Why Dubai is a booming hotspot for fintech startups
Funding, SEZs, and digital infra, oh my
Funding opportunities abound
When choosing a base in a new region, the availability of funding opportunities is one of the key deciding factors. According to Magnitt’sEmerging Venture Markets Report, in 2021 UAE based startups received the lion’s share of total funding and the highest number of deals in the MENA region.
One of the top five fintech funding rounds in Q1 went to Dubai-basedNOW Money at $7 million. Co-founders Ian Dillon and Katharine Budd will now use the investment to grow their UAE based operations further and expand their business into Saudi Arabia.
Q2 and Q3 saw even larger deals with ‘buy now, pay later’ (BNPL) startup Tabby closing a$50 million round in August. According to Chief Executive, Hosam Arab, the company is planning to maintain its Dubai base, while continuing to expand into new markets.
SEZs offer business-friendly regulations and licensing options
One of the biggest challenges of establishing yourself in a new market is overcoming the market processes, from getting familiar with the local legislation to getting the right licenses for your business to start operations.
To help grow local business and attract international founders, the UAE set up a number of special economic zones with their own independent jurisdictions and business-friendly civil and commercial laws.
The leading platform in the MEASA region is Dubai International Financial Centre (DIFC) established in 2004 to facilitate the growth of the Emirate’s finance scene. It’s now ranked in the top 20 financial centres in the world and hosts over 3,200 active companies including over 1000 finance and innovation related companies.
As a special economic zone, DIFC offers key benefits such as zero tax on business income and profits, 100% foreign ownership, and no restrictions on foreign exchange or capital/profit repatriation. In addition, the DIFC is founded on business-friendly laws, derived from English common law principles, addressing insolvency, advanced employment and pension provisions, and globally compatible data protection regulations. Its robust yet flexible business and legal framework provides a safe environment for market newcomers. Another benefit for fintechs in particular is the zone’s licensing options, including subsidies and a testing license introduced to allow for greater experimentation.
A unique aspect of DIFC is the community hub it’s facilitated for tech firms through theDIFC Innovation Hub, an important pillar of the new Dubai Future District. It’s home to the largest innovation ecosystem in the region and paves the way for early stage startups, growth stage startups, unicorns, and big Tech firms to come together.
For this reason Julian Dixon, CEO of cybersecurity fintech Napier, decided to launch the company’s Middle East operations in the DIFC Innovation Hub. In a recent podcast withInnovate Finance, Dixon said:
“It offered us a frictionless way of setting up a presence in the Middle East. This allowed us to focus on scaling rapidly, without the problems we had experienced in other parts of the world such as complex laws and banking operations.”
Digital infrastructure and tech talent
Along with favorable regulations, for innovation to happen, you need a solid digital infrastructure. And it just so happens Dubai’s main objective is to transform itself into an international technology hub. As a result, it’s adopting emerging technologies at a rapid rate and, more importantly, introducing new legislation to move the process forward.
One of its first objectives has been to become the ‘first blockchain powered city’ with the goal to have 50% of financial transactions done on the blockchain. DIFC hosted the inauguralBlockchain weekat its Innovation Hub, to discuss the adoption and regulation of blockchain tech with stakeholders across the ecosystem.
Beyond this, tech firms focused on the crypto boom will be interested to know that the Dubai Financial Services Authority (the independent regulator of financial services conducted in or from the DIFC) recently launched aregulatory framework for Investment Tokens.
The city also introduced aChamber of Digital Economywhich is set to develop a digital-centric economic growth plan focused on attracting investment, international talent, and entrepreneurs, and proposing digital economy friendly policies and legislation.
Of course, even with the best digital infrastructure in place, you can’t build a great fintech without tech talent. According to the IMD World Competitiveness Centre’s latestWorld Talent Report, the UAE maintained its position as the top country for tech talent in the Arab world and second place in the MENA region (after Israel). In the global ranking, it reached 23rd place.
Dubai in particular continues to attract international talent with its high quality of life. It’s been ranked the best city to live and work in the MENA region byKearny’s Global Cities Reportfor eight consecutive years. InterNations’Expat City Ranking 2021saw Dubai reach third place out of 57 cities that were ranked.
Still not sure if Dubai is right for your fintech?
Of course entering a completely new market can be intimidating, especially if you don’t have contacts or experience in that region to begin with.
According to Daumantas Grigaravicius, Country Manager UAE at Ebury, setting up their startup’s presence in Dubai felt like starting from scratch. Not being familiar with the market, theydecided to go for a sandbox approach, setting up a temporary office in DIFC to get a better sense of the business dynamics and understand the client base.
Going into a new market can be daunting, but having a partner that can give you a direct contact and route to peers helps.
Story bySaidat Giwa-Osagie
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