Sitting at the crossroads of Asia, Europe and Africa, the UAE is among the top start-up and SME ecosystems in the world, offering a thriving framework to nurture and develop early stage enterprises. Driven by an unmatched combination of government-backed initiatives and incentives, world-class infrastructure, and a robust venture capital network, the UAE has experienced a high rate of entrepreneurial activity in the past few years.
Global Entrepreneurship Monitor (GEM) ranked the UAE first out of 47 participating economies in its Global Entrepreneurship Index 2022 for its supportive environment for starting businesses.
Meanwhile, the UAE economy continues to shine following the successful handling of the pandemic outbreaks, encouraging entrepreneurs and many global businesses to set up their operations in the country. The landmark UAE reform allowing foreign investors 100 per cent ownership of businesses and the introduction of golden visa, green visa, freelancer and entrepreneur visas are some other bold moves that have consolidated its position as a hub for entrepreneurs.
The promotion of entrepreneurship is a priority in the UAE’s Fifty Economic Plan, with the nation aiming to host at least 10 unicorns — start-ups valued at more than $1 billion — by 2031. The UAE is also looking to increase the number of SMEs in the country and enhance the contribution of this sector to its GDP. With more than 350,000 businesses, SMEs currently represent over 94 per cent of all companies operating in the UAE, employing over 86 per cent of the labour force in the private sector and contributing over 60 per cent of GDP.
Benefits of entrepreneurship
With the world around us changing faster than ever, entrepreneurship is considered a critical growth engine for a dynamic economy. Realising its potential, governments worldwide, including the UAE, are turning their focus on entrepreneurs to exploit new opportunities, create employment and find answers to critical technological, environmental, and societal challenges that are redefining the post-pandemic global order.
Specialised free zones play an indispensable role in supporting the UAE’s entrepreneurial ecosystem. With their cost-effective business incorporation packages along with various incentives, infrastructural and mentoring support, free zones help entrepreneurs on their journey to scale.
To drive the nation’s entrepreneurial ecosystem, Hamriyah Free Zone Authority (HFZA) in Sharjah has especially shifted the focus of its sales and marketing strategy from the traditional model of acquiring large ticket investors for rent to SMEs who have limited capital and need facilities and support, says Saud Salim Al Mazrouei, Director at HFZA.
HFZA understands the need to develop a supportive environment for the SME sector and accelerate the UAE’s economic diversification agenda by championing pioneering projects and emerging industries.
“HFZA understands the need to develop a supportive environment for the SME sector and accelerate the UAE’s economic diversification agenda by championing pioneering projects and emerging industries. We offer affordable start up packages as well as streamlined procedures for company formation to support the growing entrepreneurial spirit in the country. HFZA’s seamless client experience allows investors to focus on their business rather than on bureaucratic procedures,” Al Mazrouei says.
Scalability of a start-up depends on where you lay the groundwork, proper planning, funding and systems.
Similarly, Meydan Free Zone in Dubai, with its efficient, seamless, and cost-effective options, helps entrepreneurs launch and scale their businesses successfully.
“Invest in the right partnerships to grow your business,” advises Hamed Ahli, Associate Director at Meydan Free Zone, which offers investors the opportunity to choose from over 1,500 business activities while setting up a business. “Scalability of a start-up depends on where you lay the groundwork, proper planning, funding and systems.”
KEZAD Group provides the ideal ecosystem for growth, enabling businesses to connect with suppliers and customers, build synergistic relationships, and thrive in a business environment that fosters research, growth and the development of talent.
Mansoor Al Marar, Director — Commercial, KEZAD Group, which operates 12 economic zones in Abu Dhabi, Al Ain and Al Dharfa, says, entrepreneurs need to ensure they are ready and prepared for growth and have the foundations — supply chains, processes, cash flow, and premises — in place for success.
“KEZAD Group provides the ideal ecosystem for growth, enabling businesses to connect with suppliers and customers, build synergistic relationships, and thrive in a business environment that fosters research, growth and the development of talent.”
For international entrepreneurs looking for avenues here, we go the extra mile to ensure they have all the right support in setting up their base in the UAE. Similarly, for SMEs, we provide support in terms of customisable packages and easy-on-pocket solutions.
In Ras Al Khaimah, RAKEZ supports businesses in over 50 sectors. “At RAKEZ, we have been on a journey of becoming a home for global investors as well as small enterprises by truly understanding and addressing their needs beyond the set-up process,” says Ramy Jallad, Group CEO.
“For international entrepreneurs looking for avenues here, we go the extra mile to ensure they have all the right support in setting up their base in the UAE. Similarly, for SMEs, we provide support in terms of customisable packages and easy-on-pocket solutions.”
Free zones — vehicles for economic growth
Home to a multitude of global brands and successful start-ups, UAE’s over 45 free zones have spurred the country’s growth trajectory in the past four decades by attracting innovative, knowledge-intensive companies and exceptional talents. Free zones are now considered a formidable driver for international trade and foreign direct investment (FDI), accelerating UAE’s post-pandemic economic growth.
HFZA has implemented a specific strategy with two key pillars to attract foreign investments to the UAE.
“The first pillar is to attract quality investments that support the national strategies of Sharjah, especially with regards to economic diversification. The second pillar is to launch marketing and promotional campaigns in the home countries of the investing companies to identify the nature of their work, needs, and their willingness to enter and enhance their presence in regional markets, through direct visits, seminars, and participation in official delegations, exhibitions and events,” explains Al Mazrouei.
Growth in new business registration
Despite the pandemic-induced slowdown and supply chain challenges, most UAE free zones have experienced a rise in entrepreneurial and trade activities in the past two years, in part due to rising opportunities in new, high-growth industries such as deep tech, agri-tech, game tech, e-commerce and fintech.
DP World’s flagship Jebel Ali Free Zone (Jafza) generated over Dh454.7 billion in trade in 2021, up 19 per cent from Dh382.8 billion in 2020. Complementing this growth was an 18.6 per cent increase in the number of new companies that registered in the free zone, bringing the total number of companies to more than 9,000.
In Sharjah, HFZA also posted growth in a challenging market environment. “The pandemic did not dampen our commitment to transform the way global trade is done. Many of our long-term investors reaffirmed their confidence in HFZA as their partner of choice by expanding their facilities in the free zone to further strengthen their business. Over 600 companies have set up their operations in HFZA this year,” says Al Mazrouei.
Meanwhile, free zones in the UAE have introduced several measures such as simplified and remote business set-up processes, discounted company incorporation packages, mentoring services, and events and networking opportunities to help new firms overcome several entry barriers into the UAE’s business landscape. Start-up ecosystem leaders expect to see continued interest from global business founders eager to capitalise on the region’s digital economy.
Seizing the opportunities of a new economy
“We have seen a rise of SMEs operating in new categories such as artificial intelligence, gaming, virtual education, digital marketing and e-commerce,” says Jallad from RAKEZ. “We are a part of the Ministry of Economy’s NextGen FDI initiative designed to attract digitally enabled companies to the UAE. As a partner, we are committed to improving the development of the country’s technology sector, strengthening its position as a market leader for software development and promoting good governance.”
KEZAD Group is also seeing strong traction in innovative sectors such as agri-tech, hi-tech, green energy, and life sciences. “Earlier this month, we signed an agreement with NWTN to establish an electric vehicle (EV) assembly facility, and we have just made available more space in KLP21, with over 80,000 square metre capacity of advanced temperature-controlled logistics for the food and healthcare sectors,” Al Marar says.
Innovation at the forefront
Amid changing market dynamics, most free zones are prioritising innovation in product, services and processes to unlock new opportunities and stay profitable in the long run. They have started leveraging digital technologies, cloud systems and omnichannel approaches to create unique, compelling customer experience.
“At IFZA, innovation means being forward-focused in looking at everything we do from the ever-evolving perspective of our partners and licensees,” says Jochen Knecht, CEO of IFZA.
“In response to the recent global challenges, IFZA adopted hybrid processes, which allowed both onsite and remote company set-up. This gave rise to opportunities for entrepreneurs and businesses located abroad to set up their businesses in Dubai.
“In response to the recent global challenges, IFZA adopted hybrid processes, which allowed both onsite and remote company set-up. This gave rise to opportunities for entrepreneurs and businesses located abroad to set up their businesses in Dubai. In addition to this, we have also been working closely with government authorities to continually expand our range of business activities ensuring we keep our edge in the market. Furthermore, we go the extra mile by assisting our professional partners and licensees to secure third party approvals with relevant government regulatory bodies.”
Meanwhile, HFZA has rapidly expanded its suite of online services to over 300, allowing investors in the UAE and around the world to seamlessly carry out day-to-day and exceptional activities without having to physically visit HFZA. This has allowed investors to conduct their activities, from document verification to VAT registration and more, remotely from anywhere in the world.
RAKEZ has also leveraged various digital tools to tap the market and engage with its clients. “We continuously work towards enhancing the ease of doing business in our ecosystem through the development and implementation of modern technology,” says Jallad.
Free zones have also started collaborating with multinationals, education institutions and incubator-accelerators networks to expand the start-up ecosystem and foster a strong entrepreneurial culture in their communities where creative thinking is inspired and nurtured.
We have partnered with institutions such as the University of Sharjah, Sharjah Entrepreneurship Center, Skyline University and others to offer students the opportunity of starting their business without having to invest a significant amount of money into their new venture.
“Sharjah Media City (Shams) has been heavily invested in nurturing young talent and enabling them to embark on their entrepreneurial journey in the UAE,” says Dr Khalid Omar Al Midfa, Chairman, Sharjah Media City – Shams.
“We have partnered with institutions such as the University of Sharjah, Sharjah Entrepreneurship Center, Skyline University and others to offer students the opportunity of starting their business without having to invest a significant amount of money into their new venture. Our Ghaya Package has been made specifically for students, reducing their cost of entry into the market and offering them the support they require to scale their business.” ●
UAE start-ups see escalation in venture funding
Global as well as home-grown venture capital firms have started playing a critical role in the UAE’s entrepreneurial landscape with their investments in high-growth companies and disruptive technologies.
Major exits, acquisitions and mergers have attracted regional and international capital into the UAE. This, combined with the UAE’s young, digitally connected and diverse population, has made the UAE a hotbed for venture capital activity.
“UAE based start-ups raised around $700 million in the first half of 2022, making the Emirates the leading country for venture capital financing in the Middle East and North Africa. The number of deals has also increased by 10 per cent showcasing sustained VC activity in the first half of the year,” says Shane Shin, Founding Partner at Shorooq Partners, an Abu Dhabi-based investor in early stage technology start-ups. “During this period, the UAE has also witnessed the largest convertible note of $181million in our portfolio company Pure Harvest, adding to the $1.5billion of venture capital attracted to the country.”
As the ecosystem of start-ups matures, the need for more growth capital increases, he says.
The rapid rise of venture capital in the UAE has been a result of the development of the venture capital ecosystem, backed by the support of UAE’s Mubadala, ADQ and the launch of Dubai Future District Fund. “Major exits, acquisitions and mergers have attracted regional and international capital into the UAE. This, combined with the UAE’s young, digitally connected and diverse population, has made the UAE a hotbed for venture capital activity,” says Shin, adding, “We have set precedence with our venture debt fund, investing in companies in their series A and B rounds without the need for founders to give away additional equity. Though this asset class is nascent to the region, we see the need for more institutional capital to come at later stages either in the form of equity or debt while maintaining a healthy investment appetite for pre-seed and seed stage companies.”
Free zones have also started collaborating with financial institutions to address funding challenges of start-ups.
Sharjah Media City (Shams) recently partnered with Funding Souq to simplify financing for its business community. “Securing funds remains among the most daunting challenges for start-ups to overcome at various stages of their development,” says Dr Khalid Omar Al Midfa, Chairman, Sharjah Media City – Shams. “This strategic partnership with Funding Souq will bring advanced solutions to this issue not only for our community, but also for innovative media companies from the wider ecosystem where we can see promising growth opportunities.”
“These are simply the beginning of our broader ambition for the dynamic IFZA ecosystem, which we strategically designed to empower our partners with more tools to support their clients effectively. While the Business Park offers a wide range of commercial real estate solutions, we designed it to be more than a place to do business. We envision it to be an inspiring community gathering like-minded entrepreneurs and sharing inspiration to build their ambitions.”