In 2021, the United Arab Emirates (UAE) set its own new record in venture capital (VC) investments, attracting AED 4.3 billion in funding for start-ups - an impressive 93% growth compared to 2020. 155 start-ups in the country benefited from these funds, with an average deal size also seeing a significant 72% increase.
All these figures illustrate the country’s emergence as a knowledge and innovation hub that connects creative founders with local and international investors. They also underscore the UAE’s regional proeminence as a space for strong returns on investment for start-ups, with 11 out of 35 acquisition deals in the Middle East and Africa region secured in the Emirates.
In fact, the UAE itself is somewhat of a unicorn in MENA, where the VC ecosystem faces numerous challenges, from the lack of later-stage support to the limited availability of top-tier international venture capital funds, regulatory hurdles that hamper international expansion, and talent gaps. The UAE government is playing a pivotal role in counteracting these challenges and fostering a vibrant VC ecosystem. The establishment of financial center free zones like the Dubai International Finance Centre (DIFC) and the Abu Dhabi Global Market (ADGM) have helped attract a substantial portion of VC investments. Meanwhile, tech ecosystems such as Hub71 in Abu Dhabi provide non-equity incentives and support to over 100 start-ups, promoting collaboration among entrepreneurs, investors, corporations, and the government.
As a result, a number of innovative young companies, including Kitopi and Pure Harvest Smart Farms that have both secured significant financing deals, are thriving in a variety of industries in the UAE, be it in food & beverages, financial technology, e-commerce, transportation, logistics, or enterprise software.
This strategy also empowers local and regional VC firms and platforms, such as Abu Dhabi-based Access Bridge, which focuses on early-stage investments in sectors such as fintech, healthtech, e-commerce, and cloud computing. Similarly, Cypher Capital leads the trend in blockchain and cryptocurrency start-ups, evaluating product use cases, entrepreneurial capabilities, and regulatory compliance. To connect all these moving parts and democratize private markets through technology, Dubai’s homegrown N2 Technology has established the first open-access digital network that connects companies raising capital and professional investors.
No wonder that foreign venture capitalists are increasingly drawn to the UAE as an attractive destination for innovation and investment. For instance, Target Global, a tech-focused VC investor with US$3.25 billion in assets under management and 15 unicorns in its portfolio, has opened a new office in the Abu Dhabi Global Market free zone. Another example is Scalo Technologies, a Singapore-based VC firm with a focus on cloud-based AI products and gaming companies that has relocated its headquarters to Dubai where it aims to invest $100 million in promising start-ups over the next few years.
This is just a start. There’s no doubt that the UAE is poised to see massive growth in VC investments and infrastructure developments in the years to come. Stay tuned.
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