Free zones and looser regulations stoke interest in Abu Dhabi ICT start-ups

The coming years look promising for start-ups in Abu Dhabi, as the number of new start-ups in the region continue to grow and the UAE maintains its dominant role in the field. The “2017 MENA Venture Report”, published by the technology platform MENA bytes, identified 134 investment deals reached in the region in 2017 and valued at $475m. UAE firms secured $400m, or 84% of that sum, led by deals for the ride-hailing application Careem and the video-streaming service Starz Play Arabia, valued at $150m and $125m, respectively.

Even absent those deals, the UAE still led its peers, receiving 62.5% of start-up investments in MENA, and according to Emirates News Agency, UAE start-ups are expected to raise more than $1bn in funds in 2018. Moreover, of the 56 UAE agreements identified by MENA bytes, 29 were valued at less than $1m, pointing to strong levels of interest in seeding new start-ups. A report prepared by the Mohammed Bin Rashid Establishment for SME Development and Arabnet, a news portal and conference organiser for the MENA technology sector, also found that the UAE hosted one-third of all MENA funds providers and 39% of regional corporate investors, suggesting a symbiosis between local startups and their backers. This coincides with government efforts across the region to reduce barriers to market entry and improve their business climates, which is helping start-ups to expand faster.

Verticals

UAE start-up growth has reached the point where investors have begun to explore particularly lucrative verticals. In an April 2018 report in The Khaleej Times, Walid Hanna, founder and CEO of Middle East Venture Partners, identified several such segments, including content and new media, financial technology (fintech), health care technology and e-commerce and on-demand marketplaces, among others. Fintech received three of the largest 10 investments in MENA in 2017, while e-commerce, local services and financial services were the three next-largest verticals by volume of deals, at 15.6%, 11.2% and 9.7%, respectively.

Federal Support

There has been an acknowledgement that institutional support can help to create an ecosystem where start-ups can thrive, which could in turn support the government’s efforts to attract foreign capital and talent and become an ICT hub. UAE Vision 2021 establishes among its priorities the improvement of the country’s ease of doing business metrics, while the 2016 Bankruptcy Law gives greater flexibility to distressed borrowers in negotiating debts.

The government has also advocated for small and medium-sized enterprises (SMEs) to fill more public contracts, and a May 2018 analysis from Clyde and Co. found that SMEs have been awarded more than half of all deals in the development of Dubai Expo 2020. In addition, in April 2017 the Ministry of Economy inaugurated AIM Startup, a conference intended to connect Emirati technology start-ups with investors, mentors and partners from around the globe. Its next iteration, “Harnessing Global Digitisation to Empower Start-ups and SMEs”, is expected to convene 500 start-ups and 200 investors from 25 different countries in April 2019.

Abu Dhabi Sandboxes

In May 2014 the media free zone twofour54 reached a deal with the Egyptian start-up accelerator Flat6Labs to launch the first such hub in Abu Dhabi, with the intent to provide seed funding, mentorship, workspaces and workshops to 80 digital- and media-focused firms for four years. In October 2017 the Abu Dhabi Financial Group funded the opening of Krypto Labs, a 2600 sq-metre facility that will provide partnered start-ups with access to venture capital, co-working spaces, 3D-printers, and ICT infrastructure and support. Lastly, in January 2018 Abu Dhabi’s renewable energy company Masdar partnered with BP to found the Catalyst, a start-up accelerator that will assist in launching clean-tech business, giving priority to domestic firms. The initiative, which claims to be the region’s first such venture specifically designed for start-ups focused on sustainability, will provide hands-on support to 12 select businesses in 2018.