Tech start-up companies in the UAE are set to have a better environment for growth. This is because there will likely be more money available for them from investors.
The venture capital market in the country is expected to reach $1.1 billion in 2024.
The UAE is making it easier for businesses to thrive, with support from the government and a strong community of entrepreneurs. The country ranks second in the Middle East and 28th globally in terms of supporting start-ups, according to the Global Start-up Ecosystem Index. In January, the UAE was leading in fundraising in the MENA region, even when many investors were being cautious, as shown by data from Lucidity Insights.
Experts suggest that the venture capital market in the UAE is growing rapidly. This growth is fueled by customers wanting to invest in different things to get good profits. Also, the government is helping entrepreneurs and innovators, which is pushing this growth further. They say that the UAE has a strong and varied economy, along with a young and energetic population, making it a good place for investments and supporting new businesses and ideas.
In January, start-up companies in the MENAPT (Middle East, North Africa, Pakistan, and Turkey) area got a significant amount of money from investors. However, the total was 52% less than the previous year.
'This trend shows that there are still difficulties in the venture capital world, which means the 'VC winter' is still happening.
Most of this money, which was $474.5 million and made up more than 90% of all investments in the MENAPT region, went to Israel and the UAE. However, even though they got the most money, these countries didn't have the most deals. This suggests that they had bigger investments. In fact, the five biggest funding rounds, covering different industries and stages of funding, were also mainly in these two countries,"
analysts at Lucidity Insights noted.
According to a report from fDi Insights, Dubai has ranked first in a list of the fastest-growing VC ecosystems worldwide. This shows that Dubai is becoming increasingly attractive to start-ups and investment funds, especially during uncertain times for the global technology industry.
Dubai's VC ecosystem is flourishing because of its growth as a financial center, a tourism destination, and a preferred location for businesses in the Middle East. The Dubai Chamber of Commerce states that over 90% of all funds raised in the UAE since 2017 have gone to start-ups located in Dubai.
Dubai scored 72.8 in VC ecosystem growth, according to PitchBook's analysis of data from the third quarter of 2017 to the second quarter of 2023. Following closely were Detroit in the US (72.5), Berlin (71.8), and Raleigh, the capital of North Carolina in the US (71.3).
A report by Qatar Development Bank and VC data company MAGNiTT revealed that the MENA region experienced a 23% decrease in VC funding in 2023, with Bahrain, Qatar, and the UAE seeing the most significant declines.
The same report, released this week, looked into venture investment trends in Qatar and the broader Middle East. It found that in 2023, deals in the MENA region dropped by 34% compared to the previous year.
Farah el Nahlawi, the lead researcher at MAGNiTT and author of the report, suggests that the overall feeling in the VC world is influenced by uncertain economic conditions. With interest rates reaching their highest levels in over twenty years, borrowing costs are rising, creating competition for venture capital investments as safer options offer higher returns.
In the UAE, early-stage ventures are the dominant force in the market, with an expected market volume of $0.6 billion in 2024, according to Statista Market Forecast.
On a global scale, the United States is projected to lead in capital raised, generating $264.5 billion by 2024. Meanwhile, the UAE's VC market is witnessing a surge in funding for tech start-ups, driven by government initiatives and a supportive entrepreneurial environment.
Analysts specializing in the VC market noted that investors in the UAE are increasingly turning to venture capital to diversify their investment portfolios and pursue higher returns. This shift is fueled by a growing recognition of the potential for high-growth start-ups to disrupt traditional industries and generate significant value.
Fund managers emphasized that the growth and progress of the VC market in the UAE are supported by various macroeconomic factors. These include a stable and diverse economy, with a particular emphasis on sectors like tourism, real estate, and financial services. They stated,
"This creates a solid foundation for investment and encourages the growth of start-ups and innovative businesses."
Furthermore, they highlighted the UAE's young and dynamic population, coupled with high levels of digital literacy and a strong entrepreneurial mindset, as key factors. They believe this environment fosters the development of innovative start-ups and attracts both local and international investors.
News Source: Khaleej Times
