Why is the UAE the Right Place for Your Startup

As the start-up scene in the Middle East continues to grow, the UAE’s commitment to becoming a global leader in technological advancements, as it transitions to a knowledge-based economy, has made it home to some of the hottest enterprises in the region. According to the World Economic Forum, 29 of the 100 Arab Start-ups shaping the fourth industrial revolution are based right here - in the UAE.

This is an opinion piece exploring the UAE’s immense potential for becoming an attractive start-up hub for talented entrepreneurs from around the world. Keep on reading to find out why launching in the UAE can be the best choice for your enterprise!

1. Easier set-up options

The UAE has a number of free zones which offer incentives to start-ups. Some benefits of having your start-up set up in a free zone include reduced costs of operations, fast track company set-up and procedures, 100% retainment of your equity (as opposed to having a 51% local partner for onshore company set-up). Further, most start-ups are exempted from corporate income tax, as most offer various tax holidays to employees for a period between 15 and 50 years.

Dubai has had its own impressive share of accelerators and incubators. Business accelerators and incubators, provide start-ups with the support they need to prevent an untimely demise. Both offer expertise, mentoring, shared office spaces and access to structural resources. Whilst functionally similar, there is a manifest difference.

Accelerators offer funding opportunities in exchange for equity. They are also time-sensitive as members ‘graduate’ from an accelerator programme after a set number of months. These offer a plethora of administrative business setup support, networking opportunities and affordable co-working spaces.

For instance, in5 Dubai, an incubator, provides infrastructure, funding and mentorship facilities to its members. Another recent initiative, the Dubai Future Accelerator program, links start-ups with government organisations. In Abu-Dhabi, Hub 71, a 1-billion-dirham ($272 million) tech incubator has been set-up in ADGM (a free zone) to accelerate technology and AI in the region.

With partners in the likes of Microsoft and Softbank, the government-funded scheme provides both ease of investment and easier access to capital, according to Mahmoud Ali, head of the programme. All in all, incubator and accelerator programs are a great way to offer entrepreneurs, start-ups and small businesses the expertise, support and tools necessary to get ahead of the competition, and in the UAE, you can rest assured that there is no shortage in quality or in quantity.

2. Relaxation of Foreign Ownership and Visas

Previously, one of the major dilemmas for foreign investors seeking to set-up business in the UAE mainland was its ownership regulations. Whilst the multitude of free zones across the country do offer the prospect of 100% ownership, this option is not always ideal as it comes with its own challenges. The geographical area limitation is the main setback for free zone companies as they are limited to doing business within their free zone of incorporation or outside of the UAE.

The new foreign direct investment law 2018 eases the requirements on foreign ownership, with the objective of opening up the UAE market to foreign investors. The list of sectors and activities eligible for 100% foreign ownership comprise of 122 economic activities across 13 sectors. Companies meeting these requirements may submit an application to the Dubai Economic Department (DED), which in turn decides the determines the percentage of foreign ownership, which may well be “up to” 100% foreign-owned.

Adjustments to visa requirements also contribute to encouraging foreign entrepreneurship. Examples include allowing a new five-year visa for exceptional students and entrepreneurs.

3. Investments into Technology

In line with its commitment to diversify the economy away from oil, the UAE has launched a series of successful initiatives which have supported its successful transition towards a knowledge-based economy. The UAE’s Vision 2021, the National Innovation Strategy, the Dubai Integrated Energy Strategy 2030 and 10x, all set various ambitious targets towards taking innovation in the UAE to new heights, and encouraging entrepreneurship The UAE has been one of the leading entrepreneurial hubs in the Middle East and North Africa (MENA) retaining its top spot in H1 2019 by accounting for 26% of all deals and 66% of all funding in the region.

Given the ease of set-up and low-cost environment, it is no surprise that the UAE attracts one of the highest amounts of funding for tech ventures in the world. Not only does it attract 29% of all deals and 66% of all funding in the MENA region, according to H1 2019, but the country has also been home to some of the region’s most exciting tech start-ups. Examples of these include Careem, a ride-hailing app that was acquired by Uber for $3.1 billion. Noon, an eCommerce start-up, also managed to raise $1 billion, even before its launch!

Since then, Investors have been, for lack of a better word, pouring money into the regions high-tech start-ups. In October 2019, Mubadala, Abu Dhabi’s state investor announced the launch of two new tech funds which are set to invest $250 million in start-ups in the Middle East region. Investments from the fund have played a crucial part in the development of regional start-ups, such as Bayzat, which helps companies automate HR administration.

Other instances of successful fundraisers include the real estate website Property Finder, as well as the logistics firm Fetchr, which delivers to the GPS location of a customer’s smartphone, which raised $120 million and $52 million respectively. It is an exciting time for tech in the region as investors are left to guess- which will be the region’s next unicorn?

4. A Growing Economy

Given the relative ease of securing capital across the region, it is no surprise that the UAE has a strong economy to which enables it to continue to support sizeable investments into innovation.

The projections for 2020 look even more promising. The most recent forecasts from organisations such as the international monetary fund and the institute of international finance point towards a momentum in economic growth in the next year. This is supported by a projection of a 3% GDP growth for the next year, which is an impressive upscale from the relatively modest growth rate of 1% seen in 2019. This is testimony that initiatives such as vision 2021, beyond being idealistic, are also backed by prompt, effective economic backing. UAE’s diversification has now meant that SMEs contribute to more than 30% of the country’s GDP, which is on par with the share of the oil and gas sector.

The momentum is not just due to fiscal stimulus. It is attributable to various policies easing entrepreneurship, as well as Expo 2020, which is also expected to drive up demand for entrepreneurship by attracting up to 25 million visitors.

Endnote / Concluding Thoughts

So why is the UAE an ideal location for start-ups and SMEs?

The UAE offers a plethora of opportunities for securing investment, an extremely low tax environment, and an overall ‘ease of doing business’, according to the most recent survey by the world bank, which ranked it as 21st out of 190 countries.

Its end goal?

To continue to be a global leader in providing policies and infrastructure which promote R&D, innovation, and transform it into the number-1 entrepreneurial hub around the world.

Special thanks to:

Ahmed Elnaggar | Elnaggar & Partners
Yousif Hussein Al Sahlawi​ | Al Sahlawi & Co Advocates & Consultants​
Hiba Alaa Aldin Maani | Al Khazna International Advocates & Legal Consultants

for their help in writing the article.