Should UAE start-ups be concerned about the slowdown of the global venture capital space?

14/06/2023 by Ali Sajwani

While a slowdown in the global venture capital space may have some impact on UAE start-ups, I think it is essential to consider the broader context and specific factors affecting the region.

According to CB Insights, total venture funding in 2022 amounted to $415.1 billion, some 35% less than in 2021.

But should start-ups here be concerned? Dubai enjoys the highest rate of FDI in the Middle East, and the government has worked tirelessly to create an environment that not only favours SMEs but delivers a host of benefits, support and incubation that’s rarely found in any other nation.

Last year, the Ministry of Economy launched an updated Entrepreneurial Nation programme, seeking to develop more than 8,000 SMEs and start-ups by 2030.

And I recently noticed the launch of a new scheme, Future 100, designed to connect UAE entrepreneurs and innovators with investors and mentors. It focuses on supporting start-ups and emerging businesses in sectors such as technology, sustainability, healthcare, and education. The new platform offers opportunities for networking, mentorship, funding and access to resources to help these businesses grow – and contribute to the future development of the UAE.

Here are a few considerations for UAE start-ups to bear in mind:

The UAE actively works to foster a favourable environment for start-ups with initiatives such as Dubai Future Foundation and Abu Dhabi Investment Office. We have certainly seen increased investment activity in recent years, with growing interest from local and international investors. While global trends may have some influence, the local investment landscape still provides ample opportunities for start-ups.

The UAE’s Vision 2030 initiative prioritises economic diversification and innovation. The redoubled effort to focus on non-oil sectors, including technology and entrepreneurship, is attracting investment and supporting start-up growth – even during the current global economic fluctuations.

The government has shown commitment to supporting entrepreneurship and start-ups through a wide variety of initiatives, such as Dubai Start-up Hub, Abu Dhabi Global Market, and its growing roster of special-focus-free zones. These programmes provide funding, mentorship, infrastructure and regulatory support, mitigating the potential impact of global venture capital slowdown.

The government clearly recognises the key roles innovation and technology play in driving global competitiveness and sustainable growth. By supporting entrepreneurship and start-ups, the government encourages the development of innovative solutions, new technologies, and disruptive business models that can enhance various sectors and position the UAE as a hub for innovation and technological advancement.

There may be a global slowdown in global venture capital, but the UAE is clearly continuing its support of the SME infrastructure with so many exciting schemes and plans.

We also have a strong national network of angel investors and venture capitalists looking to actively invest in start-ups. These local investors may be less affected by global trends and can continue to support innovative ideas and early-stage companies. There are specific programmes to help fund Emirati businesses, foreign businesses, youth businesses and female-led businesses, to name a few.

Of course, start-ups can adapt their strategies to focus on profitability and sustainable growth, which can be attractive to investors even during a period of venture capital slowdown. Demonstrating a clear path to revenue generation and a sustainable business model helps build investor confidence.

And remember, there are more sources of funding than traditional venture capital. I’m a great proponent of crowdfunding, to give one example, and there are always prize funds, grants, government funding, and, of course, strategic partnerships. Diversifying funding channels can provide the stability and resilience required during market fluctuations.

Of course, it is prudent for UAE start-ups to monitor global venture capital trends, but they should also consider the unique advantages and opportunities available within the local ecosystem.

We are lucky to live in such a rich business ecosystem geared towards ensuring the success of start-ups, scaler-ups and SMEs. Meanwhile, adaptation, agility and focus on long-term value creation can help mitigate concerns about the global venture capital slowdown.

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