HomeWhat the ‘Careem effect’ means for global tech
When Uber bought Dubai-based ride hailing app Careem for $3.1 billion in 2019, it marked the first bona fide tech exit in the Middle East, announcing the arrival of a new era for the region’s tech industry.
Discussion immediately began of the ‘Careem effect’ – newly enriched Careem executives taking their skills, experience, and capital into new ventures, seeding the growth of its surrounding ecosystem. The phenomenon has precedent in the ‘Paypal effect’ that kickstarted Silicon Valley’s success.
Three years on, Careem’s influence on Dubai’s tech scene has helped to birth a new tech capital, an emphatic sign of the sector’s gravity dispersing from the U.S. and Europe into a constellation of global hubs.
Global gateway
“Half the world’s population is within a six-hour flight,” says Noor Sweid, Managing Partner and Founder of Dubai-based venture capital firm, Global Ventures. “A lot of companies start regionally and then come to Dubai to scale globally.”
Careem proves the concept. Founded in 2012, it had expanded into 15 countries even before the Uber acquisition, including Egypt, Jordan, and Pakistan.
In an interview with their former employers, McKinsey, Careem founders Mudassir Sheikha and Magnus Olsson attributed much of their success to tailoring their solution to the local market. For example, while Silicon Valley behemoths like Uber shy away from cash, the pair were quick to build a solution for taking cash payments in a region reliant on hard currency.
Sweid says this local lens is a huge opportunity for tech entrepreneurs, pointing to the vast possibilities in the region for tackling regional issues often overlooked by western tech, especially in health, clean energy, and climate adaptation.
And there is often scope to leapfrog, as Africa has with cellular phones, bypassing fixed landlines entirely. “We’ll go straight to the newer solutions we’re inventing,” she says. “There is no legacy, no lobby, no infrastructure opportunity cost.”
Making the impossible, possible
Success rarely grows in a vacuum. Hubs like San Francisco, London, and Berlin developed because they provided a fertile environment for ideas – and businesses – to grow. Careem inspires MENA entrepreneurs by showing them what is possible. Dubai’s progressive approach nurtures future unicorns.
A decisive moment for Careem came when the emirate’s Road and Transport Authority (RTA) threw its support behind the company in 2016, making it the only app on which to book the city’s then 9,841 taxis and 4,700 limousines.
Dubai’s attitude has always been, ‘let’s try to make the impossible, possible.’”
— Noor Sweid, Managing Partner and Founder of Global Ventures
Today’s startups travel an even clearer path to compliance. In the Dubai Financial Services Authority (DFSA) Innovation Testing Licence (ITL) regulatory sandbox, startups develop their product in a closely monitored environment, working with the DFSA to bridge the gap between innovation and regulation. This approach is set to be replicated across the emirate with the ‘Sandbox Dubai’ initiative, announced as part of the city's 10-year Dubai Economic Agenda 'D33'.
D33 also seeks to nurture 30 new unicorns by 2033, as well as scaling up 400 SMEs – dovetailing with the Dubai Chamber of Digital Economy’s (DCDE) objective to attract 300 digital startups to Dubai by 2024. The DCDE is tasked with overseeing Dubai’s digital transformation and nurturing its digital sector.
Further support for tech comes from the Dubai Future Foundation (DFF), founded to make Dubai “a leading city of the future.” Initiatives include research, cross-disciplinary councils, public events, and One Million Arab Coders – a free online programming course for the Arabic diaspora.
The DFF – in partnership with the Dubai International Finance Centre (DIFC) – also wields a AED 1 billion ($272 million) seed fund to invest in ‘new economy companies.’
Sweid says initiatives like these are characteristic of the emirate’s approach to business: “Dubai’s attitude has always been, ‘let’s try to make the impossible, possible’.”
It’s an attitude that extends to the city’s thriving investment networks, which are increasingly focused on tech startups.
Capital access
In part because of Careem’s attention-grabbing success, the UAE is growing as a magnet for venture capital (VC), attracting 60% of all MENA VC investments in 2020, totaling $5.4 billion. One-third of MENA investors are based in Dubai, often connected with tech startups via the city’s mesh of incubators and accelerators like AREA 2071, Dubai 10X and Dubai Future Accelerators.
Talent, market, regulatory infrastructure, and capital, Dubai provides access to all of it. The rest is timing and luck.”
— Noor Sweid, Managing Partner and Founder of Global Ventures
The sovereign wealth funds and family offices that have historically comprised the region’s investment landscape are joined by a growing community of local VCs – a sign of how the UAE’s vast wealth is shifting away from oil and into future-forward technology.
Dubai-based Knuru Capital recently committed $30 million to Dubai healthcare fintech startup Klaim. Real-estate fintech startup Stake (Dubai) raised $8 million in Series A funding led by Middle East Venture Partners (Dubai) and BY Ventures (Beirut, Lebanon.)
And capital is increasingly flowing from outside the region. The $3 million pre-seed funding raised for UAE edtech startup Qureos was led by COTU Ventures (Dubai) and Colle Capital (New York). Dubai unicorn and cloud kitchen platform Kitopi’s $415 million funding round in March 2022 came from a group of VCs based in Europe, Japan, the UAE, and the U.S.
Tech paradise
Western capital flowing into Dubai is symbolic of tech’s glocalization. For startups, it means somewhere closer to home – and their market – from which to launch and scale their businesses.
As Sweid says, startups need, “Talent, market, regulatory infrastructure, and capital,” to succeed. “Dubai provides access to all of it. The rest is timing and luck.”
