New Delhi, May 20 -- To address the late-stage funding gap facing startups in Dubai, the Dubai International Financial Centre (DIFC) Innovation Hub is actively working to attract global venture capital (VC) firms that specialize in growth-stage investments, according to Mohammad Alblooshi, CEO of DIFC Innovation Hub.
"There's a lot of seed-stage and early-stage capital available, but growth-stage funding is probably an area that we need to work on," Alblooshi told VCCircle on the sidelines of the Dubai Fintech Summit. "Efforts are being made to attract more funds that deploy growth-stage capital. That's something we're looking at closely."
While the Dubai Future District Fund (DFDF), Dubai's evergreen venture capital fund-of-funds and direct investment platform, remains the sole public fund for startups in the emirate, Alblooshi emphasized DIFC's broader mission to mobilize private capital. "We cannot deploy capital in a thousand startups, but we can make it easy for global investors to come and set up in DIFC," he said.
The DIFC Innovation Hub hosts more than 1,240 growth-stage tech firms, established innovation companies, digital labs, venture capital firms, regulators, and educational entities. It offers accelerator programs, business licensing, co-working support, and a comprehensive regulatory framework for startups, positioning itself as a regional hub for AI and fintech innovation. "We're speaking to global VCs to attract them to Dubai. Some of the larger players from the Far East are seriously considering setting up shop here," Alblooshi said.
The funding crunch in Series B and C rounds-critical phases when startups scale operations-has been a growing concern in the region. A report by DFDF last year noted that the majority of startups transitioning from Series B to C are facing a lack of capital. The report also suggested that while sovereign wealth funds and regional growth-stage VCs are attempting to bridge the gap, international pools-once a major source--have become increasingly scarce.
"For bolder investors, this year may have solid businesses up for grabs with down rounds and valuations that return to 2018-2020 averages for Series B and C," the report said. "Contrary to prevailing sentiment, today's bear markets may be the optimal time to invest in GCC-based startups."
A 2023 report by Saudi VC firm Saudi Technology Ventures (STV) had noted that growth-stage funding in the MENA region faced a $20-billion gap, with only $4.2 billion in available VC dry powder. The scarcity of funding allocated to growth-stage companies requires the presence of at least 10 VC funds dedicated to late-stage funding in the market, it said.
In a positive development, 500 Global, a US-based multi-stage venture capital firm managing assets worth $2.3 billion, launched a MENA-focused growth fund in January to back high-growth technology startups in the region. Earlier, in 2021, it had set up its Middle East headquarters in Riyadh.
Alblooshi also stressed the need to unlock regional capital, particularly from family offices. "There's a lot of family wealth available in the region. We want to help family offices diversify and see startups as an asset class," he said. "There is a lot of interest, but not enough know-how. We can be that funnel."
DIFC has positioned itself as a regional leader in fintech and emerging technology. "Around 2016-17, it became clear to us that we had to look at the future of finance," Alblooshi said. "We launched accelerator programs to understand the ecosystem and started building what today is home to over 1,200 fintech, innovation, and AI companies."
He pointed to the success of homegrown fintech startups like Tabby and Tamara as evidence of a maturing ecosystem. "Initially, most startup applications came from outside the region. Now, most come from within. That tells us the market is growing," he said.
In 2023, DIFC expanded its focus to artificial intelligence with the launch of the Dubai AI Campus. "We've announced 100,000 square feet of dedicated space. We have already started the campus within our existing facilities," Alblooshi said, adding that it aims to become the largest AI cluster in the region.
Published by HT Digital Content Services with permission from VC Circle.