The UAE’s rise as a global startup hotspot is underpinned by strong growth opportunities

22 October 2024

The emergence of the United Arab Emirates (UAE) as a hub for technology investments has captured the attention of entrepreneurs across the globe. For long-term shareholders looking to capitalize on these emerging opportunities, securities-backed financing can be a flexible and cost-effective way of unlocking funds for new ventures.

Foreign investment into the UAE has typically flowed into five main sectors: wholesale and retail trade; real estate; financial and insurance; mining and quarrying; and manufacturing.^[1] But, in line with the UAE’s broader ambition to cultivate a more digital and knowledge-based economy, the most promising sectors in the future could be more technologically intensive.

The government has rolled out a series of strategic initiatives and policies to help diversify the nation’s economy by incentivizing several future-facing economic sectors. Apart from fintech, these include e-commerce, agricultural technology (agritech), healthcare technology (healthtech), educational technology (edtech), space technology, renewable energy, smart city technology, media and entertainment, gaming, and creative industries.^[2]

Each of these sectors presents strong growth opportunities in the UAE and the wider Middle East and North Africa (MENA) region – where the UAE serves as a launchpad for startups and agile businesses. Many of these sectors are underpenetrated in the region, but the stage is set for them to grow rapidly. As they do, they will fill critical gaps and support and hasten the region’s overall development.

New sectors of note

Agritech investment in MENA grew from US$97 million in 2021 to US$250 million in 2022, with a range of innovative startups developing solutions to grow fresh fruits, vegetables and leafy greens in the UAE – one of the most water-stressed countries on Earth. After being developed and proven in the UAE, these technologies could be deployed more widely amid worsening food insecurity driven by climate change.^[3]

Healthtech, including online consultations, remote patient monitoring, AI-powered diagnostics and digital tools to streamline administrative functions, is also projected to expand steadily in the UAE over the next few years.^[4] Growth will be supported not only by government initiatives and overall improvements in the nation’s digital infrastructure, but also by the increasing emphasis on preventive healthcare and patient-centric solutions, as well as the greater prioritization of health and wellness by consumers in the wake of the Covid-19 pandemic.

Edtech startups, ranging from providers of digital tools for bricks-and-mortar schools to fully online learning platforms are also growing fast in the UAE, bolstered by the government’s commitment to integrating technology into the education system and preparing its citizens to compete in the fast-changing global economy. These technologies could play a key role in addressing the need to develop human capital throughout the Middle East and Africa.

Meanwhile, the prospects for renewable energy startups were bolstered in August 2024 by the government’s announcement of a plan to invest up to US$54 billion over the next seven years to triple its supply of renewables, with an overarching goal of generating 70% of its power from renewable sources by 2050.^[5]

And the UAE’s rising prominence in the rapidly developing space economy was cemented by the initial public offering in October 2024 of Space42, an integrated provider of AI-powered analytics for a variety of satellite data, on the Abu Dhabi Securities Exchange.^[6] Moreover, the government has set its sights on building up the nation’s capabilities for designing and developing commercial spacecraft, and further using space data for commercial use.^[7]

Furthering its entrepreneurial appeal

In addition to its bright economic prospects, the UAE provides the ideal conditions to establish and scale startups in these new sectors – and those conditions keep getting better. The nation has ranked as the best place in the world to start a new business for three years in a row, according to the Global Entrepreneurship Monitor (GEM) survey, up from fifth in 2019-2020.^[8]

“This demonstrates astonishing progress, and a shining example of how political determination and sufficient resources can transform an entrepreneurial environment,” noted the authors of the survey report.

Two other Middle Eastern nations – Saudi Arabia and Qatar – also made the top five in the 2023-24 GEM rankings for similar reasons. It’s also worth noting that the UAE was among a handful of countries — alongside South Africa, Croatia and Saudi Arabia — in which entrepreneurial conditions were deemed to have improved markedly after the pandemic. Elsewhere the evidence was either too mixed, or the changes too small, to draw conclusions, according to the GEM survey.

A burgeoning startup ecosystem

Global entrepreneurs are well aware of the UAE’s growing appeal, and have been flooding into the nation and the wider Gulf region to establish a variety of startups.^[9] This has created the critical mass needed to position the region as a world-leading entrepreneur ecosystem.^[10] That, in turn, will attract even more startups and help propel the nascent venture capital ecosystem into a larger and more vibrant one.

Given that venture capital in the UAE is still ramping up, however, other forms of specialty financing could potentially help get startups off the ground more quickly. Securities-backed financing from EquitiesFirst, for example, provides a convenient and flexible way to raise capital to pursue investments in these rapidly emerging sectors.

With the Middle East’s IPO boom potentially paving the way for lucrative exits from startups in these new sectors, the opportunity is becoming ever greater.

[1] https://www.uae-embassy.org/fdi-and-business-environment

[2] https://u.ae/en/information-and-services/finance-and-investment/foreign-direct-investment

[3] https://www.bbc.com/storyworks/voices-of-vision/seeds-of-change-the-uaes-solutions-for-the-future-of-food

[4] https://www.grandviewresearch.com/industry-analysis/uae-digital-health-market-report

[5] https://apnews.com/article/uae-cop28-investment-renewable-energy-hydrogen-carbon-0138f18dda532eab15bd450ff026fe30

[6] https://www.zawya.com/en/markets/equities/space42-debuts-on-abu-dhabi-securities-exchange-following-merger-of-bayanat-yahsat-nxlvn8x2

[7] https://www.timesaerospace.aero/features/space/how-uaes-space-agency-is-reaching-new-heights

[8] https://www.gemconsortium.org/report/global-entrepreneurship-monitor-gem-20232024-global-report-25-years-and-growing

[9] https://www.arabianbusiness.com/startup/uae-wider-gulf-region-witness-influx-of-global-entrepreneurs-looking-to-raise-early-stage-startup-capital

[10] https://www.entrepreneur.com/en-ae/starting-a-business/dubais-world-leading-entrepreneur-ecosystem-is-making-it-a/476133

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