What makes the UAE an oasis for startups and VC investors?

The last journey is over, so the next journey begins… Fasten your seat belts, our flying carpet is taking off! Next stop — the United Arab Emirates.

If you are interested in venture investments and wanna meet industry insiders or learn how to build a successful startup deal flow in the Middle East and North Africa, join us for VC Weekend Middle East (Dubai — Abu Dhabi) on October 13–16 — find out more here.

Being an epicenter of global entrepreneurship and a home of choice to the world of startups, approaching the Dubai funding landscape to start financing your business is easier than it may seem. For investors, entrepreneurs, and emerging companies, Dubai offers a plethora of funding options and facilitators to cut through the noise, launch your projects, accelerate their growth, and create new markets.

Let’s figure out how everything works there, where to go, with whom to communicate and why it’s worth it.

Why the UAE was named the best place to start a business and make investing decisions

The UAE has the world’s most supportive entrepreneurial ecosystem. Because of its position, the UAE is an ideal location for many companies. Located strategically between Europe, Asia, and Africa, the UAE is considered a central trading hub for shipments from the east to the west and vice versa. It also provides easy access to the Middle East markets that span over 16 countries and around 400 million people. Being based in Dubai is a badge of honour for businesses and investors — one that is recognised both regionally and internationally.

The UAE topped this year’s Global Entrepreneurship Monitor (GEM) report that evaluated several framework conditions, such as the availability of entrepreneurial finance, ease of access to entrepreneurial finance, entrepreneurial education at school, government policy, ease of entry, research and development transfers, and social and cultural norms. GEM found that the UAE had the highest total score by a clear margin, having improved in 11 out of the 13 framework conditions. It also scored the highest of all 47 economies in four framework conditions and was the only country that scored as sufficient or better in all framework conditions.

And the UAE is firmly among the leaders in the Ease of Doing Business Index. The UAE has set its ambitions clear about unicorns — having 20 of these startups valued at $1 billion-plus each based here by 2031.

Dubai and Abu Dhabi have become entrepreneur favorites with some of the most futuristic, world-class interconnected infrastructure, a diverse and multicultural talent pool, and easy access to funding and regional markets.

These include:

1. Allowing 100% foreign-owned businesses

In May 2019, the UAE government announced it would soon be possible for foreign entrepreneurs to be 100% shareholders in a locally incorporated business.

Total foreign ownership was previously only permitted in the UAE’s increasing number of free zones, meaning businesses incorporated ‘onshore’ had to be 51% locally owned.

2. Offering extended visas for entrepreneurs

In May 2019 the UAE brought in a new system for five- and ten-year residency visas, enabling outstanding non-UAE investors and specialists to live, work and study here without a national sponsor. The visa can be renewed if the holder’s circumstances remain positive.

These five- and ten-year visas require investments of AED 5 million and AED 10 million respectively. There are currently 125 business areas that UAE-based expats can operate in without the requirement of a local sponsor.

3. Attracting tech businesses to the UAE.

The UAE government created a new technology space, Hub 71. Based in Abu Dhabi, Hub 71 is a joint partnership with Microsoft. The fact the government has also earmarked AED 500m in investment funds as part of the overall initiative is further evidence of the UAE’s commitment to attracting international tech talent.

Coupled with its ambitious Government Accelerators’ programme which includes Ghadan 21 — a three-year development plan worth AED 50bn –all of these efforts make it pretty clear that the UAE government wants to create an even more thriving tech scene here.

4. Providing funding and support for smaller businesses

Given the leaps and bounds being made in providing help and support to entrepreneurs and startups, it’s no surprise that the UAE ranks highly for online access to administrative and government services.

To make things easier for businesses, it was recently announced that 5% of government capital projects will be allocated to small and medium enterprises (SMEs). This comes as part of a drive to encourage them to enter into major projects contracts with government agencies, and form alliances to compete for government projects.

The UAE has a strong tradition of encouraging talented individuals to come here to live and work. However, looking at these recent developments, it’s increasingly evident that the government is now keen to attract independent entrepreneurs from a range of disciplines. As a result, the playing field for international entrepreneurs looks even more attractive, particularly when paired alongside other other developments.

Specialised free zones play an indispensable role in supporting the UAE’s entrepreneurial ecosystem. With their cost-effective business incorporation packages along with various incentives, infrastructural and mentoring support, free zones help entrepreneurs on their journey to scale.

Moreover, an income tax-free regime, steady growth, extensive needs, and investor-friendly processes make it an appealing proposition for most investors.

​​Among all the countries of the Middle East, investors are most interested in the United Arab Emirates. The latest Dubai Chamber statistics show MENA Region hosts 587 scaleups that raised VC funding to the tune of $9.1 billion which is a 47% increase since 2020. The UAE, however, leads the show hosting 251 scaleups raising 60% of the total VC funding at $ 5.4 billion. The data further confirms that it holds to its position as the de facto tech city hub of the region, aggregating 40% of MENA startups attracting the majority of funding and being home to most of the region’s tech giants.

The government of Dubai provides support to VC firms, with the aim of nurturing Dubai-based innovation. VC firms can access the vehicles they need to raise capital and deploy investments locally.

Features of the business culture in the UAE

The market here is not very large — about 10 million people, but on the upside it is quite rich. The United Arab Emirates is a good place to gain a foothold and scale to neighboring countries that are less financially secure but have larger populations.

In the UAE the local population makes up only 8–10%, and the country has the largest number of migrants in comparison with other countries. Most of them moved from India and Pakistan to work. In this regard, the United Arab Emirates is a unique place. This diversity of people imposes specific restrictions on all businesses. Here your team must consist of people of different nationalities.

In B2B sales before the lockdown no one really held online meetings since Arabs prefer to solve everything face to face and not remotely. Zoom, for example, was always blocked on home Wi-Fi, but during the pandemic everything changed and meetings had to take place online.

Of course if we are talking about a long, complex B2B sale for a high price, then you definitely cannot do without a meeting in person. If it is a major client, then the transaction must be attended by several people from each side. An important point: if the client has an Indian negotiator, then you must also appoint an Indian negotiator from your company.

Eastern venture

Funding is one of the key challenges for a start up company in the UAE. Here, investors do not invest in competitors. If your startup has been invested in, it will be the investor’s only portfolio project in this niche.

What will help startups to sail across their initial stages until it reaches a sustainable stage where they generate ample revenue to sustain the business operations:

1. Alternative funding sources. If the requirement amount is less, (around $5000) then there are many microloan companies that provide funding to startups and entrepreneurs. Also, there are different crowdfunding sites.
2. Look locally. The local small business development Centre is also helpful in raising funds for businesses set up in Dubai. A lot of startups in the UAE, sponsored by the government or the respective free zones. There are persons who can guide the investor to many incubators, ‘startup hubs’, and accelerators that have popped up all over the UAE. You can also get in touch with the local chamber of commerce, industry association, or business council on guidance for local funding.
3. Angel investors. There are a large number of angel investor networks in the UAE such as the Dubai Angel Investor network, the Women’s Angel Investor Network, and the Falcon network which have encouraged the angel investment scene.
4. Private equity and venture capital. The sources of funding, which are slowly entering the UAE. Venture capital typically provides funds in return for minor equity stakes in start-ups or young SMEs that are not publicly trading. On the other hand, private equity funds often take a majority stake in mature companies in traditional industries.

Within Dubai, the Dubai International Financial Centre (DIFC) is MENA’s leading financial centre. It is the region’s top hub for innovative startups, providing unparalleled access to a diverse ecosystem of industry stakeholders, including international companies, investment funds, wealth management institutions, banks and entrepreneurs. This ecosystem provides ideal access to investment opportunities. Having all the stakeholders within arm’s reach cuts discovery time significantly and facilitates the establishment of relationships. Deal flow is cultivated and cross-pollination of innovative ideas is made possible.

First steps in Dubai

First steps in the UAE are the first sales on the market. The Dubai market is not the easiest: it is difficult and time-consuming (and expensive) to make all the necessary documents.

If you bring a business here, then you open a legal entity, get a residence permit, and then open an account. In Dubai, business proceedings in government agencies and banks are slow. You will definitely be asked for background information. Be prepared to put together and provide all the necessary extracts and certificates.

If you are moving to Dubai to acquire employment, be aware that this is a very risky undertaking. The competition here is intense. The chances of finding a job are extremely low. Planes land in Dubai five times a day with Indians who are more educated, have good English, and they ask for three times less money than Russians.

The United Arab Emirates does not have a very fast market, and at the same time it is very expensive. If you have the energy to go to Dubai with your business just for the heck of it — think carefully!