Dubai largely kept its border open, aggressively vaccinated and introduced visa and other policies that have attracted an increasingly mobile international workforce. Relaxed virus policies, low taxes and relatively light business regulation in Dubai created an attractive environment for technology startups, officials said, with much of Europe and Asia beginning lockdowns through multiple waves of Covid-19.
“The thing that has really changed is Covid – it has accelerated the ecosystem for three to five years,” said Asher Siddiqui, a Dubai-based venture capitalist and former partner at San Francisco-based 500 Startups.
Ralf Glabischnig, an investor and founder of Crypto Oasis, an organization helping blockchain and crypto startups founded in Dubai, moved to the city last year, which he called the fastest growing center globally for crypto technology. Crypto Oasis says it has helped 200 startups in Dubai build businesses trading cryptocurrencies or on the blockchain. The world’s largest crypto exchange, Binance, has set up offices in Dubai.
Dubai has also benefited from the UAE’s new diplomatic ties with Israel, known as the Abrahamic Agreement in 2020, which created opportunities for Dubai to build ties with the already established technical center in Tel Aviv . Companies in Israel, which are also experiencing a tech boom, are expanding and choosing Dubai for their first regional outpost.
According to Dubai-based Wamda, a research platform, investments in tech firms in the Middle East and North Africa, excluding Israel, quadrupled last year to $2.87 billion, compared to $654 million in 2020, nearly half in the United Arab Emirates. Half the investment done.
Dubai is now home to three tech startups worth at least a billion dollars: Kitopi, a cloud kitchen platform; private aviation platform Vista Global; and Emerging Markets Property Group, which operates classified listing websites in the United Arab Emirates, Egypt and other countries, according to New York-based CB Insights.
“This is an important point,” said Dominic Perks, chief executive officer of London-based investment firm Hambro Perks, which has launched a fund to invest in startups in the Middle East.
Three India-based executives at Sequoia Capital moved to Dubai during the pandemic, where they obtained long-term permits to move freely in and out of the city, according to people familiar with the moves.
These people said Sequoia Capital India’s effective expansion in Dubai helped produce the venture fund’s first investment in the Gulf region. California-based Sequoia’s India-focused fund led a $33 million early-stage investment in Saudi-based fintech startup, Lean Technologies Ltd., in January, and the fund is planning another deal, a person said.
Along with Lean, Sequoia’s Europe-based team also invested in Egyptian fintech startup Telda last year.
In July, SoftBank Group’s Vision Fund 2 led a $415 million investment in Kitopi. A few months later, SoftBank struck a $125 million deal for a stake in Saudi Arabian customer-engagement platform Uniphonic. The investment firm, backed by $60 billion from Saudi and United Arab Emirates sovereign-wealth funds, established a presence in Abu Dhabi in 2018, but none of the Vision Fund’s earlier investments in companies from the Arab world.
Instead, SoftBank waited for the deal to flow, and now looks to more sophisticated entrepreneurs running Gulf-based companies of a significant-substantial size, according to a person familiar with the fund’s strategy. SoftBank invested in Kitopi in an earlier investment round, but it kept in touch with the founders and when the firm made investments to operate more than 60 cloud kitchens in the United Arab Emirates, Saudi Arabia, Kuwait and Bahrain.
Sovereign-wealth funds in the region, such as Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala Investment Company, are also placing direct bets and seeding local venture-capital firms.
“Big money is under scrutiny from Silicon Valley VCs or global VCs, who see it as the next emerging sector,” said Kunal Sajani, Dubai-based partner at Shoruk Partners, a venture firm with a portfolio of more than 45 startups. It’s more competitive.”
Venture capitalists noted that the Arab world has a young, tech-savvy population, but it has traditionally been a source of capital for investors, not a place of appreciation for its entrepreneurs. Its constant struggles have also put investors off, he said, and Saudi Arabia, the largest economy, has only opened up economically and socially in recent years.
Investor interest in the Arab world remains dwarfed by venture-capital investments in the Americas, Asia and Europe. Israel startups attracted more than $25 billion last year, according to Start-up Nation Central, an Israeli non-profit.
The UAE has a stated goal of becoming home to 20 tech companies worth $1 billion or more by 2031. It is offering 100,000 “golden visas” or permits that allow entrepreneurs and technology investors to stay in the country for up to 10 years. Compared to regular visas, the UAE has also established a national small-business program to help startups get funding, partner with established companies, and market their products overseas.
“You don’t just draw talent from having an open border, you need to create opportunities, the environment needs to be right,” said Sarah Al Amiri, Minister of State for Advanced Technology.
Dubai startups have pulled out, such as Uber Technologies Inc. by the purchase of local Dubai rival Careem, and Amazon Inc. The 2017 purchase of e-commerce site Souq.com, which has encouraged former employees to start their own companies.
Companies are also setting up in Dubai but focusing on a wider region. Swvl Technologies Inc., which last year listed in a deal with a special-purpose acquisition company that valued the Dubai-based tech firm for about $1.5 billion, makes ride-hailing service for taxi vans, but its Operations are focused on Egypt, the United Arab Emirates rather than Pakistan and Kenya. Another startup, Capiter, is based in Cairo but has an office in Dubai as the city is good for hiring and raising capital.
“Dubai can bring all the talent you need around the world, no matter where they are from,” said Mahmoud Noah, Egypt, who co-founded Swvl and now runs Capiter.
This story has been published without modification to the text from a wire agency feed
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