According to reports, funding is at a nine-year low, and investment amounts as well as the number of startups getting investors are trending downwards.
But there’s one city where it’s always sunny: Dubai. Progressive policies, a growth mindset, global talent, long-term
potential, and ease of doing business have put Dubai on the global map for venture capital funding and incubators.
VC funding in Dubai has evolved significantly over the years. According to MAGNiTT, a data and analytics firm, in 2019, Dubai-based startups raised $1.3 billion in funding across 263 deals, up from $210 million in 2016.
In 2020, the total funding amount decreased to $704 million, but the number of deals increased to 338. Recently, a number of international VC firms and tech companies have set foot in Dubai, including Arbor Ventures, Sequoia Capital, Accel Partners and Lightspeed Venture Partners.
Mark Chahwan, co-founder and CEO, Sarwa, a leading investment platform, said their VC experience in the city has been positive, owing to supportive initiatives like access to capital and talent. “You now have government entities providing funding for startups, and Dubai’s reputation as a global hub for business is attracting international talent. The positive changes in laws and regulations support ease of business,” Chahwan said.According to Suneel Gokhale, partner, VentureSouq, VCs in Dubai offer quality of experience, execution capabilities and add value to portfolio companies. “This is a function of many things; likely more VCs are popping up organically and moving to Dubai and the broader MENA region as the quality of founders keeps getting better, number of
investable companies grow and capital availability and regulatory frameworks developed continue to make it easier to build and scale startups.”
The Way Is Up
“It’s exciting times,” said Craig Moore, founder and CEO, Beehive, a peer-to-peer lending platform.
Dubai’s infrastructure and regulatory environment make it an ideal place to grow as afinancial hub.
“From a peer-to-peer lending perspective, startups can establish themselves here and secure seed funding from investors looking for year-on-year growth and the ability to repay debt finance. While risk is always a factor, digital
innovation and B2B propositions attract interest. Investors are cautious citing the state of the wider global economy but excited by regional growth projections.”
Dubai’s infrastructure and regulatory environment make it an ideal place to grow as a financial hub. Sharif El-Badawi, CEO, Dubai Future District Fund (DFDF), shared that the city was positioning itself as a major hub for innovation and entrepreneurship. “The UAE was the only country in the MENA region to maintain its
lead in funding and cross the $1 billion mark in 2022. The VC market aggregated $1,190 million, falling below the 2021 value by 20 per cent, across 153 deals, which registered an 11 per cent decline across transactions. The ecosystem mirrored global performance as markets absorbed the impact of geopolitical and macroeconomic
It is worth noting that international VCs investing in the UAE rose from around 33 per cent in 2019 to 48 per cent
in 2022,” he said. DFDF, being a government backed fund, aims to support deeper technologies that impact
people’s lives and the future of Dubai’s economy.
Addressing The Challenges
With such a nascent ecosystem in emerging market regions, founders are constantly faced with challenges and find creative ways to overcome them.
“As regional venture capital investors, and the LPs investing in their funds, we also face market-related challenges (maturity of talent,strong deal flow, private sector participation, competitiveness) or financial and regulatory challenges. One of the things that attracted me to Dubai was the government’s eagerness to listen to its constituents and enact changes to address challenges,” said El-Badawi.
Entrepreneurial energy is still high and rising. “There’s a big push to support the startup ecosystem from incubators and accelerators such as DIFC Fintech Hive, AstroLabs and In5. There are many organisations that support you with establishing a business, and free zones that suit your business needs.The current high-projected growth in GCC compared to the rest of the world is also attracting entrepreneurs,” added Moore.