Best Family and Friends Funding Options for Pre-Series A Companies in UAE
December 8, 2025
Overview: Family and Friends for Pre-Seed / Seed Startups
Family and Friends (General) funding is a foundational source for pre-Series A startups in the UAE, involving informal equity investments or friendly loans from personal networks such as family and friends. This funding typically ranges from AED 50,000 to AED 200,000 and is characterized by flexible arrangements with fewer formalities than institutional capital. It serves as an important early validation of the startup idea and demonstrates founder commitment, providing a critical stepping stone before pursuing formal funding rounds. Simple agreements outlining terms and expectations are recommended to maintain transparency and protect all parties involved.
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Top Family and Friends in the UAE
Family and Friends Network (informal equity investment or friendly loans from personal networks)
How Family and Friends Funding Work at the Pre-Seed / Seed Stage
Typical & Available Funding Amounts
Typical Funding Amount: AED 50,000 to AED 200,000 (approximately USD 13,600 to USD 54,500)
Funding Amount Range: AED 50,000 to AED 200,000 (approximately USD 13,600 to USD 54,500)
Time to Funding: The average timeline from application to funding decision for Family and Friends funding for pre-Series A startups in the UAE is typically short, often ranging from a few days to a few weeks. This is due to the informal and flexible nature of this funding source, which relies on personal networks and trust rather than formal application processes. Founders usually raise between AED 50,000 and AED 200,000 from family and friends as an initial step, with agreements often being simple and straightforward to expedite the process. Patience and relationship-building are important, but the decision timeline is generally much faster compared to institutional funding rounds.
Application Process
The application process for Family and Friends funding for pre-Series A startups in the UAE is informal but requires professionalism and clarity. Here is a detailed step-by-step overview:
Preparation and Planning: Assess your personal savings and identify family and friends who might invest. Typical amounts raised range from AED 50,000 to AED 200,000.
Initial Approach: Present your startup idea professionally, explaining risks and potential rewards transparently.
Drafting Agreements: Create simple agreements outlining investment amount, terms, expected returns, and timelines to protect both parties.
Consider Convertible Notes: Use convertible notes for flexibility, allowing valuation to be set in a later funding round.
Formalize Investment: Sign agreements once terms are agreed upon, ensuring all parties understand conditions.
Use of Funds and Reporting: Use funds as planned and maintain regular communication with investors to build trust.
Prepare for Next Funding Stages: Use this funding as validation to approach angel investors, government programs, or institutional investors.
This process emphasizes trust, flexibility, clear communication, and simple legal documentation, recognized in the UAE as a legitimate early funding path. Patience and persistence are key in building these personal investment relationships. (FounderConnects)
Eligibility Criteria
Family and Friends funding for pre-Series A startups in the UAE is typically accessible to startups at the earliest stage, including pre-seed and pre-Series A, operating within the UAE or targeting the UAE/GCC market. This funding is informal and sourced from personal networks such as family, close friends, and acquaintances who trust the founder and the business idea. There are no strict sector or revenue requirements, but startups should demonstrate a clear business concept and commitment, often evidenced by personal savings or sweat equity. Typical funding amounts range from AED 50,000 to AED 200,000. Founders are advised to maintain professionalism by drafting simple agreements outlining investment terms, expected returns, and timelines to ensure transparency and trust. Convertible notes may be used to delay valuation until formal funding rounds. This funding is ideal for validating the business idea, building prototypes, and gaining initial traction before approaching institutional investors.
Standard Documents Required
Simple Investment Agreement or Convertible Note Agreement outlining investment amount, terms, expected returns, and timelines
Business Plan detailing the startup idea, market analysis, and growth strategy
Pitch Deck customized for UAE investors including problem statement, solution, financial projections, market analysis, and team overview
Legal Structure Documentation proving company incorporation and jurisdiction (e.g., ADGM, DIFC, or mainland UAE)
Shareholders' Agreement or Articles of Association specifying investor rights, dividend entitlements, voting rights, and exit mechanisms
Financial Projections including revenue forecasts, burn rate, and fund utilization plan
Notable Investments
Family and Friends funding in UAE startups is typically informal and foundational, providing the earliest capital to pre-Series A companies before institutional investors get involved.
Such investments are usually not publicly disclosed or listed due to their private and personal nature.
This funding often comes from personal networks of the founders including relatives, close friends, and trusted acquaintances who believe in the startup's vision.
Family and Friends funding enables startups to develop minimum viable products and initial traction, making them attractive for subsequent angel or venture capital investment rounds.
While specific notable investments are not publicly documented, this funding route is widely recognized in the UAE ecosystem as a critical first step for many successful startups to launch and grow.
Tips for Success at the Pre-Seed / Seed Stage
For pre-Series A startups in the UAE seeking Family and Friends funding, founders should focus on the following actionable tips:
Start by raising AED 50,000 to AED 200,000 from personal savings and close networks to demonstrate commitment and early validation.
Maintain professionalism by drafting clear agreements outlining investment amounts, terms, expected returns, and timelines to build trust and protect relationships.
Be transparent about the risks, including the possibility of total loss, to set realistic expectations and safeguard personal relationships.
Consider using convertible notes to delay company valuation until a formal round; however, ensure investors meet accredited investor criteria to comply with securities laws.
Tailor your pitch according to your audience: for less business-savvy friends and family, focus on vision, problem-solving, and milestones; for savvy investors, present detailed financials, market analysis, and growth plans.
Customize your pitch for the UAE market by emphasizing scalability within the GCC, regulatory compliance, local market insights, and cultural awareness.
Set clear communication expectations and provide regular updates to keep investors engaged and informed.
Limit friends and family investments to those who understand the risks and legal implications.
Be patient and persistent, building trust and a solid legal structure to attract future institutional funding.
Flexible terms; quick access; based on personal trust; no formal valuation needed initially.
Risk of personal relationship strain; limited funding (AED 50,000–200,000).
Friendly Loans
Lower or no interest; flexible repayment terms; easier negotiation with family/friends.
Potential misunderstandings from informal agreements; risk to personal relationships.
Convertible Notes
Delays valuation to later funding; aligns investor-founder interests; flexible conversion terms.
Requires legal counsel; risk of future disputes without clear terms.
Early Validation & Support
Signals confidence in the idea; stepping stone to institutional funding; founder commitment.
Limited strategic mentorship; primarily financial support; less structured feedback.
UAE Market Relevance
Culturally accepted early-stage path; leverages strong personal networks in UAE.
Less rigorous due diligence; may not satisfy later-stage investors’ documentation standards.
Application Process
Simple, informal; no formal applications; based on introductions within personal network.
Unstructured process can lead to unclear expectations; may need professional agreements drafted.
Funding Amount Range
AED 50,000–200,000 suits MVP development and initial operations for pre-Series A.
Insufficient for large-scale growth; necessitates follow-on institutional rounds.
Documentation Expectations
Simple term sheets or informal notes recommended to set clear terms and protect relationships.
Overlooking formal documentation can lead to disputes; legal advice recommended.
This table compares key features, advantages, and limitations of Family and Friends (General) funding—an essential foundational source for pre-Series A UAE startups. It highlights how informal equity, friendly loans, and convertible notes offer accessible, flexible capital, while emphasizing the need for clear agreements and legal counsel to manage relational and documentation risks. The typical ranges align with pre-Series A requirements, facilitating initial validation and growth in the UAE’s network-driven ecosystem.
Actionable Guidance for UAE Founders
For pre-Series A startups in the UAE, Family and Friends funding is a foundational and flexible source of capital, typically ranging from AED 50,000 to AED 200,000. Founders should approach this funding stage professionally by drafting clear, simple agreements that outline investment amounts, terms, expected returns, and timelines to protect relationships and demonstrate transparency. Structuring investments as convertible notes can provide flexibility by delaying valuation until a formal round, but it's important to communicate the risks involved clearly to all parties.
Tailor your pitch to UAE investors by emphasizing scalability within the GCC region, regulatory compliance, and local market insights. Highlight your business model, financial projections, and how funds will be allocated. Building trust through a solid legal structure and transparent communication is crucial in the UAE ecosystem.
Leverage local startup communities and platforms like Founder Connects to network and prepare for subsequent funding rounds with angel investors and government programs. Be patient and persistent, as relationship-building and funding processes can take several months. Combining family and friends funding with government grants and angel investments can strengthen your startup's financial foundation and credibility.
In summary, maintain professionalism, clear communication, and cultural awareness to safeguard personal relationships and maximize your chances of success with Family and Friends funding in the UAE.
Overview: Convertible Instruments for Pre-Seed, Seed, Pre-Series A Startups
SAFEs (Simple Agreements for Future Equity) are legal contracts that allow UAE startups to raise early-stage funding from friends, family, or angel investors without immediate equity transfer or debt. Investors provide capital now in exchange for the right to convert their investment into equity at a future priced round or liquidity event, making SAFEs a flexible and efficient funding option for pre-Series A companies. Popular in UAE financial free zones like ADGM and DIFC, SAFEs simplify fundraising by avoiding complex valuation negotiations and offer protections like valuation caps and discounts to investors, aligning well with the UAE's evolving startup ecosystem.
Top Convertible Instruments in the UAE
Wamda Capital
Shorooq Partners
Middle East Venture Partners (MEVP)
Oraseya Capital
Raed Ventures
F6 Ventures
Global Ventures
BECO Capital
Oqal
Dtec Ventures
How Convertible security Work at the Pre-Seed, Seed, Pre-Series A Stage
Typical & Available Funding Amounts
Typical Funding Amount: Typical funding amount for SAFEs in the UAE pre-Series A stage, especially from friends, family, and angel investors, generally ranges from approximately $100,000 to $250,000 USD (around AED 367,000 to AED 917,500). This aligns with typical angel investment rounds in the UAE, where investors like Dubai Angel Investors deploy between $100,000 and $250,000 per investment. SAFEs are used as informal equity participation mechanisms suitable for early-stage funding without immediate ownership changes or debt obligations, fitting well within this funding range for pre-Series A startups in the UAE.
Funding Amount Range: USD 25,000 to USD 1,000,000 (approximately AED 92,000 to AED 3.67 million)
Time to Funding: The average timeline from application to funding decision for SAFEs (Simple Agreements for Future Equity) in UAE startups at the pre-Series A stage is typically between 4 to 8 weeks. SAFEs are designed to be simple and fast to execute, often faster than traditional equity rounds, aligning with early-stage funding needs. This timeline aligns with typical angel investor funding cycles in the UAE, which range from 4 to 6 weeks, considering the streamlined nature of SAFEs without interest or maturity dates.
Application Process
The application process for SAFEs (Simple Agreements for Future Equity) in UAE startups, especially at the pre-Series A stage, typically involves the following steps:
Preparation and Legal Structuring: Startups should ensure their corporate structure supports SAFEs, preferably incorporating in UAE financial free zones like ADGM or DIFC, which offer legal frameworks accommodating SAFEs. Mainland UAE companies face legal gaps as SAFEs are not formally recognized under UAE Commercial Companies Law.
Drafting the SAFE Agreement: The agreement must clearly define conversion triggers (usually a future priced equity round), valuation caps, discount rates, and treatment upon dissolution or acquisition. It should align with the company’s Articles of Association authorizing share issuance upon conversion.
Investor Presentation and Negotiation: Founders present SAFE terms to friends, family, or angel investors. SAFEs' simplicity typically enables quicker negotiations compared to priced equity rounds.
Signing and Capital Transfer: Upon agreement, the SAFE is signed and capital transferred. SAFEs do not create immediate equity or debt.
Record Keeping and Compliance: Startups maintain SAFE agreements and update capitalization tables. Compliance with local corporate governance and contract laws is necessary, especially in free zones.
Conversion Event: Upon a qualifying future equity financing round (e.g., Series A), SAFEs convert into equity shares at the agreed valuation cap or discount.
Post-Conversion Formalities: Update shareholder registers and corporate filings to reflect new equity holders.
This process facilitates early-stage funding from informal investors without immediate dilution or debt, fitting pre-Series A needs in UAE startups, particularly within ADGM and DIFC jurisdictions. Legal counsel is advised to navigate jurisdictional nuances and draft enforceable agreements. (mandcolegal.com, atblegal.com, arnifi.com)
Eligibility Criteria
Startups eligible to use SAFEs (Simple Agreements for Future Equity) in the UAE for pre-Series A funding typically meet the following criteria:
Location: Must be incorporated or operating in the UAE, preferably within investor-friendly jurisdictions such as the Abu Dhabi Global Market (ADGM) or Dubai International Financial Centre (DIFC) which offer common-law frameworks and flexible shareholding structures.
Stage: Early-stage startups, specifically pre-Series A, seeking informal equity participation mechanisms without immediate valuation or ownership dilution.
Sector: Open to various sectors, but startups should be prepared to handle valuation caps and discount rates as part of the SAFE agreements.
Legal Compliance: Must ensure compliance with UAE securities laws and local regulations, especially outside financial free zones where legal frameworks are more complex.
Founder Background: Founders should have access to legal advisory to structure SAFEs appropriately, considering local market readiness and cultural business practices.
These criteria ensure that startups can effectively use SAFEs to secure early-stage funding from friends, family, or angel investors while navigating the unique UAE legal and business environment. (mandcolegal.com, linkedin.com, dlapiper.com)
Standard Documents Required
SAFE note agreement (legal contract specifying terms such as valuation cap, discount rate, and conversion triggers) (Legal Nodes, WOWS Global)
Company statutory documents including Certificate of Incorporation and Articles of Association or Bylaws (Legal Nodes)
Term sheet or investment summary outlining key SAFE terms (WOWS Global)
Due diligence documents including financial statements and business plan (Legal Nodes)
Notable Investments
Halo AI raised AED 22 million in funding through early-stage mechanisms including SAFEs.
Wittify AI secured AED 5.5 million in investment at pre-Series A stage using flexible funding instruments like SAFEs.
Armoir, a luggage-tech startup, raised AED 1.8 million in pre-Series A funding rounds involving SAFEs.
Tips for Success at the Pre-Seed, Seed, Pre-Series A Stage
For pre-Series A startups in the UAE using SAFEs (Simple Agreements for Future Equity), follow these actionable, stage-specific tips to maximize funding success:
Emphasize the speed and cost-efficiency of SAFEs to attract friends, family, and angel investors—highlight that there’s no immediate equity dilution or debt repayment pressure.
Choose investor-friendly jurisdictions like Abu Dhabi Global Market (ADGM) or Dubai International Financial Centre (DIFC) to benefit from familiar common-law frameworks and flexible share structures.
Prepare a concise info pack detailing your traction metrics (e.g., prototype completion, pilot customers, MRR growth) and team expertise to instill confidence.
Negotiate SAFE terms mindfully: set realistic valuation caps, reasonable discount rates, and include MFN and pro rata rights to protect both parties.
Clarify pre-money vs. post-money SAFE mechanics to prevent dilution surprises for founders and investors.
Use the “better of” valuation cap or discount structure to give investors the most favorable conversion outcome.
Leverage standardized SAFE templates (e.g., Y Combinator’s SAFE) to minimize legal costs and streamline the process—partner with a local UAE law firm familiar with free-zone requirements.
Maintain transparent communication with investors on expected timing for conversion triggers (priced equity rounds) and keep them updated on milestone progress.
Document all agreements in shareholders’ agreements and constitutional documents to safeguard governance rights and exit mechanisms.
Position your SAFE raise as a bridge to a Series A: accompany it with a polished pitch deck, 12–18 month financial model, and clear roadmap to justify a higher next round valuation.
By executing these strategies, UAE pre-Series A startups can efficiently leverage SAFEs to secure essential early funding and set the stage for a successful priced equity round. (mandcolegal.com, rbcx.com, pkclegal.com)
Quick Comparison Table
Feature
Advantages
Limitations
SAFEs (Simple Agreements for Future Equity)
- Simple and fast way to raise early-stage capital without immediate valuation or ownership changes.
No maturity date or interest, reducing pressure on founders.
Converts to equity at a future priced round or liquidity event.
Lower legal costs and negotiation complexity.
Post-money SAFEs provide clear ownership dilution visibility.
Supported in UAE financial free zones (ADGM, DIFC) with investor-friendly legal frameworks.
Suitable for pre-Series A startups seeking informal equity from family, friends, or angel investors.
| - Not formally recognized under mainland UAE law, leading to enforceability and regulatory risks.
No investor rights (voting, dividends) until conversion.
Requires careful drafting of terms like valuation cap, discount rate, and conversion triggers.
Potential tax implications on conversion under UAE Corporate Tax law.
Market adoption is still emerging; traditional equity or debt financing remains more common.
Post-money SAFEs may cause higher dilution for founders in future rounds.
This table summarizes SAFEs as a flexible, efficient funding instrument for pre-Series A UAE startups, highlighting key features, advantages, and limitations for founders seeking family and friends funding with informal equity participation.
Actionable Guidance for UAE Founders
For UAE startup founders considering SAFEs (Simple Agreements for Future Equity) as a funding option for pre-Series A rounds involving family and friends, several UAE-specific factors and best practices should guide decision-making:
Jurisdiction is crucial: Incorporate in UAE financial free zones such as ADGM or DIFC where SAFEs are legally recognized and flexible under common law. Mainland UAE companies face legal ambiguity and limited enforceability of SAFEs.
Draft SAFEs carefully: Include clear terms on conversion triggers, valuation caps, discounts, and treatment upon liquidity events. Ensure Articles of Association allow share issuance upon conversion and support multiple share classes.
Maintain uniform SAFE terms across investors to simplify future equity conversion and cap table management; use side letters for any special investor rights.
Understand that SAFEs do not grant immediate shareholder rights like voting or dividends until conversion; additional rights can be negotiated separately.
Be aware of UAE corporate tax implications upon conversion and potential regulatory scrutiny by the Securities and Commodities Authority if SAFEs are broadly marketed.
SAFEs offer a quick, simple, and cost-effective way to raise early-stage capital from family and friends without immediate equity dilution or debt obligations.
Engage UAE legal advisors experienced in startup financing to navigate jurisdictional nuances and draft robust SAFE agreements.
By following these tailored guidelines, UAE founders can effectively leverage SAFEs to secure early funding from family and friends, optimizing for speed, legal clarity, and future fundraising readiness in the UAE ecosystem. (Mandco Legal, ATB Legal, Wamda)
Overview: Convertible Notes for Pre-Series A Startups
Convertible Notes are short-term debt instruments that convert into equity at a later stage, typically during a subsequent funding round. They allow startups in the UAE, especially at the pre-Series A stage, to raise capital without setting an immediate valuation, which can be challenging for early-stage companies. Investors provide funds as a loan that accrues interest and converts into shares later, often with a discount or valuation cap to reward early risk-taking. This instrument is popular among family and friends investors in the UAE due to its simplicity, speed, and regulatory compliance, providing a flexible bridge between informal and institutional capital while protecting both founders and investors.
Top Convertible Notes in the UAE
Dubai Angel Investors (DAI) - A member-led micro-VC in Dubai with over 100 investors focusing on early-stage technology startups, providing seed and pre-Series A funding typically between $100,000 and $250,000. They offer mentorship, a structured application process, and co-investment opportunities.
Sabban Corp Investment - A UAE-based family office investing $50,000 to $600,000 in sectors including fintech, manufacturing, agriculture, software, IoT, and logistics, active in early revenue and scaling stages suitable for pre-Series A companies.
ADQ - A strategic investment company in Abu Dhabi known for co-investing with family offices and corporate VCs, providing growth capital and strategic partnerships for startups in various sectors.
MENA Angels - A regional angel investor network with a strong presence in the UAE, focusing on fintech, e-commerce, and healthcare sectors, offering early-stage funding and mentorship.
Mohammed Bin Rashid Innovation Fund (MBRIF) - A government-backed fund providing grants and investments from AED 500,000 to AED 2 million, supporting innovative startups in the UAE at early stages including pre-Series A.
How Convertible Notes Work at the Pre-Series A Stage
Typical & Available Funding Amounts
Typical Funding Amount: Typical funding amounts for Convertible Notes in UAE startups at the pre-Series A stage generally range from around $200,000 to $2 million USD (approximately AED 735,000 to AED 7.3 million). This range reflects common early-stage investments where convertible notes are used as flexible financing instruments that convert to equity at a later funding round, often with valuation caps and discounts to reward early investors.
Funding Amount Range: Typically, Convertible Notes in UAE startups provide funding amounts ranging from approximately $500,000 to $2 million USD (about AED 1.8 million to AED 7.3 million), suitable for pre-Series A fundraising stages.
Time to Funding: The average timeline from application to funding decision for Convertible Notes in UAE startups at the pre-Series A stage typically ranges from 3 to 6 weeks. Convertible Notes are favored for their faster fundraising process compared to priced equity rounds, with minimal paperwork and negotiation, making them one of the quickest early-stage funding instruments to secure capital from friends, family, and early investors.
Application Process
Preparation: Startups prepare by developing a business plan, determining key terms like principal amount, interest rate, maturity date, conversion discount, and valuation cap. Legal counsel is engaged to draft compliant convertible note agreements suitable for UAE jurisdictions such as ADGM, DIFC, or mainland UAE.
Negotiation: Founders present terms to potential investors (often friends and family or early-stage investors), negotiate terms including discounts and valuation caps, and obtain shareholder approval if required.
Documentation: Legal documentation is finalized, ensuring disclosure of material information and compliance with jurisdiction-specific regulations and free zone rules.
Issuance: Convertible note agreements are executed, and funds are received as loans that will convert to equity upon a qualifying event.
Post-Issuance: Startups monitor maturity dates and conversion triggers like subsequent funding rounds or liquidity events. Upon a qualifying round, notes convert to equity at agreed terms. If no round occurs by maturity, repayment or conversion is negotiated as per agreement.
This process provides a flexible, legally compliant early-stage funding option that bridges informal and institutional capital, deferring valuation until a later stage while protecting both founders and investors.
Eligibility Criteria
Convertible Notes in the UAE are primarily suited for early-stage startups, particularly those in the pre-Series A and seed stages, seeking flexible and fast financing options. Eligible startups must be legally incorporated within the UAE, either in mainland jurisdictions governed by the UAE Commercial Companies Law or in financial free zones such as the Abu Dhabi Global Market (ADGM) or Dubai International Financial Centre (DIFC), which offer more investor-friendly and flexible corporate structures. There are no strict sector limitations, but startups must comply with local ownership and licensing regulations, especially regarding foreign ownership restrictions. Founders should have a viable business idea or prototype, often with some initial traction or proof of concept, to attract friends, family, angel investors, or early-stage venture capitalists. Legal compliance is essential, including obtaining shareholder approval and drafting clear convertible note agreements outlining terms such as conversion triggers, valuation caps, and investor rights. Convertible notes are favored for their ability to delay valuation discussions, provide investor incentives like discounts and caps, and maintain founder control until conversion.
Standard Documents Required
Convertible Note Agreement detailing terms such as principal amount, interest rate, maturity date, conversion discount, and valuation cap.
Business plan outlining the startup’s strategy and growth projections.
Shareholder approval documentation for issuing convertible notes.
Updated Articles of Association and Shareholders’ Agreement reflecting convertible note terms.
MYKI (Exited) - cybersecurity digital identity protection
App4Legal - legal tech digitizing legal practice
Obrizum - AI-powered adaptive learning edtech
360VUZ - social media virtual reality video experience
Tips for Success at the Pre-Series A Stage
For pre-Series A startups in the UAE using Convertible Notes, maximize success by focusing on these key areas:
Leverage the flexibility of convertible notes to delay valuation until more traction is achieved, which suits early-stage startups with uncertain valuations.
Prepare clear, concise legal documentation outlining principal, interest, maturity, conversion discount, and valuation cap to protect both founders and investors.
Incorporate in investor-friendly UAE jurisdictions like ADGM or DIFC for flexible shareholding and regulatory compliance.
Maintain operational control as investors do not have voting rights until conversion.
Negotiate favorable terms on valuation caps and discounts to balance dilution and investor incentives.
Be prepared for maturity dates to convert or repay notes, avoiding financial strain.
Use convertible notes to formalize friends and family investments, ensuring transparency and risk awareness.
Tailor pitch materials to UAE investors emphasizing GCC scalability, regulatory compliance, and local market insights.
Engage legal advisors experienced in UAE startup funding to ensure compliance and robust structuring.
Utilize convertible notes as a fast, cost-effective bridge to institutional funding rounds.
These strategies help founders secure early capital efficiently while positioning for successful Series A rounds in the UAE ecosystem. (FounderX, M&Co, Bahrain EDB PDF, Founder Connects)
Quick Comparison Table
Feature
Description
Advantages
Limitations
Convertible Notes
Short-term debt instrument converting to equity at a future funding round, typically Series A.
- Flexibility: delays valuation until later round, ideal for pre-Series A startups.
Simplicity: less complex legal documentation than equity rounds.
Investor incentives: valuation caps and discounts.
Regulatory compliance: aligns with UAE corporate and free zone laws.
Bridges informal (friends and family) and institutional capital.
| - Debt nature: may require repayment if no conversion event.
Dependent on future funding rounds.
Requires careful negotiation of discount and cap.
Causes dilution upon conversion.
| Usage in UAE startups | Widely used by UAE startups for early financing, especially friends and family in pre-Series A. | - Investor-friendly frameworks in financial free zones (ADGM, DIFC).
Enables raising AED 50,000 to several hundred thousand.
Helps founders maintain control and defer valuation.
| - Requires proper legal structuring.
May be less familiar to some family investors.
| Application Process | Drafting agreement with principal, interest, maturity, discount, and valuation cap terms. | - Faster and simpler than priced equity rounds.
Can be combined with free zone incorporation.
Suitable for startups without clear early valuation.
| - Needs legal advice for compliance and clarity.
Terms must be clear to avoid disputes.
| Stage-specific tips | For pre-Series A startups:
Use to bridge informal and institutional funding.
Clearly communicate terms to family investors.
Keep documentation professional.
Negotiate fair valuation caps and discounts.
| - Avoid over-reliance without Series A plan.
Prepare for dilution post-conversion.
Ensure maturity dates allow time for next round.
Summary: Convertible Notes offer UAE pre-Series A startups a flexible, investor-friendly funding option ideal for friends and family rounds, combining speed, simplicity, and regulatory compliance while deferring valuation challenges. Founders must manage debt risks and negotiate terms carefully.
For UAE startup founders seeking pre-Series A funding from family and friends, Convertible Notes are a highly effective financing instrument offering flexibility and speed. They allow founders to raise capital without immediately setting a valuation, deferring equity conversion to a later priced round, which suits early-stage startups facing valuation challenges. To maximize success, founders should clearly define terms such as principal, interest rate, maturity date, conversion discount, and valuation cap to align expectations and protect relationships. Incorporating in investor-friendly UAE jurisdictions like ADGM or DIFC supports flexible shareholding and convertible note structures. Founders should prepare for potential dilution due to accrued interest and conversion terms by modeling cap tables and communicating impacts transparently. Being aware that Convertible Notes are debt instruments until conversion, founders must plan fundraising timelines carefully to avoid repayment risks if a priced round is delayed. Using Convertible Notes as a bridge from informal family and friends capital to institutional funding demonstrates early traction and investor confidence. Maintaining professionalism with formal agreements and legal compliance under UAE corporate laws and free zone regulations is essential. This approach balances speed, flexibility, and legal robustness, enabling founders to secure early funding while preserving future growth and investor trust in the UAE startup ecosystem.
Overview: Shariah-Compliant Financing for Pre-Series A Startups
Shariah-Compliant Financing in the UAE, especially via qard hasan (benevolent loans), is an interest-free loan system rooted in Islamic finance principles. It involves lending money without charging interest, where the borrower repays only the principal amount, making it suitable for startups with cultural or religious preferences seeking pre-Series A capital. This financing method is often used among family and friends, providing a benevolent and ethical funding option recognized locally in the UAE startup ecosystem.
Top Shariah-Compliant Financing in the UAE
Dubai Islamic Bank (DIB) - The largest and most established Islamic bank in the UAE offering Shariah-compliant financing products suitable for startups, including profit-sharing and Murabaha models.
Abu Dhabi Islamic Bank (ADIB) - Provides a range of Shariah-compliant financing solutions with a strong presence in corporate and retail sectors, including SME financing.
Emirates Islamic Bank - Known for digital-friendly Islamic financing options, including SME financing and halal Buy-Now-Pay-Later products.
Sharjah Islamic Bank - Offers affordable Shariah-compliant microloans and SME financing, with a focus on community and Sharjah residents.
Ajman Bank - Specializes in SME Murabaha financing and halal auto leases, catering to startups in the Northern Emirates.
Funding Souq - A Shariah-compliant private credit platform regulated by the Dubai Financial Services Authority, offering interest-free, benevolent loan structures and investment opportunities for small businesses.
Dubai Angel Investors - An active angel investor network in the UAE supporting early-stage tech startups with investments typically between AED 100,000 and AED 500,000, often aligned with Shariah principles.
MENA Angels - A regional angel network with a presence in the UAE, interested in sectors like fintech and e-commerce, providing early-stage funding and mentorship.
Family and Friends Networks - Commonly used in the UAE for qard hasan (benevolent, interest-free loans) among culturally or religiously aligned groups, typically raising AED 50,000 to AED 200,000 for pre-Series A startups.
How Shariah-Compliant Financing Work at the Pre-Series A Stage
Typical & Available Funding Amounts
Typical Funding Amount: Shariah-Compliant Financing in the UAE, specifically qard hasan (benevolent loans), typically involves interest-free loans where only the principal amount is repaid. While exact typical funding amounts for startups are not rigidly defined, Islamic banks and platforms like Funding Souq offer Shariah-compliant financing options with individual investment limits up to AED 365,000 per year for individuals and higher for professional or corporate investors. Pre-Series A startups can often access qard hasan loans in the range of tens of thousands to several hundred thousand AED, depending on the borrower's creditworthiness and collateral. These loans are culturally and religiously preferred for early-stage capital without interest, aligning with Islamic finance principles.
Funding Amount Range: Typically, Shariah-Compliant Financing in the form of qard hasan (benevolent loans) in the UAE for startups ranges from small personal loans to amounts up to AED 1 million (approximately USD 272,000). These loans are interest-free and structured according to Islamic finance principles, often provided by family, friends, or Islamic banks as part of corporate social responsibility. The exact amounts can vary depending on the lender and the borrower's needs, but for pre-Series A startups, the range is generally from AED 50,000 to AED 1,000,000 (USD 13,600 to USD 272,000). This range aligns with typical interest-free loan offerings and government-backed grants for early-stage companies in the UAE.
Time to Funding: Typically 1–2 weeks from application to receipt of funds for Shariah-compliant financing in the UAE, assuming all documentation and invoices are in order.
Application Process
Application Submission: The startup or business submits an application for Shariah-Compliant Financing either by visiting the financial institution's office or through their online platform (e.g., Mawarid Finance or Emirates NBD).
Eligibility Assessment: A representative or SME Relationship Manager contacts the applicant to verify eligibility based on core criteria such as business stage, nationality, and compliance with Islamic finance principles.
Documentation and Proposal Review: The applicant provides necessary documentation including business plans, financial statements, and details of the financing requirement. The financial institution reviews these documents.
Shariah Compliance Review: An authorized Shariah scholar or board reviews the financing proposal to ensure it aligns with Islamic finance principles, including the prohibition of interest (riba) and adherence to profit-and-loss sharing or benevolent loan structures.
Financing Structure Agreement: The institution and the startup agree on the specific Shariah-compliant financing structure suitable for the business needs, such as qard hasan (benevolent loan), Murabaha, Ijarah, or Mudaraba.
Profit Share and Repayment Terms: The profit share, repayment schedule, and other terms are finalized and approved by the Shariah board.
Funding Decision and Disbursement: Upon approval, the financing amount is disbursed to the startup as per the agreed terms.
Ongoing Monitoring and Support: The financial institution may provide ongoing support and monitor the business performance to ensure compliance with the agreed terms and Shariah principles.
This process is designed to be inclusive for all nationalities and tailored to startups at the pre-Series A stage seeking culturally aligned, interest-free funding options in the UAE.
Eligibility Criteria
Shariah-Compliant Financing in the UAE, particularly in the form of Qard al-Hasan (benevolent loans), is interest-free and structured according to Islamic finance principles. Eligibility criteria for startups typically include:
Location: Must be based in the UAE.
Stage: Suitable for pre-Series A startups, especially those seeking early capital from family and friends.
Sector: Open to various sectors but must comply with Shariah principles, avoiding prohibited industries (e.g., gambling, interest-based finance).
Founder Background: Preference for founders who seek financing aligned with Islamic ethics and cultural preferences.
Loan Terms: Only the principal amount is repaid without interest or profit-sharing.
Collateral: Lenders may require collateral or guarantees to secure the principal amount.
Repayment: Borrowers must repay the principal by the agreed due date; late payment fees are not permissible under Shariah.
Documentation: Simple agreements outlining the loan amount, terms, and repayment schedule are recommended to maintain transparency.
This financing is often provided within personal networks (family and friends) as benevolent loans, reflecting kindness and support without financial gain. Islamic banks may offer Qard al-Hasan loans on a limited scale, primarily as part of corporate social responsibility rather than commercial activity.
These criteria ensure that startups can access culturally and religiously appropriate funding at the pre-Series A stage, fostering trust and compliance with Islamic finance principles in the UAE startup ecosystem. (Funding Souq, Founder Connects)
Standard Documents Required
Completed Application Form
Copy of Valid Passport with valid UAE Residence Visa for expatriates (original documents required for verification)
Last three months Bank Statement
Salary Transfer Letter/Salary Certificate (for salaried customers only)
Account Opening Form for shares trading
Liability Letter (for buyout cases only)
Trade License (for self-employed customers only)
Memorandum of Association (MOA) & Articles of Association (AOA)
Power of Attorney (POA) borrowing power
Notable Investments
Tabby secured $160 million in a Series E funding round in February 2025, boosting its valuation to $3.3 billion and making it the region’s most valuable fintech startup. Tabby is a leading provider of purchase financing solutions in the UAE.
Beehive is a sharia-compliant online marketplace for business loans in the UAE, connecting small businesses with investors. It has raised $15.5 million in funding and is recognized as a key player in sharia-compliant financing.
Cashew Payments Technology, a point-of-sale financing platform offering interest-free installment payments, has raised $10 million in funding and operates in Dubai, UAE.
Tips for Success at the Pre-Series A Stage
For pre-Series A startups in the UAE seeking Shariah-Compliant Financing, especially through family and friends or microfinance options like qard hasan, Mudarabah, or Musharakah contracts, here are actionable tips to maximize funding success:
Traction: Demonstrate clear early-stage validation of your business idea with initial customer interest or pilot sales. Even small revenue or user engagement metrics help show potential for growth.
Team: Highlight a committed founding team with complementary skills and a strong understanding of Islamic finance principles to build trust with Shariah-compliant financiers.
Metrics: Prepare transparent financial projections that align with risk-sharing principles, emphasizing ethical business practices and avoiding prohibited industries (e.g., gambling, alcohol).
Preparation: Have clear documentation of your business plan, including how the financing will be used to grow the company ethically. Understand the specific Shariah-compliant contract types (e.g., profit-sharing in Musharakah) and be ready to negotiate terms that reflect partnership and shared risk.
Cultural Fit: Emphasize your adherence to Islamic ethical standards and social responsibility, which is crucial for Shariah-compliant investors.
Application Process: Engage with UAE-based institutions known for Shariah-compliant microfinance such as Emirates Development Bank and Khalifa Fund. Utilize advisory services from firms experienced in Islamic finance to ensure compliance and optimize contract structuring.
By focusing on these areas, pre-Series A startups can effectively position themselves to secure interest-free, ethical financing that aligns with both their growth goals and cultural values in the UAE.
Quick Comparison Table
Feature
Description
Advantages
Limitations
Funding Type
Qard al Hasan (benevolent, interest-free loan) typically among family and friends in UAE
Interest-free, aligned with Islamic finance principles, culturally relevant for Muslim founders
Limited to personal networks, amount depends on family/friends' capacity, informal process
Eligibility
Startups at pre-Series A stage with cultural/religious preference for Shariah-compliant finance
Accessible for founders preferring Shariah-compliant options, no interest burden
May require strong trust and relationship, not suitable for large funding needs
Funding Amount
Typically small to moderate amounts (e.g., AED 50,000 to AED 200,000 as common early funding)
Provides vital early capital without debt burden
May not suffice for larger growth or scaling needs
Application Process
Informal, based on personal agreements and trust among family/friends
Simple, quick to access without formalities or lengthy approvals
Lack of formal documentation may cause misunderstandings or disputes
Repayment Terms
Principal amount repaid without interest, no profit sharing
Clear and fair repayment aligned with Islamic law, no additional financial burden
Late payment fees are not permissible, may complicate enforcement
Collateral or Guarantees
Permissible to require collateral or guarantees to secure loan principal
Provides security to lender while maintaining Shariah compliance
May be difficult for early-stage startups to provide collateral
Cultural and Religious Fit
Fully compliant with Islamic finance principles, recognized and respected in UAE
Builds trust within Muslim communities, aligns with ethical finance values
Limited appeal for non-Muslim founders or investors
Notable Providers
Informal family/friends networks; Islamic banks offer limited Qard al Hasan loans as CSR
Accessible within community; Islamic banks provide limited formal options
Islamic banks' Qard al Hasan loans are limited and not a core banking product
Stage-Specific Tips
Emphasize trust-building, clear communication, and documentation even if informal
Helps maximize success in securing benevolent loans
Requires careful relationship management and transparency
More formal and may require eligibility criteria and credit assessments
Actionable Guidance for UAE Founders
Shariah-Compliant Financing through Qard Hasan (benevolent loans) is a culturally and religiously aligned funding option for pre-Series A startups in the UAE, especially when seeking capital from family and friends. This form of financing is interest-free, where only the principal amount is repaid without any profit-sharing or interest, making it compliant with Islamic finance principles and attractive for founders who prioritize ethical and Shariah-compliant funding.
Founders should consider the following actionable guidance when pursuing Qard Hasan financing:
Understand the Nature of Qard Hasan: It is a loan given out of kindness without interest or profit. The borrower repays only the principal amount at the agreed time. It is not a donation but a loan with a repayment obligation.
Documentation and Agreement: Clearly document the loan terms, including the principal amount, repayment schedule, and any collateral or guarantees if applicable. While interest or late fees are not permissible, collateral can be stipulated to secure the loan.
Leverage Family and Friends Networks: Since Qard Hasan loans are often informal and benevolent, approaching family and friends who share your cultural and religious values can facilitate access to this funding.
Prepare for Repayment Flexibility: In case of repayment difficulties, lenders may offer extensions or waive the loan as an act of kindness, but this should be communicated and agreed upon transparently.
Avoid Conventional Loan Pitfalls: Unlike conventional loans, Qard Hasan avoids riba (interest), making it compliant with Islamic law and reducing financial burden on early-stage startups.
Consider Institutional Support: Some Islamic banks offer Qard Hasan loans on a limited basis as part of corporate social responsibility, though these are less common for startups.
Use Collateral Wisely: If collateral is used, ensure it is clearly defined and agreed upon to protect both parties.
Stay Informed on Shariah Compliance: Engage with Shariah advisors or boards if possible to ensure all agreements and practices remain compliant.
By aligning funding efforts with Shariah principles, UAE startup founders can access ethical, interest-free capital that respects cultural values and supports sustainable growth at the pre-Series A stage. This approach not only secures necessary funds but also builds trust and goodwill among close networks, which can be invaluable for long-term success.
For deeper research, founders can explore local Islamic finance resources and consult Shariah-compliant financial advisors to tailor agreements to their specific needs and circumstances.
