In November 2021, the Ministry of Economy launched the Entrepreneurial Nation Initiative within the county’s framework for achieving its 50th vision in development of entrepreneurship and asserting UAE’s position as not only a regional but also a global entrepreneurship hub.
The UAE has set its mission to become the destination to 20 unicorns or startups valued at more than $1 billion by 2031.
In line with the initiative, on Wednesday 27 April, Sheikh Hamdan Bin Mohammed, the Crown Prince of Dubai, announced the launch of a new venture capital fund for startups with more than $100 million to finance start-up projects in the UAE and further “reinforce Dubai’s status as a leading innovation hub.”
The fund, also remarked as the “Bold Fund for Emerging Ventures”, will be in effect as of June 2022 for a period of eight years, and will be governed by Dubai International Financial Center (DIFC) which is also a partner with a 15 percent contribution to the fund.
It is expected to contribute around $816.74 million (AED 3 billion) to Dubai’s GDP and facilitate more than 8,000 new jobs in the emirate.
Pioneering initiatives to boost entrepreneurship in the UAE
The UAE, considered the MENA region’s third-largest country by population of 10 million people of which 89 percent are foreigners; and one of the wealthiest in the world with a GDP of $425 billion and income per capita of $66,275, had set clear its goal of diversifying the economy towards the non-oil sector; which at present makes up 70 percent of the country’s GDP.
This is seen as a natural progression of the pioneering initiatives and incentives that the UAE has implemented in the last period including the recently announced new visa system, its embrace of 45 free zones which permit 100 percent foreign ownership, easing market access and setup requirements, the flexible legislative system, and most importantly the strength of the government commitments and support services provided to attract investments and encourage innovation.
The venture capital announcement further comes to support the UAE’s sustainable economic growth and strategy to be a leading global partner in the map of entrepreneurship, fintech, innovation and venture capital.
According to 2021 statistics, global venture funding increased by 92 percent reaching $669 billion compared to $335 billion in 2020; and further marking a 10 times increase compared to a decade ago reflecting a remarkable shift in the startup funding outlook.
The breakdown shows that funding for late-stage and technology-growth stage startups was the highest for a total of $413 billion, funding for early-stage startups was at $201 billion, seed-stage startups grew 56 percent yearly, while unicorn startups in 2021 raised $10 billion more in funding than 2020; with an average of more than 10 unicorns each week compared to an average of only three in 2020.
North America and Europe were the regions that reported the highest venture capital invested globally in 2021; 131 percent and 135 percent increase respectively, while venture funding in Asia also grew by 61.5 percent from that of 2020.
Focus on fintech rising
On a sector basis, technology services have seized the highest venture capital investments followed by the finance sector.
Accordingly, the digital era and demand for fintech services has dominated the global economy, creating new innovations and global trading opportunities; thus, opening the door for faster paced, widespread billion-dollar unicorns to enter the world market.
It is forecast that investments in fintech companies in the Middle East will raise more than $2 billion in venture capital in 2022.
As such, nations such as UAE have implemented a digital and innovation-based supportive ecosystem through massive tech entrepreneurship investments and spendings that include contributions from both the public and private sector to grasp those unicorns.
Dr Ahmad Belhoul AlFalasi, the UAE Minister of State for Entrepreneurship and SMEs, noted that the venture capital investments in the UAE are primarily focused on funding of new and future economical areas that are technology-based including digital technologies, green technology, e-commerce, health care, and fintech.
Statistical reports in 2021 demonstrated that the UAE has attracted $1.17 billion from venture capitalists, the largest in the GCC region, imposing its rank amongst the top emerging venture markets coming second to Turkey, with KSA ranking the fifth; accordingly confirming that “Dubai is the capital of the venture capital space in the Arab world” as described by the Walid Hanna, Founder and CEO of Middle East Venture Partners (MEVP).
The new venture capital fund again places the UAE as the pioneer in the Middle East for economical ecosystems expansion and diversification, specifically amongst oil exporting nations in the region; and diverts international entrepreneurial attention to Dubai, increasing the number of start-ups mainly in the fintech industry.
Scott Cairns is the managing director of Creation Business Consultants
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