The UAE’s new labour law, the introduction of DAFZA’s Talent Pass licence in January – and the freelance visa last September helped in solving start-ups’ problem of access to skilled employees and gave founders the flexibility to innovate without the fear of failing.
All these factors are slowly leading to more mergers and acquisitions (M&As) and consolidations within the country’s start-up ecosystem, explained Noor Sweid, founder & general partner of Global Ventures, calling it a “proud moment”.
“The new labour law and the visa changes have made talents much more flexible which is very important when you’re building a company where your first year is very different to your third year and you need a different set of talent as some people grow with you and others don’t. So that ability to recruit a variety of people and to try and fail is very, very important and helps us solve the talent problem,” said Sweid.
“For a lot of entrepreneurs, the lack of access to capital and talent was an issue and so those recent changes have addressed the talent problem in the market,” she added.
All businesses generally benefit from the freelance visa, talent pass and flexible contracts outlined in the new labour law in that the commitments that come with a full-term contract are no longer an issue.
“The ability to hire people, if they’re on a consulting license or an entrepreneur visa, and try them out for six months or so on is incredible for start-ups and even for us as a start-up VC,” said Sweid.
“We follow the six-month probation and before [the visa changes], you had to deal with getting someone the work visa and residency papers and with the cost of on boarding them so you were making this big commitment and then, if it doesn’t work out, you debate between not wanting to let them go and being stuck with someone who might not be a good fit,” she continued.
Sweid also mentioned the amendments to the Commercial Companies Law, allowing foreign investors and entrepreneurs to establish and fully own onshore companies, introduced last year calling it “huge” and explaining that “it allows people to come in and just brainstorm and start companies here and if one doesn’t work, they start another one whereas before it was very difficult to change from one company to another.”
Another area where the start-up ecosystem in the UAE is very helpful is the regulator.
“The UAE is very regulation-forward where the regulator wants to work with founders, looking at what they are trying to build and how they can support. We’ve seen that in FinTech, with ADGM and the DIFC FinTech Hive, and with blockchain land. There is a desire to regulate in a founder-friendly way,” said Sweid.
More M&As and consolidations for start-ups in 2022 and 2023
Being nascent in its entrepreneurial journey, start-up founders in the UAE were attached to their company and its outcome believing it was their only chance to do something meaningful but this is changing, said Sweid.
“Now there’s enough conviction in the system that if you’re a second-time founder, those first two years are actually so much easier. You can raise money, hire talents and get conviction more easily,” explained Sweid.
“Founders have realised that they don’t have to run this horse until it dies but can exit at a $50 million valuation, for example, and build another company they’re passionate about without having to go through the same kind of mental damage and stress they did the first time, and so you have a lot more founder-conviction that M&A might be the right thing for them, even if it’s a small one,” she continued.
Sweid expects to see more of those M&As as the ecosystem evolves and said it is “definitely a sign of the ecosystem’s evolution and maturity.”
“I think we are going to see a lot more consolidations where 2022 and 2023 become consolidation-years across different sectors from fintech to food; all the sectors that have been blooming over the last few years will be consolidating in the next couple years,” she said.
Asked about what Global Ventures is excited about investing in 2022, Sweid said they’ve invested in five Web3 companies last quarter.
“It is exciting in terms of the democratisation of access to income and the ability for people that have a lot of creative or cognitive talents, such as those who are good or art, to have a platform which we saw very basically with art NFTs,” said Sweid.
“We just invested in a company in Pakistan that effectively takes your skills as a teacher and puts them onto a platform where as people consume this content, you earn – versus YouTube where you have to get a sponsor or paid advertisement and people have to subscribe. With Web3, what you enable is almost a pay as you go platform, which in great in emerging markets where people can only pay for what they need, not all these massive subscriptions. So we’re seeing democratisation of education through Web3,” she continued.
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