By Lior_Ronen | Founder, Finro Financial Consulting

There’s no doubt that Dubai is a global business hub, but did you know it’s also becoming one of the best cities for startups?

The city has become an essential part of the regional startup ecosystem with dozens of incubators, accelerators, and venture capital funds.

Let’s look at how Dubai has become a hotbed for innovation in the Middle East.

Dubai is an incubator of Middle Eastern entrepreneurship.

Dubai has always been an entrepreneurial hub in the Middle East. It has a rich history and culture, which has attracted many entrepreneurs over the years.

Dubai is a leading business and trade hub in the region and one of the fastest-growing cities in the world. In 2022, Dubai has a population of 3.5M, a whopping 3.5x growth in the last 20 years.

But that's only part of the story. 88% of Dubai's population are expats from Asia, Europe, and the rest of the Middle East, making it a regional cosmopolitan hub.

The city has a large expat population, and foreign companies have set up shop there to expand their market share in these emerging economies. With its thriving economy, Dubai attracts thousands of expats every year looking for new opportunities.

With its strong financial sector and economy, UAE has acted as a magnet for startups in the region - like Bahrain, Egypt, and Lebanon, and Dubai is the center of that.

With the rise of digital technologies and social media platforms, various tech companies have emerged across the region. In addition, many local startups are creating jobs for young people who want to be self-employed or work independently.

Expats helped inspire a shift in Dubai's economy away from its reliance on oil and gas and towards tech startups.

Many things have happened over the past few years that have helped boost Dubai’s startup ecosystem.

The first and perhaps most significant is the flow of expats to the region. The region’s growing expat population fuels the startup ecosystem in Dubai. A large number of these new expats brought with them their fresh ideas and international perspective.

This helped diversify the existing business landscape that was dependent on traditional industries like oil and gas to focus on technology companies.

The GCC nationals returning to the region after completing their studies abroad is another major factor driving this growth. These individuals bring a wealth of knowledge, experience, and access to networks that they now use to contribute positively towards innovation across various sectors such as technology and healthcare.

Dubai is a local hub for global technology companies and investors.

Dubai, a significant global business hub, is the destination of leading technology companies and venture capital firms seeking entry into emerging Arab markets.

Tech giants like Cisco, Facebook, Google, Microsoft, and Amazon (including AWS) choose Dubai as their regional innovation hub. These companies have been very active in supporting startups through startup mentoring programs, accelerators, and networking events for the local tech community, like Startupbootcamp Fintech & Banking (a three-month accelerator program), Microsoft for Startups Middle East and accelerator, Google Accelerator in the Middle East, and many more.

Venture capital firms also spotted Dubai as a significant emerging tech hub in the middle east and north Africa. Global investors like 500 startups, Global Venture, TechStars, and more opened a regional office in Dubai, and many leading Middle Eastern funds see Dubai as a central location for the entire region.

The government is betting on the future, and startups in Dubai are reaping the benefits.

Dubai is a global hub for business and finance, with headquarters of some of the world’s biggest companies. It is also the center of the Middle East, making it a natural choice for startups looking to expand their regional reach.

The local government has made it extremely attractive to do business in the country. The UAE leads the MENA region in ease of doing business, according to the World Bank's Doing Business 2020 report.

The UAE government and local government in Dubai took several strategic decisions to make it easier to do business and that Dubai will be a haven for tech innovation.

In the early 2000s, Dubai’s government opened Dubai Internet City, a free economic zone, to attract foreign tech companies to the city. This high-tech park is currently populated with more than 1,500 tech companies that employ more than 10,000 workers.

The impressive list of companies includes Facebook, LinkedIn, Google, Dell, Intel, Huawei, Samsung, SAP, Microsoft, IBM, Oracle Corporation, and UAE-based companies.

To strengthen the local tech community, The UAE government launched the Coders HQ at the beginning of the year. It's a project to build a new generation of coders and give them tools and expertise. Then, the project empowers the coders to design innovative solutions to address local and global challenges.

Earlier this year, the crown prince of Dubai, Sheikh Hamdan bin Mohammed, launched a $100M fund. The potential investment of this VC is Dubai-based fintech startups to build Dubai as a global fintech powerhouse.

These initiatives join a long list of accelerators and incubators in Dubai and government programs such as the Dubai Future Foundation (DFF) to expand the local startup ecosystem.

The massive investment and traction impact startup valuations in Dubai and UAE.

Dubai is a frontrunner in the digital transformation of the Middle East and North Africa region. The World Bank reports showing substantial socio-economic benefits and a 46% increase in GDP per capita through digital adoption.

According to North Star Dubai, of the 50 most funded startups in MENA, 26 are based in the UAE.

Moreover, four out of the top five unicorns in the region are located in Dubai: Careem, Swvi, Kitopi, and EMPG.

According to MAGNiTT’s UAE 2021 Venture Investment Report, venture capital investment in the UAE crossed the $1 billion mark in 2021.

In the last three years, we witnessed a sharp increase in the average deal size of the startup valuation in the UAE and Dubai.

According to Startup Genome, these efforts have helped propel Dubai to the 11th emerging startup ecosystem in the world after a list of Asian and European cities.

It’s an impressive feat for the city and speaks volumes about what it can achieve as its ecosystem grows.

Other cities in the region try to mimic Dubai’s success.

The United Arab Emirates is currently the most prominent tech hub in the Arab world, which has attracted most of the deals and VC activity in the region. In 2022, most venture deals involved UAE-based startups, and 45% of the funding in 2021 went to UAE-based startups.

Recognizing this trend, many regional governments, including Saudi Arabia and Egypt, have also set up their tech hubs to boost their country’s startup ecosystem.

While Dubai is by far the most rapidly growing tech hub in the Arab world, other cities in the region are closing the gap quickly.

In a new ranking of the top 100 emerging startup hubs, Dubai ranked highest in the region. The list included Cairo, Riyadh, and Abu Dhabi—showing an interesting trend:

1. Saudi Arabia and Egypt have seen the potential of Dubai's thriving tech community, and they're working hard to catch up.

2. The United Arab Emirates is investing heavily in the tech industry, positioning Dubai as a regional innovation hub and Abu Dhabi as well.

In the face of globally low-interest rates and financial uncertainty in specific mature markets, investors look for safe havens outside traditional markets like Europe or North America.

They turn to emerging markets like the Middle East and North Africa. Especially when the region keeps growing in terms of deal count, deal value, and the number of exits.

Some of the world's biggest tech companies and venture capital funds have invested in the region. They do so directly, through subsidiaries, or by partnering with local businesses.

Conclusion

Dubai has always been an entrepreneurial hub in the Middle East. With its strong financial sector and economy, UAE has acted as a magnet for startups in the region - like Saudi Arabia, Egypt, and Lebanon.

Yet, it's only in the last few years that we've seen the startup ecosystem emerge in Dubai. There are several reasons for this growth:

1. Relentless government support in tech startups and the entire tech ecosystem in the UAE and Dubai.

2. Global companies were setting up their regional offices in Dubai, which led to an influx of talent that further fueled innovation and growth in the region.

If you're based in Dubai or across the UAE, raising funds for your startup, and would like to learn more about your startup valuation and financial modeling needs, feel free to drop us a line!