A Dubai strategy: top guidelines for Indian startups eyeing Middle East expansion
For startups in India looking at venturing into Dubai, the Gulf Arab city offers great promise – but making the move requires thoughtful and realistic consideration, market experts have said.
Dubai has been historically fertile ground for Indian entrepreneurs.
But the UAE-India Comprehensive Economic Partnership Agreement (CEPA) – a bilateral free trade deal struck last year that allows most of India’s exports duty-free access to the UAE – has set the scene for a new era of closer cooperation, catalyzing the convergence of both entrepreneurial ecosystems.
“Dubai forms a very substantial opportunity for Indian startups,” UAE-based serial entrepreneur and angel investor Prashant K. Gulati said.
“It’s the gateway to a very large Middle East and North Africa (MENA) market, which many Indian founders don’t seem to have looked at closely or have only looked at peripherally so far.”
Trade volumes between India and the UAE reached $60 billion in 2019.
With CEPA, they are projected to increase by 120% to $100 billion in five years, while driving the migration of Indian firms, funds and families choosing the emirates as a preferred jurisdiction for global expansion.
Gulati – founder of the Smart Start Fund, an early-stage investment vehicle for startups from around the world – noted that major Indian players like Lenskart, FirstCry and Cars24, have grown to become “substantially bigger” following their move to the UAE.
Last year, India’s Lenskart announced the opening of its sixth retail store at Dubai Mall, the largest mall in the world by total land area, with plans to have 20 retail stores in the UAE by 2023 and secure 25% of the region’s $3.5 billion ocular market share by 2026.
The eyewear retailer also raised $500 million in funding from Abu Dhabi Investment Authority.
Gulati cautioned however that the UAE market is “highly competitive”.
“The biggest misconception is that it’s easy and that it’s easy money,” he said.
“Startups that are only coming here to raise funds shouldn’t come. This part of the world is not exporting just capital. Anybody who thinks he cannot raise any capital to burn in India and will come to raise it here is wrong. There is capital availability for the right people, and for people who are building businesses here.”
Skye Nguyen, Head of Global Expansion at Middle East proptech startup Stella Stays, added that startups need to be very clear about their objective beforehand: Are they coming to Dubai to fundraise or to expand their operations?
“Dubai is quite immune to global conditions, but its dynamics are very different,” she said.
“The capital market here is heavily dominated by family offices, which don’t function like VCs that take a lot of risk for a lot of returns. They like profitable businesses. They will not fund loss-making companies.”
Nguyen, an award-winning growth strategist, added that expanding to Dubai and the wider Gulf requires at least a year of being present in the city in order to build strong relationships.
“You need to come visit, build your network and have conversations with many different people including potential customers,” she said.
“To have a clear strategy, you need to focus on customer obsession. Don’t just copy and paste what you are doing in India and bring it here.”
Gulf-based business growth specialist Ayman Itani, who advises both founders and governments running startup programs in the region, said getting the product-market fit right is critical.
“Do not make the assumption that the product will work as it is,” he said.
“There may be customizations needed. You also need to improve your cost calculation. When you’re moving to another country your cost structure is different across many layers, from licensing to rent to hiring, to payment gateway fees.”
Itani advised founders not to rely only on country representatives for their market expansion.
“Many businesses coming in just want to assign it to somebody who is in the country and let them handle the sales,” he explained.
“But at the end of the day, it’s your product and your customer. Founders need to be personally involved in the expansion and spend time in Dubai to build relationships. There is so much opportunity and potential for partnerships, collaborations, great hires, market segments they can grow into – and only a founder has the eye, experience and instinct to identify it.”
Itani also warned startups not to enter the market to compete solely on price.
“The Dubai market is highly competitive, leading to improvement in service and price,” he said.
“Competing on price is not a differentiator. It will only hurt margins and affect service delivery.”
Consumers in Dubai expect the “absolute best” quality and delivery of product or service, Nguyen added.
“It’s a very promising consumer market,” she said, describing the environment as offering a low-to-medium volumes but high margins.
“The discretionary spending power is high. Businesses serving direct consumers will do well.”
Meanwhile, Gulati added that Indian startup teams would find it easy to “blend in culturally” in Dubai and enjoy better productivity.
“The efficiency level here is higher,” he said.
“In India, the typical solution is to throw more bodies at the problem. Here, it’s better if you throw brains at the problem. Also, something very important here which you don’t have when you sit in India is the availability of diversity of talent, which raises the value of your startup. The availability of talent in this city is exceptional.”
A 2022 Boston Consulting Group (BCG) report, which studied 11 global tech hubs, showed Dubai as a leader based on the policies it has employed to attract tech talent from around the world.
The UAE’s move to offer long-term residency, which are a first in the region, was listed as a major factor in its ranking.
India’s finance minister Nirmala Sitharaman said in 2022 that India’s trade pact with the UAE will pave the way for the economic growth of the country, urging entrepreneurs to access the available market.
Last year, the Federation of Indian Chambers of Commerce & Industry (FICCI) and the Dubai International Financial Centre (DIFC) launched an ‘India-UAE Start-Up Corridor’ to help both startup ecosystems expand and scale.
Indians currently represent over 30% of Dubai’s startup community.
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