to the table than just money. It makes capital raising and investing more accessible, efficient and transparent than other traditional sources of capital and, rather than replacing angels and venture capitalists (VCs), the model is serving as a vehicle for them to invest in SMEs, along with the rest of the crowd.

It is also very affordable with a limited financial risk as equity crowdfunding platforms usually only charge a fee to businesses if, and when, the money is raised. If the campaign is unsuccessful, there is nothing to pay. Companies choose how much capital they wish to raise and how much equity they are prepared to part with.

Masters of Excellence

As former investment bankers and entrepreneurs, co-founders and co-CEOs Quawasmi and Thomas were keenly aware of the challenges that businesses face in seeking funding.

The writing on the wall was clear – 50% of the jobs are created by SMEs but one of the main reasons an SME fails in the first five years is lack of access to capital. Coupled with the changing dynamic in the global economy (debt crisis 2008), it was evident how difficult it was for any business, let alone an SME, to get funding. There is a clear “no-man’s land” gap between VCs that are looking to make large investments to generate big returns fast, and risk-averse banks that offer limited loans to SMEs.

With thorough market research and a vast banking experience backing them, Chris and Sam headed out on a venture to influence change. Chris comes with over 10 years’ experience setting up and running businesses. He exited his last major business, an FCA-regulated online brokerage with 60 staff in 12 countries, in 2010, and has made numerous angel investments, owning two online businesses and a property company in Brazil. Chris completed a law degree from Brunel University in the United Kingdom in 2000.

The Growth Strategy of a Successful Business

Eureeca is currently present in four markets (UK, UAE, The Netherlands & Malaysia). Off the back of Eureeca’s successful self-crowdfunding campaign in August 2016, which raised $400,000 in just 12 days of being online, Eureeca’s strategy was to have a ‘light touch’ presence in each of these markets with 1-2 businesses from each of these geographies opening for funding on the platform per quarter.

Eureeca conducted a further Eureeca self-funding campaign in September 2017 raising a further $400,000 in just six hours of being online. The capital raised will enable Eureeca to become fully entrenched in the current markets, as well as to expand into additional new markets in EMEA.

Eureeca is estimating by Q3 2019 it would have achieved an additional 3 – 4 licenses in other markets, in addition to the current ones. This would then lead to having obtained 7 – 8 licenses in total; far ahead of its rivals in the UK and other markets.

Eureeca plans to move away from the ‘light touch’ strategy in these markets – which is currently at listing 1-2 businesses on the platform from these markets per quarter. The next ‘well entrenched’ strategy will ensure Eureeca features between 5-10 businesses per quarter from these markets allowing its investor-base from 36 different countries to invest in a wide range of growing companies in multiple markets that vary in sector, truly democratising the process of investment.

The Distinctive Factor of Prominence

Equity Crowdfunding has the potential to foster greater financial inclusion and to facilitate funding in support for SMEs and growth-oriented businesses. The impact, especially for emerging markets like MENA that rely on job creation to nurture the upcoming workforce, is more jobs, given that 90% of hires are made after a company receives financing. There is an increasing requirement for greater access to alternative finance in order to continue empowering the companies that form the backbone of the economy in the region.

All Eureeca’s competitors work hard and have closed deals. All make a local impact in their markets. There are several equity crowdfunding platforms out there, so it is important to check that startups and SMEs are choosing the right platform for their business. Key differences are in the type of business ideas they accept, the commercial requirements, the people they reach and how they can help support you.

For example, at Eureeca, they specialise in giving businesses the chance to access funding from an international pool of investors, as they are the most regulated equity crowdfunding platform in the world, with four licenses to operate in three different continents (Europe, Middle East and South East Asia).

– Eureeca is the first global equity crowdfunding platform

– By Q3 2019, this is likely to grow from four to eight licenses

– Eureeca is the first regulated platform in the MENA region

– They have an operating model that works in multiple countries

– The first firm to have listed business from different countries

– They are truly global with offices and representation in six countries

– The first firm to participate in the writing of the first crowdfunding law of jurisdiction

– Eureeca has obtained the coveted license from the FCA in the UK

The Futuristic Approach Stimulating Growth

The crowdfunding industry in the Middle East is now at turning point. With the first deals funded by platforms now reaching the point in the cycle (3-5 years) where we would expect to be seeing returns and exits to the crowd, Eureeca anticipates the emergence of transparent and quantifiable statistics about the industry. Up until now, they were operating in unknown territory and a lot of what they knew was based on forecasts of similar markets. The availability of substantiated insights, statistics and trends will mean that it is highly probable that current consumer/investor behavior will adapt and change, and this will cement the pillars of equity crowdfunding as an asset class. Consumers will be more sophisticated and Eureeca forecast that the industry, as it matures and adapts to the macro environment in the next decade, will look entirely different.

Within the next 12 months, Eureeca aims to have access to a combined population of over 400 million people in South East Asia alone more than quadrupling its current target market (Europe and Middle East) and enabling Eureeca to launch expanded marketing and PR campaigns to build awareness and facilitate significant growth in these markets. It will also facilitate the development of expanded revenue streams by layering on additional products, such as the Secondary Market, which would allow investors to sell shares in companies that they have previously invested in to facilitate returns on investments.

With a view make a difference in the equity market, Eureeca is making a remarkable impact with new ideas and innovative strategies. They have a well-planned future ahead of them to expand their business and capture the market redefining their success in a new way.