How Venture Capital will impact Middle East?
How Venture Capital will impact Middle East?
Emergence of Powerhouses: The Transformative Landscape of Venture Capital in the UAE Post-COVID
In the last 5 years (especially right after COVID) we’ve seen a lot of new VC firms coming up in the UAE. A few most prominent VC firms are Wamda Capital, Middle East Venture Capital (MEVP), Shorooq Partners, Group42, Dtec Ventures (the VC fund of the Dubai Silicon Oasis Authority), and especially the sovereign wealth fund Mubadala (also through its venture investment arm, backed by Abu Dhabi government) substantially driving the local investment ecosystem. These major active investors can literally be counted on fingers.
Why UAE VCs are Essential for MENA Startups
These firms have a strong track record of investing in successful startups in the wider MENA region, and in the UAE. These are the main sources of funding for early-stage startups here, and are becoming essential for startups to develop and commercialize their products and services globally. This impacts positively in terms of capital requirements and expertise.
UAE Venture Capital Firms Pave the Way for Inclusive Startup Ecosystem
Given the demographics of UAE, there are 11.5 million people living here, out of which 80% are expats of different backgrounds. And these firms are investing in startups that are led by women and minorities thereby creating a more inclusive and innovative startup ecosystem. Therefore, this impacts positively towards building an organic vibrant innovation culture.
Moreover, VCs here are investing in a variety of businesses including ride-hailing, food delivery, e-commerce, and fintechs, and a few unicorns. The most notable include those of Noon and Careem. Careem(acquired by Uber for $3.1B) is a ride-hailing & food delivery company that operates in the Middle East and North Africa. Noon.com, which is a local e-commerce company (aka: local Amazon) that operates in the Middle East. And Swvl, tech-enabled (Egypt born) mass transit company – to name a few.
Therefore such unicorn funding not only attracts but encourages innovation and helps create a flourishing startup ecosystem that goes beyond tech-enabled startups.
Future-Proofing UAE: From Sand to Fintech Gold Rush by 2030
UAE has the “vision 2030” target to become a global talent hub. Dubai local government has itself a target called “Dubai smart” and reach fully autonomous (commute) trips by the year 2030. UAE has become a hive of fintech activity – 465 FinTechs there are set to generate over $2.2B in investment capital funding in the upcoming year, compared to merely $80M five years ago. FinTech and Innovation companies surge from 599 to 811, up 35% year-on-year (as of H1 2023). The UAE government is actively involved in enhancing laws and policies that foster the growth of the digital economy, creating an environment to attract global digital enterprises.
Venture Capital's Vital Role in Scaling Up UAE's Innovation Economy
All these endeavors by ecosystem partners significantly contribute to the innovation in UAE’s “scaleup economy”. This also means that the high concentration of scaleups could help support the expansion of the whole MENA innovation economy. VCs are playing a key role in the MENA ecosystem, and 92% ($8.4B, although negligible when compared with Silicon Valley or even UK) of capital raised by MENA scaleups comes from VC firms, CVCs, private equity funds, public-supported equity funding vehicles, governmental organizations, and family firms/groups.
UAE appears to be the front-runner of regional tech innovation, steadily transitioning to a post-oil economy.
Sources:
-https://www.difc.ae/whats-on/news/difcs-h1-2023-performance-strengthens-dubais-position-global-finance-and-innovation-hub
-https://www.dubaichamber.com/wp-content/uploads/2022/08/DubaiChamber_UAEVentureOutlook_eng.pdf
