Dubai: Tech startups in the UAE – and the numbers keep rising – are finding it’s not just favourable business conditions they are getting here. Even their cost of launching and sustaining operations in the UAE are proving to be extremely favourable.
The most popular jurisdictions for tech-facing new businesses in the UAE have been drawing in more players and talent with incentives that are hitting the ‘sweet spot’ and helping startups manage costs better.
“The DIFC’s ‘innovation licence’ and ADGM’s ‘tech startup licence’ are low cost licencing options for tech startups in the UAE,” said James Swallow, Commercial Director at PRO Partner Group, the Dubai-based consultancy.
Individuals can setup through a freelancer licence, which covers general consultancy services. This licence is a popular option in both Dubai and Abu Dhabi mainland, in addition to the Dubai trader licence, which is an instant licence option.
The startup vibes was quite noticeable at this week’s Gitex Global show and associated events. The mood among many tech professionals is that the UAE’s credentials as the place to be and do business will be reinforced in the current environment.
And when mentions are made about job losses happening at LinkedIn or Nokia, the feedback is that the global tech industry situation need not reflect in the UAE and Gulf. “It’s simple – the UAE, Saudi Arabia and Qatar have not stopped spending on technology,” said the founder of a recently launched HR software business in Dubai.
“A year ago, Big Tech shed thousands of jobs in the US, and there was hardly a ripple when it came to tech spending and projects in the Gulf.”
Industry sources add that finding a spot to lease at Dubai Internet City is about being patient. “The Tecom Group will soon announce its 9-month results and one of the most awaited numbers will be the occupancy levels at their many business hubs,” said an analyst. “Based on what we know, the waiting list for space keeps building.”
HUB71's incentives – and equity deals
Abu Dhabi’s Hub71 this week said it will provide startups with up to Dh750,000 in cash and in-kind incentives. The interested businesses can join the ‘revamped’ ‘Company Building Program’, through which they can tap into Dh250,000 worth of in-kind incentives in the form of support services - and Dh250,000 in cash for equity.
“For the first time, Hub71 will gain an ownership interest in startups selected to join its Program,” said a statement.
At the end of the first year of the Company Building Program, ‘top-performing startups selected by Hub71’ can line up a further Dh250,000 cash incentive in lieu of additional equity.
What should startups aim for – free zone or mainland?
According to Swallow, “Generally, cost for these licences is the same unless the businesses’ desired activity is regulated. Companies involved in fintech, trading, e-wallets, digital payments, or crypto are regulated, and these licences are more expensive and onerous to set up, as they include the additional element of regulation.
“These companies can also expect the additional costs and responsibilities associated with requiring qualified staff (such as a compliance officer) and dealing with the regulator.
“Each jurisdiction is striving to cut costs, reduce licencing fees and red-tape for tech companies as it is becoming a flourishing sector. Ultimately, the different types of tech activity don’t affect the price, so the cost will be roughly the same.”
That’s just what startups want to be hearing as new ones start on their getting licensed journey. That is, if they haven’t already started the process – or completed it.
Business owners will be able to access the funds upon onboarding. When the startup proceeds with a formal funding round later on, ‘Hub71 will exercise its right under the SAFE to take an equity interest in the startup’.
“This newly established approach is designed with founders in mind, offering a streamlined and investor-friendly way for startups seeking to expand globally from Abu Dhabi to raise capital,” the Abu Dhabi entity said in the statement.