It has been 10 years since Step held its first startup conference and festival in Dubai, a time when the entrepreneurship sector in the emirate was so nascent that the team struggled to find 10 startups to showcase to the 100 people that attended. Now a decade later, the conference has provided a platform for 1224 startups from 56 countries and attracted more than 30,000 attendees.

“The past ten years have been a giant leap for us and the startup ecosystem in the region. Today, we have more than 300 startups participating annually, and it amazes me how many founders, investors, accelerators, government organisations, and pure general interest in tech and startups exists today in our region. Year on year, over the last 10 years, Step’s community has grown at a compound annual growth rate of 30 per cent,” said Ray Dargham, CEO of Step.

This year, the conference returned after going online in 2021 and the excitement of the ecosystem coming back together in person was palpable. What was starkly clear, is that entrepreneurship has not only survived the pandemic, it is now thriving, with more founders building globally relevant ideas.  

Competing for startups

In a fireside chat with Dr Ahmad Belhoul Al Falasi, minister of state for entrepreneurship and SMEs, the UAE’s ongoing ambitions to remain the hub for entrepreneurship was emphasised with a roster of plans and initiatives. These include the establishment of a new Dh1 billion fund, new entrepreneurship licences and an expected reduction in licence fees after the introduction of corporate tax in the country.

“The UAE has firmly established itself as a global centre for entrepreneurship; we have gone to great lengths to make sure entrepreneurs have everything they need to succeed, launching a host of ambitious initiatives and strategies to create an innovation- and entrepreneurship-friendly environment,” said Al Falasi.

According to government figures, there were 350,000 SMEs in the UAE in mid-2020, representing over 94 per cent of all companies, employing more than 86 per cent of the private sector’s labour force, and accounting for over 60 per cent of gross domestic product (GPD). The federal government also recently launched The Entrepreneurial Nation initiative to support entrepreneurship in the country and attract global unicorns with an ambition to have 20 unicorns in the UAE by 2031.

“The initiative also aims to train 15,000 entrepreneurs and support 8,000 startups to go global over the next decade. We want all brilliant minds to think of the UAE as their partner towards success, and to that end, we spare no resources or capacities in promoting a culture of entrepreneurship and building a sophisticated entrepreneurship environment,” he said. “Bold ideas are of course the essence of startups, but without the necessary infrastructure, financing, mentorship, etc., they remain just that – ideas. This is where we come in: our role is on a more macro level. We must rally our efforts and work together to set a global vision for building a cross-border entrepreneurship ecosystem.”

But building this cross-border ecosystem is proving to be illusive as the region’s top cities continue to compete with one another to attract the top startups.

“Each market is a silo, Dubai is different from KSA and Egypt. You still have to succeed in each market and that is the number one challenge,” said GV Ravishankar, partner at Sequouia Capital India, who also highlighted the lack of talent and exit opportunities as the top challenges in the region.

Valuations bubble

Moreover, competition for the best startups is also impacting the investment community. Over the past couple of years, the number of VCs in the region has jumped, access to capital has become easier and startup valuations have skyrocketed as a result. Among the topics that dominated discussions was the high valuations evident across the region and the creation of a valuations bubble that most believe is unsustainable. VCs that had initially set out to sign later stage cheques are now finding themselves investing earlier, providing startups with greater choice and further compounding the valuations issue.

“There is plenty of cash in terms of investments and valuations are going up like crazy. It’s a bubble and everyone wants to IPO,” said Michael Aswad, co-founder and chief executive officer of Saudi Arabia-based Vom, a SaaS accounting platform for businesses.

But for Sequoia's Ravishankar, there is one particular trait that stands out in the region, regardless of its challenges. 

"It goes back to the belief of do the founders here believe they can build large, world-beating companies? If the belief is there, all the challenges are real but solvable," he said.