Ryaan Sharif is the general manager at Flat6Labs UAE

“The backbone of the world economy.” Read any article about startups and SMEs and you will, at some point, encounter a variant of that phrase. But there is a reason cliches are cliches. Past estimates say 90 per cent of the world’s businesses are SMEs and that they are responsible for half of all employment worldwide. By December last year, other figures suggested smaller businesses were the source of 70 per cent of all jobs and 70 per cent of global gross domestic product (GDP). Indeed, they are the “backbone”. 

If we drill down to focus on the United Arab Emirates — a global economic sensation by any standard — we see a similar story. As of mid-2020, the 350,000 SMEs in the UAE made up more than 94 per cent of the nation’s businesses, employed some 86 per cent of its private-sector workforce, and accounted for more than 60 per cent of GDP. The reasons for this have always been plain: private innovation and government commitment. 

For every global sensation like Netflix, Uber, and Airbnb there is a UAE-based regional success story like Kitopi, Washmen, or Careem. But while their ideas definitely captured a moment with astounding vision, innovation, leadership and grit, longevity is governed as much by local regulations and access to funding as by the inspiring attributes that gets the company out of the gate. Today, the aftershocks of the pandemic threaten to destabilise even high-flyers. Inflation, supply-chain jitters, talent shortages — all must be answered with strategies that leverage realities to deliver sustainable growth. 

The place to be

And yet, thus far, the UAE has suffered less from these externalities than many other nations regionally and globally. Its GDP growth rate hovers between 6 per cent and 7 per cent. And foreign capital flows show no signs of slowing, as the country last year ranked first in the Arab World and 19th globally for its ability to attract foreign direct investment (FDI). 

More and more, the smart move for any startup looking for a global headquarters is Abu Dhabi. The UAE capital is an economic and transportation hub in the Middle East and North Africa (Mena) region, where we have seen extraordinary expansion in tech startups. Mena offers a diverse customer base that is more tech-savvy than average because of the region’s relatively young demographic. This should attract tech startups, which are primed to capture market gaps through the latest niche consumer app or efficiency-driving B2B platform. Many of the region’s industries are in introspection mode right now — looking at ways of reinventing themselves. This trend also represents a smorgasbord of gaps waiting to be filled by apps and solutions. 

As regional startups widen their customer bases and generate new revenue streams, they get noticed. In a 2022 Forbes watchlist on SME funding, we find UAE agritech business Pure Harvest Smart Farms beat the crowd on funding ($387 million). And fintechs Tabby (UAE), Tamara (KSA), and ride-hailing, delivery, and payments firm Yassir (Algeria) also make the list — all funded to the tune of hundreds of millions of dollars, and all thriving in Mena.

Government gives

In the UAE, the government plays an important role in business development. It provides SMEs and entrepreneurs with an atmosphere that is the right mix of “getting out of the way” (light regulation and taxation) and “getting involved” (providing competent advice, mentoring, and financial support). This is all part of the government’s vision for economic diversification. Leaders here are determined to build a sustainable, non-oil, knowledge-based economy and know that SMEs, rather than large corporates, are the way to achieve it. The Ministry of Economy has launched many initiatives, including Entrepreneurial Nation, to provide help to entrepreneurs establishing or expanding their businesses in the UAE.

And on the “getting out of the way” front, the headline corporate tax rate has been set at 9 per cent, but many companies affiliated to free-zones are exempt and certain other conditions can see exemption from import or export duties. The UAE also offers 100 per cent repatriation of revenues and profits and up to 50 per cent reductions in more than 1,500 government fees. Risk management is also given a helping hand through Abu Dhabi Global Market’s application of English Common Law, and its eCourt Platform that delivers a holistic judicial dispute-resolution service that is time- and cost-efficient for litigants and their lawyers.

The world is seeing a talent shortage, but the UAE has introduced golden visas and remote-work visas to attract professionals to key positions in a country that is already known for a high standard of living. As a result of such efforts, today Abu Dhabi has a large pool of highly skilled professionals, including the engineers, scientists, and technologists that startups need to drive their success. Moreover, initiatives such as the National Programme for Coders have further contributed to Abu Dhabi’s growing pool of talent, which is being continually fed by colleges and research facilities such as the Masdar Institute, Khalifa University, and the New York University Abu Dhabi. And of course, top-grade infrastructure, high Internet-penetration rates, a strong banking system, and digitised government services also oil the cogs of business, just as the vibrant culture, exceptional healthcare facilities, and the world-renowned safe and secure environment make it an attractive domicile for entrepreneurs and their families.

Of course, these benefits and luxuries come at a cost and startups planning to set up operations in the UAE need to be aware that the cost of living in the country is generally quite high. This means that they will need to carefully manage their finances and secure adequate funding to ensure their business can thrive in the region.

Seeds and futures

Among the SME-nurturing schemes initiated by the government is the Abu Dhabi Seed Programme — a source of mentorship, funding, and networking opportunities. Abu Dhabi is also home to many angel investors and venture-capital firms that specialise in tech. The flipside of this however is that because the nation’s capital is attracting entrepreneurs, it is becoming a highly competitive landscape for founders. Startups are constantly racing to emerge as first movers and the best in their respective industries. In such an environment, it is only the fittest who survive and thrive, so founders will have to tap into every ounce of motivation and never make the mistake of resting on their laurels.

Tapping new markets is the prime way to grow revenue, thereby reducing risk and maintaining financial stability. Abu Dhabi is fast becoming the regional capital of market tapping — a truth learned recently by DocVita, an Indian healthtech company that offers an AI assistant for medical professionals. DocVita expanded into the region through the Abu Dhabi Seed Programme, with help from Flat6Labs. It discovered that Abu Dhabi’s business environment and high per capita B2C demographic is ideal for startups — from the laws and regulations to the logistics of expansion itself. 

The government is showing support for entrepreneurs and paves the way for their success.