Start-up matchmaking: Dubai bets on tech as it seeks to hit 30 unicorns by 2033

Dubai Founders HQ, the initiative launched last month by the emirate, is betting on technology start-ups to achieve its ambitious goals in the entrepreneurial space.

Located at the 25Hours Hotel at One Central in Dubai World Trade Centre, Dubai Founders HQ has already onboarded 500 start-ups and around 30 partners so far, including venture capital firms, banks, free zones, corporates, government entities and academic institutions.

A joint initiative by the Dubai Department of Economy and Tourism (DET) and the Dubai Chamber of Digital Economy, it is aimed at helping Dubai reach its target of 30 unicorns – start-ups valued at over $1 billion – and enabling 400 small and medium enterprises to scale by 2033.

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It is a “matchmaking” platform that is a “mix of physical and digital that really is meant to unlock the full potential of start-ups and scale ups”, said Hadi Badri, chief executive of Dubai Economic Development Corporation – part of DET.

Dubai Founders HQ operates as a hub and spoke model, with the physical side covering co-working and event spaces, and the digital layer providing entrepreneurs access to a database of the ecosystem, a knowledge hub and helping them tap into government services, Mr Badri told The National during a tour of the area. While Dubai already does well in areas such as talent attraction, “density matters”.

“What we mean by density is bringing people together, convening them … how do you bring people to almost rub shoulders with one another as entrepreneurs, and then to bring partners that can come in as venture capital firms, accelerators, academia, banks, to also make commitments … [under the umbrella] of Dubai Founders HQ,” he said.

While the platform has start-ups and SMEs covering the entire spectrum – including some at the ideation stage and others that are already generating millions, a common thread is tech. Those onboarded so far are from sectors including FinTech, PropTech and HealthTech, among others.

“And, of course, a lot of AI companies. So that's really where we see the future. It's not only tech, but AI companies are being born, scaling up from here. And sometimes, these AI companies will be sector specific, and some of them will be sector agnostic,” said Mr Badri.

Dubai-based start-up CrayonLabs, which was set up six months ago and builds, launches and scales AI products, is part of Founders HQ. The company is hoping to launch its first product, a tool targeted at venture capital firms, in the next four weeks, said co-founder Barney Lewis. A seasoned entrepreneur, he met his co-founder at a gym in Dubai a year ago.

“I have been in Dubai for two years now and I cannot understate how much my network has improved, the quality of people I am meeting,” he said. “I have never seen anything like that – having worked in Lisbon, in London, they don’t have this opportunity and network quality anywhere,” Mr Lewis said.

In the current market, funding isn't a challenge if you have the right business model and the right founders behind that project, he added.

“What I like about Dubai is that … there is high competition, there's a high bar of quality, there's a high bar of people, and you've got to at least match that or go above it, and that, in turn, gives you downstream effects of a better business going forwards. So, I like the fact that Dubai is super competitive.”

AI bubble fears

Funding for AI and machine learning start-ups is soaring, and they received 38.4 per cent of the $30 billion venture debt in US and European value in the first half of this year, according to PitchBook data.

While overall deal count continues to decline, AI is increasing its overall share, and accounted for 21.8 per cent of deal count in the first half of this year. Last year, AI start-ups received nearly one in four venture debt dollars at $22.9 billion, and accounted for 18.9 per cent of all deals, the report found.

But with high valuations and funding, there have also been increasing concerns of an AI bubble in the space.

“I can't speak for every investor out there, but yes, from what I see in the market and generally in the investing world, there is a lot of froth happening, which is obviously a bit of a red flag, but that's kind of natural in this cycle when there’s such a sea change happening in our lives as AI,” Mr Lewis said.

For CrayonLabs specifically, because of its model, the company can show its products and revenue stream before it asks for investment, which has led to a lot of “eyeballs” on it, he said. “For us, we want to choose the right strategic investor who cannot only give us the capital but also open doors for us, either in Dubai or globally,” he added.

Mr Badri also stressed that the opportunity in AI remains massive in the emirate.

“AI is a lot of things, it's such a broad canvas. And so, there are questions globally, or always being raised about an AI bubble here and there, but I think those are in very specific areas,” he said.

“Here [in Dubai], when you have businesses that are being born in AI, they're typically more on the solution side, service side, rather than on the hardware side. And it's amazing to see the productivity enhancement that can be achieved by AI, and this is the city where we are seeing high talent density in terms of AI talent, we're seeing high adoption in terms of AI.”

‘Not an easy target’

While Dubai is forging ahead with its plans of boosting the ecosystem, enabling 30 companies to scale up to a $1 billion valuation by 2033 is a tough target.

“It's not an easy target, but it's Dubai … We always put a high target and we always achieve it,” said Ahmad Alroom, acting chief executive of the Mohammed bin Rashid Establishment for Small and Medium Enterprises Development (Dubai SME).

“I want technology to come out of Dubai, I want IP to come out of Dubai, I want companies here to scale up.”

Dubai SME last year facilitated the launch of 3,461 new Emirati businesses, bringing the total number of supported SMEs to 19,904 since 2002, when it was founded. Its funding arm, the Mohammed bin Rashid Fund for SMEs, funded 44 projects with Dh35.17 million ($9.57 million) last year.

As a government entity, Dubai SME has “all the support”, it needs, he said.

“I just need to implement the initiatives that we're having. I need to bring the start-ups to let them have the confidence in the SME ecosystem – Dubai Founders HQ will offer that. A lot of different initiatives also will be announced [by Dubai SME next year] to achieve our targets.”