STV has announced the launch of a new financing tool called “Non-dilutive Investment in Callable Equity” (NICE), aimed at funding startups in the Middle East and North Africa region as an alternative to traditional debt financing.
STV confirmed that it experimented with this structure with Tabby, a company valued at one billion US dollars, with the company’s founder describing this tool as a cost-effective alternative to equity financing.
According to STV, the NICE tool and its structure are based on redeemable equity stock instruments, allowing founders the option to purchase shares in installments during the financing period.
This provides significant flexibility and does not result in the complete loss of the company in case of a crisis, which is naturally Sharia-compliant.
The company explained that the redemption amount of the shares varies based on the investing company’s revenue performance, meaning that financing returns are tied to future cash flows.
The return for the financier is inversely related to the company’s revenue growth, meaning lower returns if growth is less than expected.
In cases of exceptional company growth, the total redemption payments are capped at a pre-agreed upper limit, preserving the founders’ equity value.
As it is linked to ownership rights, it does not include covenants and warranties, significantly reducing the burden on startups. Similar to equity investment, entrepreneurs have the right to invest capital in the manner they deem appropriate according to STV.
Three companies in the Arab region have previously benefited from NICE financing, with a total investment of $26 million, including STV’s funding of Tabby, and growth capital financing for Golden Sent for e-commerce, and YouGotAGift for digital gifting solutions.
STV invited startups with revenues exceeding $3 million to collaborate with them, commenting on the launch of the tool, stating: “While this trend is still in its early stages in the region, we are witnessing strong interest in this innovative mechanism from both founders and other investors.
We aim for this trend to be an open initiative for everyone to join, as we look forward to collaborating with founders and investors to work together to increase the share of alternative financing for startups in the region.”
