Over the last couple of months I’ve spoken to a number of early-stage investors — both angels and VCs — who seem to be proud of having been able to take 25-30% of a startup’s equity in an early-stage funding round. In one case, an angel investor patted themselves on the back for “managing to […],
The Rise of Startup Equity Grab in Dubai’s Investment Scene
A Disturbing Trend
In recent months, an alarming trend has emerged in Dubai’s startup investment scene. Angel investors and venture capitalists are boasting about their ability to secure a whopping 25-30% of a startup’s equity in early-stage funding rounds. This equity grab has raised concerns among entrepreneurs and industry experts alike.
A Questionable Practice
While securing investment is crucial for startups to grow and thrive, the practice of taking such a large chunk of equity at the early stages can be detrimental to the startup’s long-term success. By diluting the ownership of the founding team, these investors risk stifling innovation and motivation, ultimately hampering the startup’s ability to attract future funding or pivot when necessary.
The Impact on Dubai’s Startup Ecosystem
Dubai’s vibrant startup ecosystem is renowned for its innovation and ambitious entrepreneurs. However, this equity grab threatens to undermine the very foundation that has made the city a hub for entrepreneurship. Startups should be nurtured, encouraged, and given the freedom to experiment. Stripping away a significant portion of their equity at the outset can have a chilling effect on their growth and potential.
Conclusion:
While securing investment is an essential part of any startup’s journey, it is important for investors to strike a fair balance. Taking an excessive amount of equity in the early stages may hinder a startup’s progress and limit its potential. Dubai’s startup ecosystem thrives on collaboration, innovation, and creativity, and it is crucial for investors to support this spirit by providing fair and reasonable funding terms.
Reference:
Original article: “Why greed is bad for angel investors” by James Altucher – https://bit.ly/3pW36g9
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