Where’s the money, honey?
LOCAL START-UP BEEHIVE FACILITATES LENDING BETWEEN INVESTORS AND SMES
When crowdfunding platform Beehive launched in Dubai in 2014, it didn’t just need to educate the market on its brand: It needed to introduce the concept of crowdfunding, and peer-to-peer lending, to the market from scratch.
Earlier that year, as Beehive’s founder Craig Moore was still putting the pieces of his lending business together, banks throughout the UAE were pulling funding from small and medium-sized enterprises (SMEs) as oil prices fell dramatically.
According to the Khalifa Fund for Enterprise Development, nearly 50 to 70 per cent of loan applications made by SMEs in the UAE are declined by traditional banks, while loans to SMEs account for around four to five per cent of the outstanding bank credit in the UAE. Enter peer-to-peer lending. The idea is simple: Connect people who need money with those who have money to invest. Proponents of such platforms argue that they provide access to credit for businesses with little to no collateral, while offering average people the chance to smartly invest their money and receive stellar returns.
Many of the largest companies in this space, including Zopa, have existed for well over a decade. Meanwhile, in the UAE in 2013, there was no one offering such services.
“I was thinking about bringing the concept to emerging markets,” said Moore, Beehive’s founder and CEO, in a recent interview with Gulf News, adding: “It seemed like Dubai, where I’d travelled, was a good place to base such a platform.”
Headquartered in Dubai, the company would also have the ability to springboard in to the wider region, Moore noted.
Originally from the UK, the entrepreneur said in 2013, no one was talking about financial technology (FinTech) in the UAE. “It was a new concept in a new market that was unregulated and pushing the boundaries in a number of ways,” Moore said.
In a decisive move to legitimise the business early on, Beehive hired ex-Emirates NBD group CEO Rick Pudner, and made him chairman.
When the platform went live towards the end of 2014, it promised SMEs the chance to receive debt financing from retail investors, instead of going to a bank. “Banks pulled a lot of lines around 2014 because of the oil price crash. It was hard [as an SME] to get timely finance,” Moore said.
The platform allows investors to lend as little as Dh100 to businesses, with financing agreements varying from 60 to 120 days, to three years. “We try to stay agile and meet the needs of the SMEs in the market. We worked hard to create a scalable enterprise transaction engine,” Moore said.
For example, says Moore, in direct response to a government call for greater support of Emirati SMEs, Beehive partnered with the Mohammad Bin Rashid Fund (MBRF) to underwrite all loans made to local businesses on the platform. “Emirati businesses can borrow and if they go bust, the government will underwrite the finance,” he said.
Having already raised $5.5 million in funding from individuals, and a further $6 million in a formal Series A round led by the Riyad TAQNIA Fund and supported by the MBRF, Moore says that further capital will need to be raised to finance expansions. “We’ll look to raise again next year — but as you move up the scale, conversations take longer,” he said, adding: “We’re targeting next summer.”
According to the founder, the company’s Series B round will be led largely by venture capital funds but with some private equity firms contributing too.
“We’re looking for investors that can help us in the markets we’re targeting,” he said.
Moore says that Saudi Arabia is at the top of his list of priorities in the region.
As Saudi Arabia grapples with employment issues (the country’s ministry of economy says that unemployment will sit at around 12 per cent this year), Moore explains how he believe Beehive can change that.
“SMEs drive the majority of employment and GDP growth, and with the Middle East economies having such large youthful populations, SMEs will allow Saudi Arabia to hit its employment targets,” he said.
One of the challenges Beehive had in the early days was the cost and burden of educating the entire market, Moore said. Now, he says that things are changing.
“We’re seeing more activity now, but we want to remain fully integrated with the financial ecosystem, and continue to leverage our experience, tech, process, and operational excellence.”