Venture capitalists in the Middle East are always on the lookout for the next big global startup boom, and now they have set their sights on the African region. After the USA and UK, the UAE now holds the third highest number of investments in African startups, and their position is expected to rise throughout 2024.
While other major venture capitalist countries such as China and France are also trying to grab some of the African startup pie, the Middle East is beating them at the game. In 2019 there were only 16 Middle-east-based investors in the region, now the number has grown to over 80.
It is also being noticed that African startups are now seeking investments primarily from Middle-east-based VCs and investors. Why is it so?
A Shift to Government-backed Funding
While the USA and UK comprise almost 50% of the investments being poured into the African continent, there is a clear-cut difference between the trend in funding from these two powerhouses and Middle-east-based VCs. With funding shortage becoming an issue globally, the funding that is coming from investors who are backed by governments is now much more reliable.
This is especially true for early-stage startups that are looking for long-term investors in their businesses. And with most Middle-eastern VCs now looking to diversify their portfolio, it is the perfect opportunity for these startups to grab the funding. This is why the presence of African founders in the Middle East region is also growing. A global tech show (GITEX) organized in UAE at the end of 2023 had 21% attendees from Africa.
However, there is a catch to this situation. The funding that is backed by the GCC (Gulf Cooperation Council) comes with its own rules and regulations that these startups now must adhere to. So, African VCs are also in talks with many of these investors to help them gain a better understanding of what the African startup ecosystem looks like, and how it can be made more viable for the Middle-eastern VC ecosystem.
Dubai Wants to Become a VC Leader
As revealed at the GITEX, Dubai wants to invest in key startups and become the driving force behind the next set of Unicorns that will arise out of Africa. So, they are now working with experienced General Partners in the African region to ensure investments are well-regulated and reach the right organizations.
It is also expected that many African startups will soon be setting up shop in the Middle East, with Dubai becoming the centre of this newfound ecosystem.
