Early-Stage Entrepreneurial Investment decision making: Challenges and Dynamics

Abstract

This study investigates the decision-making challenges that funders in the United Arab Emirates (UAE) face in selecting the best start-ups to receive high returns and ensure the sustainability of the business ecosystem. Further, it examines the funders' risks while making early-stage investments in innovative businesses. Applying a qualitative methodology, indepth interviews were conducted with 12 funders and analyzed using Nvivo software for deeper insights. The analysis permits understanding the dynamics of the key factors that funders consider to make better decisions on the perfect business to invest in with a higher probability of success. The key elements are based on their intuition, entrepreneurs' commitment, and the business trends the government encouraged. Specifically, government policies and programs supporting particular industries act as signals that affect the decisions made by investors. Further, the study highlights the challenges faced while investing in earlystage innovative enterprises. These include startup sourcing, the dedication of the founding and management teams, market risk-such as competition vs. imitation-, governmental regulation and the discrepancy between anticipated policy outcomes and actual implementation, funding needed to keep the business running, and financing constraints. Specific issues were explored, including the UAE business environment and its orientation in terms of growth and innovation. This research contributes to building up an ecosystem that supports start-up financing, providing lessons and implications to strengthen investors' decision-making processes, and developing a framework for financing policies, schemes, and programs for those seeking to encourage start-ups and foster entrepreneurship and economic growth in the UAE.