Dubai Emerges as Tech Hub of the Arab World

“The thing that’s really changed is Covid—it accelerated the ecosystem by three to five years,” said

Asher Siddiqui,

a Dubai-based venture capitalist and former partner at San Francisco-based 500 Startups.

Ralf Glabischnig,

an investor and founder of Crypto Oasis, an organization helping blockchain and crypto startups establish in Dubai, moved last year to the city that he calls the fastest-growing hub globally for crypto technology. Crypto Oasis says it has helped 200 startups—trading cryptocurrencies or building businesses on blockchain—establish in Dubai. The world’s largest crypto exchange, Binance, has set up offices in Dubai.

Dubai has also benefited from the United Arab Emirates’ new diplomatic relations with Israel, struck in 2020 in a deal known as the Abraham Accords, which created opportunities for Dubai to make connections with the already-established tech hub in Tel Aviv. Companies from Israel, which is also experiencing a tech boom, are expanding and choosing Dubai for their first regional outpost.

Investments in Middle East and North Africa tech firms, excluding Israel, quadrupled to $2.87 billion last year, compared with $654 million in 2020, with roughly half that investment flowing into the U.A.E., according to Dubai-based Wamda, a research platform.

Dubai is now home to three tech startups worth at least a billion dollars: Kitopi, a cloud kitchen platform; private aviation platform Vista Global; and Emerging Markets Property Group, which operates classified listing websites in the U.A.E., Egypt and other countries, according to New York-based CB Insights.

“This is a tipping point,” said

Dominic Perks,

chief executive officer of London-based investment firm Hambro Perks, which has launched a fund to invest in startups in the Middle East.

Three India-based executives at Sequoia Capital moved to Dubai during the pandemic, where they obtained long-term permits to move freely in and out of the city, according to people familiar with the moves.

The effective extension of Sequoia Capital India to Dubai helped produce the venture fund’s first investment in the Gulf region, these people said. California-based Sequoia’s India-focused fund in January led a $33 million early-stage investment in a Saudi-based fintech startup, Lean Technologies Ltd., and the fund is planning another deal, one person said.

Alongside Lean, Sequoia’s Europe-based team also invested last year in Egyptian fintech startup Telda.

SoftBank Group’s Vision Fund 2 in July led a $415 million investment in Kitopi. A few months later, SoftBank did a $125 million deal for a stake in Saudi Arabian customer-engagement platform Unifonic. The investment firm, backed with $60 billion from Saudi and U.A.E. sovereign-wealth funds, established a presence in Abu Dhabi in 2018 but didn’t invest any of the first Vision Fund in companies in the Arab world.

Instead, SoftBank waited for deal flow to pick up, and now sees more sophisticated entrepreneurs running Gulf-based companies of a significant-enough size, according to a person familiar with the fund’s strategy. SoftBank passed on investing in Kitopi in an earlier investment round, but it kept in touch with the founders and invested when the firm grew to operate more than 60 cloud kitchens across the U.A.E., Saudi Arabia, Kuwait and Bahrain.

The region’s sovereign-wealth funds such as Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala Investment Co. are also taking direct stakes and seeding local venture-capital firms.

“Big money checks are coming in from Silicon Valley VCs or global VCs who see this as the next emerging region,” said

Kunal Savjani,

a Dubai-based partner at venture firm Shorooq Partners, which has a portfolio of more than 45 startups. “It’s more competitive.”

The Arab world has a young, tech-savvy population, but it traditionally has been a source of capital for investors rather than a place lauded for its entrepreneurs, venture capitalists said. Its frequent conflicts also have put off investors, and Saudi Arabia, the biggest economy, opened up economically and socially only in recent years, they added.

Investor interest in the Arab world remains dwarfed by venture-capital investment into the U.S., Asia and Europe. Israel startups attracted more than $25 billion last year, according to Start-Up Nation Central, an Israeli nonprofit.

The U.A.E. has a stated aim of becoming home to 20 tech companies worth $1 billion or more by 2031. It is offering 100,000 “golden visas,” or permits that allow entrepreneurs and technology investors to live in the country for up to 10 years, longer than regular visas. The U.A.E. also has set up a national small-business program to help startups find funding, partner with established companies and market their products overseas.

“You don’t draw talent just by having an open border, you need to create opportunities, the environment needs to be the right,” said

Sarah al Amiri,

minister of state for advanced technology.

Dubai startups have had exits, such as

Uber Technologies Inc.’s

purchase of local Dubai rival Careem, and

Amazon Inc.’s

2017 purchase of e-commerce site Souq.com, that have emboldened former employees to start their own companies.

Companies also are setting up in Dubai but focusing on the wider region. Swvl Technologies Inc., which listed last year in a deal with a special-purpose acquisition company that valued the Dubai-based tech firm at roughly $1.5 billion, does ride-hailing service for taxi-vans, but its operations are focused on Egypt, Pakistan and Kenya rather than the U.A.E. Another startup, Capiter, is based in Cairo, but has an office in Dubai because the city is good for hiring and raising capital.

“Dubai can simply bring any talent you need around the world no matter where they are from,” said

Mahmoud Nouh,

an Egyptian who co-founded Swvl and now runs Capiter.

—Dov Lieber contributed to this article.

Write to Rory Jones at [email protected]