Maydan Capital, a UK-based equity crowdfunding platform that seeks to offer Shariah-compliant and ethical investment opportunities to tech-focused investors as well as networking opportunities for start-ups has rolled out.
LONDON: Maydan Capital, which launched last week, aims to help kickstart early-stage companies in their initial stage of growth, targeting those looking to raise between $100,000 and $10 million.
The platform is open to companies globally from all ethical sectors, but Maydan expects the majority of its early deals to stem from the tech industry.
“Our current pipeline already includes businesses in the UK, Europe, Africa, the Middle East, Asia and North America,” said Safdar Alam, CEO of Maydan. “This is regulated activity, and we are finalising our approval with the FCA (Financial Conduct Authority) as we speak. We expect to have live deals on our platform in December 2021.”
Maydan says it is applying to become an appointed representative of U.S.-based Islamic robo-advisor Wahed Invest, which is authorised and regulated by the FCA. The FCA approval is pending and Maydan expects the application to be completed by November/December 2021.
Through the platform, investee companies can communicate and promote their offerings to Maydan’s diverse network of investors.
“Our typical investors will be high net worth individuals, family offices and also self-certified investors. “These are all investors that are looking for ethical investment opportunities,” said Alam. “We do not forecast returns – indeed the full capital is at risk in such investments. Potential returns on early-stage equity investments are already well understood by investors.”
“At the initial stages, the minimum investment size will be in the region of $5,000-$10,000,” said Alam. “However, it is important that we offer solutions to other retail investors in our network too, so we will be able to reduce the minimum investment amount in due course to $100.”
Despite operating on the back of an estimated $2.24 trillion Islamic finance market, Islamic start-ups and fintechs struggle to receive financing from traditional Islamic investors and funds.
“We are seeing significant gaps in the ethical and Muslim markets – entrepreneurs find it difficult to find quality investors that do not demand preference structures, or debt based alternative structures,” said Alam. “And our investors typically do not want preference structures – as these are seen as unethical in their (and our) view. “
He said that this prevents investors being able to take part in typical venture capital (VC) type deals leaving ethical investors with the only option of sourcing their own deals, and not being in control of professional grade screening and due diligence.
Maydan will focus on equity investing into investee companies.
“We typically look at companies requiring funding up to Series B at the moment. Working capital financing for SMEs is an underutilised asset class and we aim to move into this sector in 2022,” said Alam.
He said that the initial investments will be into ordinary shares, and not preference shares, as a matter of Shariah compliance.
“We are also working with our start-ups to finalise structures such as SAFE [simple agreement for future equity], and other non-dilutive solutions in due course, to complement our equity investment offerings,” he said.
Alam claimed that Maydan’s screening of prospective companies is robust and rigorous.
“Firstly, we perform a negative screening to ensure the company does not carry out activities we see as unethical – this includes activities such as lending, gambling, military, derivatives and so on,” he said. “After that, we focus on companies that have a tech angle and have a social impact too. Finally, we perform more regular due diligence on any new and growth companies, looking at their product, market fit, the team and so on.”
Aside from investing into companies, Maydan will also work closely with companies that are promising, but may not be primed for immediate investment.
“We have relationships with companies that can be 12 months away from being ready, and we will guide them as to how they can best position themselves for future investment,” said Alam.
Maydan will join a growing market of Shariah-compliant SME financing providers and crowdfunding platforms, which also seek to support start-ups and SMEs.
Among the most notable players in the UK are Qardus and Izdihar. Whilst the offering of providers is growing, a large proportion of them either finance via debt typically through commodity murabaha facilities or are only able to finance smaller deal/ticket sizes.
Maydan will also not be alone in the Shariah VC space. The space has also seen some activity during this year. This includes IFG.VC angel syndicate which formally launched at the beginning of this year.
Despite this, Alam claims that there are factors that differentiate Maydan Capital, among them is Maydan's quality of deal flow.
“We do not operate on a volume model – only a small portion of fundraising applications will pass our strict due diligence phase,” he said.
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