Islamic business angels — the most important ingredient in the Startup Equity Cycle
Every year over 305 million startups are created worldwide. To survive and prosper they need money, advice and acceptance. From idea to exit, the startup lifecycle is a continuous process.
Successful startups are likely to have several rounds funding, each falling into one of the three stages beginning with pre-seed and ending with IPO.
An early-stage companies are funded by entrepreneurs themselves, the notorious FFF — “Friends, Family and Fools” and business angels. Later stage startups are likely to be funded by venture capital funds. And the more mature companies are IPO-ed or partially or completely financed by private equity funds or industrial buyers.
Over the last couple of years we discussed multiple problems faced by Islamic venture capital and private equity industries. Among them are the scarceness of investment capital, the shortage of experienced professionals and the lack of interest in Islamic startups from the Shariah compliant institutions. But still, the key problem is likely to be the insufficient number of Islamic startups that are “mature” enough to be of interest for venture capitalists. I intentionally avoid using the term “Shariah compliant VCs”, since Hijra Group (formerly ALAMI Group), an enormously successful fintech company from Indonesia, had proven many times that a good Islamic startup would find plenty of conventional VC suitors.
A Business Angel is a high-net-worth individual who provides financial backing in a start-up founded by an entrepreneur. Business angels come into play when entrepreneurs are mostly out of cash but still are “too green” to generate professional investment interest. They invest in great ideas, not in CAC (Customer Acquisition Cost) or ARPU (Average Revenue per User).
There are several organizations that position themselves as Islamic Business Angels. Here is the short list of these heroes of Islamic finance industry:
· IFG.VC (Cure8 Capital) — a subsidiary of islamicfinanceguru Limited. Its investors become a part of an angel investor syndicate. The company also acts as a regular Shariah compliant VC investor;
· Muslim Angel Investor Network (MAIN) — a platform that connects Muslim angel investors with promising entrepreneurial ventures. MAIN aims to support and promote Muslim entrepreneurship by providing financial resources, mentorship, and networking opportunities to startups and early-stage companies;
· Islamic Investment Network — another networking and capital transfer platform;
· Halal Angel Network was largely quiet since its sonorous launch in 2020;
· Ethis Super Angels (ESA). Led by Islamic fintech superstar Umar Munshi, ESA is a private group of angel investors from across the globe that invests in Shariah compliant startups with the potential for huge financial returns;
· HASAN — Halal Super Angels. HASAN also leverages on Shariah compliant Ethis’ ecosystem;
· digiWaqf — a fully digital waqf that will provide grants and Qard Hassan loans to Islamic entrepreneurs. It is to be launched in November 2023.
Aside for desperately needed money, Islamic business angels also offer mentorship which may initially be even more valuable to startuppers. They vastly expend our Islamic tech universe.
