By Manara Global
If someone told you that the UAE and Saudi Arabia were the best places in the world for aspiring entrepreneurs, would you believe them?
Well, this is the verdict of more than 175,000 entrepreneurs from 51 countries: based on their responses in the latest Global Entrepreneur Monitoring Index survey, the Gulf states have emerged as the top two destinations worldwide for their supportive environment for new business ventures.
Therefore, it is no surprise to learn that in the last year, the Dubai Chamber of Commerce recorded a 43% uptick in new business registration, and Abu Dhabi’s startup ecosystem is currently the 6th fastest-growing in the world. Meanwhile, Saudi Arabia saw a 33% increase in startup growth in 2023 and is leading the MENA region with a record-high USD 1.38 billion in venture funding. This phenomenal growth is especially impressive in the current global climate, which has seen a sharp decline in investor appetite for startups worldwide.
So, what is driving this growth and what does this mean for the future of our region?
UAE: The Middle East’s Startup Nation
First, let’s talk about the UAE, a country that has long been the preferred destination for aspiring entrepreneurs and venture capital in the Middle East. With its strategic location in regional commerce, the culture of entrepreneurship is embedded in the country’s DNA. A 2022 YouGov survey shows that nearly two-thirds of UAE residents would like to be self-employed or have their own business if given the choice.
The UAE is an international startup hub, drawing talents from across the globe. It is home to some of the world’s most successful tech and e-commerce startups, including Careem and Namshi. As of 2023, UAE-based startups accounted for more than half of all venture deals in the MENA region. Between 2020 and 2022, the emirate of Abu Dhabi generated over AED 14 billion (USD 3.8 billion) in ecosystem value – a 134% jump from the previous two-year period.
According to the World Bank, the UAE is ranked 16th in its Ease of Doing Business ranking, out of more than 190 countries – this is the highest in the MENA region. The UAE government is constantly looking for ways to boost its economic competitiveness with business-friendly policies: it allows 100% foreign ownership in most sectors, and recent federal reforms have further opened visa terms to make it easier for foreign talent to live and work. The country also boasts world-class physical and digital infrastructure, transparency in government procedures, and a well-functioning financial system.
Equally important is the government’s proactive approach to fostering robust startup ecosystems. The UAE aims to become home to 20 unicorns (startups valued at over USD $1 billion) by 2031 as part of its Entrepreneurial Nation vision. With strong financial and regulatory backing from the federal and local governments, initiatives such asDIFC’s Fintech Hive, DMCC’s Astro Labs, Dubai Internet City’s In5, and ADGM’s Hub71 have created a dynamic environment for aspiring entrepreneurs to network, collaborate, innovate, and bring their ideas to fruition.
Take Hub 71 for example. The Abu Dhabi-based incubator has partnered with world-leading investors and research institutions such as Mubadala Ventures, Sequoia, Microsoft, NYU Abu Dhabi, and Mohamed bin Zayed University of ArtificialIntelligence (MBZUAI) to assist early-stage digital asset and climate tech startups. Since its launch in 2019, Hub 71-onboarded startups have collectively raised more than USD 1 billion in global venture capital, and the incubator is investing a further USD 2 billion to build a Web3-focused accelerator program.
Saudi Arabia: Big Market, Greater Ambitions
If the UAE’s strength is its robust and globally connected ecosystems, Saudi Arabia’s advantage lies in its enormous domestic market and financial prowess.
The unique strengths of both economies are coming together to drive remarkable innovation and entrepreneurial growth and can significantly alter both the regional and global landscapes.
The Saudi government has ramped up support for startups in recent years. A good example is the Technology Development Financing Initiative, which offers loan guarantees for up to 90% of the funding for tech startups. A similar financing initiative is the Saudi Investment Bank’s Kafalah program, which has offered USD 53 billion in loan guarantees to more than 18,000 Small and Medium Enterprises (SMEs) since 2020. The Saudi authorities even established a government office dedicated to SMEs, which underscores their support for entrepreneurial ventures and private sector growth.
The country’s generous financial support to startups is also reflected in the sheer size of its venture funds. Just two weeks ago, Saudi Aramco allocated USD 4 billion to its global venture capital arm, Aramco Ventures, which now has an investment allocation of USD 7 billion.
The vast size of the Saudi domestic market provides a great environment for startups to test their products and services, especially in e-commerce and fintech. Tabby, a USD 1.5 billion fintech unicorn that provides “Buy Now, Pay Later” services to MENA-based e-commerce customers, recently relocated its headquarters from Dubai to Riyadh to focus on the booming Saudi market. Tamara, another Saudi-based fintech unicorn, secured USD 340 million in a Series C equity funding round last December to expand its operation in the Kingdom and across the region.
Who Are These Entrepreneurs?
We found that more than 3 in 4 of the UAE’s entrepreneurs are male. But female entrepreneurs are on the rise, with the number increasing by 20% over the past 5 years.
We also found that 4 in 5 of the UAE’s entrepreneurs are currently based in Dubai, but a growing number of them are making Abu Dhabi their home. This shift indicates that the increased effort Abu Dhabi has put into investing in tech incubators and startup ecosystems is paying off. We would expect this trend to continue.
Another interesting tidbit is education: we found that although 2 in 5 of the UAE’s entrepreneurs have a bachelor’s degree or above, more than half of them never went to university. Now, this is not to say that every kid aspiring to become Sam Altman should have the green light to drop out from college (even then, they would need to get into Stanford first). Rather, it shows that entrepreneurship is not necessarily correlated with formal education, and the most innovative minds can come from all backgrounds – a compelling reason for incubators and investors to think out of the box in their search for talent.
Looking Ahead
In any case, the future looks bright for startups in the GCC. The region’s rapid economic growth in recent years has attracted talents and investors from around the world, and the proactive government strategy in fostering entrepreneurship is bearing fruits. This thriving startup scene is set to contribute to GDP growth in these countries and attract further international investment. It also paves the way for homegrown startups to expand globally, creating and sustaining a multitude of job opportunities in the process.
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