Why Is Dubai Such A Hub Of Finance Startups?
Fast-growing software businesses are flocking to the Middle East and North Africa (MENA). In 2020, the region will have invested a total of $1 billion in startups, indicating a strong hunger for technological investments.
For a growing number of global entrepreneurs, MENA is an attractive destination to build or scale a company due to the region’s maturing digital economy and regional-wide innovation efforts. Heavy hitters such as Microsoft, Google, and Amazon are also investing in the region, with recent investments favoring later-stage transactions, indicating that the land is ripe for opportunity.
Dubai has become a popular destination for financial entrepreneurs looking to expand their operations across the Middle East and the wider MENA region.
The UAE now has 33 of the top 50 most funded companies in the region, followed by Saudi Arabia and Egypt, with Dubai accounting for the great majority of the success stories. Uber paid $3.1 billion for Careem. Then there’s the Nasdaq listing of Dubai unicorn Swvl and the region’s financial giant PayTabs.
The Emirate’s potential for global startup dominance has sparked a groundswell of enthusiasm, thanks to these and other triumphs.
This is what you need to know about Dubai’s finance ecosystem if you’re looking to expand beyond your existing bounds.
There are numerous funding options available.
One of the most important deciding elements when considering where to locate in a new region is the availability of funding opportunities. According to Magnitt’s Emerging Venture Markets Report, UAE-based startups will obtain the majority of overall funding and the most deals in the MENA region in 2021.
Dubai-based NOW Money received $7 million in one of the top five fintech investment rounds in Q1. Ian Dillon and Katharine Budd, co-founders, will now use the funds to expand their UAE-based operations and expand their business into Saudi Arabia.
Even bigger acquisitions were made in Q2 and Q3, with BNPL startup Tabby closing a $50 million round in August. According to the company’s CEO, Hosam Arab, the company intends to keep its Dubai base while expanding into other countries.
Business-friendly policies and licensing choices are available in SEZs.
Overcoming market processes, from familiarizing yourself with local regulations to obtaining the necessary permissions for your business to begin operations, is one of the most difficult aspects of entering a new market.
The UAE established a variety of special economic zones with its own independent jurisdictions and business-friendly civil and commercial rules to aid local business growth and attract multinational entrepreneurs.
Dubai International Financial Centre (DIFC), founded in 2004 to promote the growth of the Emirate’s finance industry, is the major platform in the MEASA region. It is now one of the world’s top 20 financial centers, with over 3,200 active enterprises, including over 1000 in the finance and innovation sectors.
DIFC offers important advantages as a special economic zone, including no tax on corporate revenue and profits, 100 percent foreign ownership, and no restrictions on foreign exchange or capital/profit repatriation. Furthermore, the DIFC is built on business-friendly legislation based on English common law principles that cover insolvency, sophisticated employment and pension benefits, and globally applicable data protection requirements. Its business and regulatory framework is strong but flexible, making it a secure place for entrants to the market. The zone’s licensing options, which include subsidies and a testing license that allows for more experimentation, are another incentive for fintechs in particular.
The DIFC Innovation Hub, a crucial pillar of the future Dubai Future District, facilitates a community hub for tech enterprises, which is a distinctive feature of DIFC. It’s home to the largest innovation ecosystem in the region and opens the road for early-stage entrepreneurs, growth-stage companies, unicorns, and big tech firms to join together.
As a result, the CEO of cybersecurity fintech Napier chose the DIFC Innovation Hub to begin the company’s Middle East operations. In a recent podcast with Innovate Finance.
Technology talent and digital infrastructure
Along with favorable rules, a strong digital infrastructure is required for innovation to take place. And it just so happens that Dubai’s main goal is to become an international technological powerhouse. As a result, it is rapidly adopting new technologies and, more critically, passing new regulations to speed up the process.
One of its original goals was to become the world’s first blockchain-powered city, with the goal of conducting 50% of all financial transactions on the blockchain. The DIFC Innovation Hub organized the first Blockchain Week to debate the adoption and regulation of blockchain technology with stakeholders from throughout the ecosystem.
Aside from that, IT companies interested in the crypto boom will be pleased to learn that the Dubai Financial Services Authority (the independent regulator of financial services performed in or through the DIFC) has announced the establishment of a regulatory framework for Investment Tokens.
The city has also established a Chamber of Digital Economy, which will build a digital-centric economic growth strategy aimed at attracting investment, international talent, and entrepreneurs, as well as advocating digital economy-friendly regulations and legislation.
According to the 2017 World Talent Report from the IMD World Competitiveness Centre, the UAE remains the top country for tech talent in the Arab world and second in the MENA area (after Israel). It came in 23rd place in the global rankings.
With its great quality of living, Dubai in particular continues to draw international talent. For the eighth year in a row, Kearny’s Global Cities Report has named it the best city in the MENA area to live and work in. Dubai came in third place out of 57 cities in the InterNations Expat City Ranking 2021.
Still not sure if Dubai is ideal for your fintech?
Setting up their startup’s presence in Dubai, according to Daumantas Grigaravicius, Country Manager UAE at Ebury, felt like starting from zero. Because they were unfamiliar with the market, they chose to take a sandbox approach, establishing a temporary office in DIFC to gain a better understanding of the business dynamics and client base.