Kevin Czok rode a bright career in Germany, managing investments for a venture capital fund firm until he struck a chord with the idea of improving hotels’ presence around the web, selling bookings smarter within a short time.
From reviewing about 800 opportunities for investment yearly, he gradually veered into researching and travel marketing to Dubai to affirm the validity of the problem he was about to solve. He found his outcome shocking. No one had solved the idea he describes as an ‘existing demand in an existing market’.
A week after, he resigned, opted for the 10th global Fintech hub, Dubai, to nest his idea and found Gregory Amon as a co-founder.
“I resigned from my job, a job that I would have continued for decades but this was an opportunity. Gregory had the industry expertise, I had the expertise in building companies and funding them and we jumped at it,” Czok said, speaking excitedly at the Entrepreneurship Department of the Dubai Chamber of Commerce and Industry.
But why Dubai, instead of racing to queue behind an endless list of start-ups jostling for expansion push in Silicon Valley, UK, France, Germany or Switzerland?
“The choice of Dubai is because it is a tourism hub; we have been supported very well by Dubai tourism under the Accelerator programme. There are just so many hotels, wealth, so many headquarters and chains we can have access to. We don’t do things because they are easy but because they are challenging,” Amon explained.
Czok’s idea, Hotel Data Cloud, has since taken flight just as its start-up peers, Meekd. com, a specialised online search engine with a focus on no sponsored results or paid-for search results and Junkbot, manufacturer of robotic kit that enables people to build robots from almost anything.
According to Meekd.com founders, leaving Bangkok, India for Dubai had everything to do with the opportunities including the amount of venture capitalists that actually have specific focus on technology. Essentially, they realised the ecosystem for support was already established. “It’s nascent as a lot of these have just come in the last three years. As it’s maturing, I think we are in the right place to do it,” he said.
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From its Chamber of Commerce to its financial centre, commodity trade zone and Fintech Hive, the government of Dubai is exploring various options to help start-up and emerging ventures through the early-growth stage, with particular focus on expanding throughout the region.
For Sheikh Mohammed bin Rashid Al Maktoum, vice president of the United Arab Emirates, prime minister and ruler of Dubai who has decisively led this vision, the aim is to turn the city to a test bed for emerging technologies and exporters of innovative solutions.
The Dubai International Financial Centre ( DIFC), for instance, has asked Nigerian financial technology start-ups and others around the globe to think first of its Fintech Hive, especially with the unlocking of a $100 million Fintech Fund.
Ghait Abdulrahman, head of Ecosystem Development & Partnerships at AREA 2017, another free zone said the centre is particularly enthralled by the vibrant growth of Nigeria’s Fintech hub and is keenly open to work with interested parties in terms of early-stage support for growth, expansion and experimentation with innovations.
With financial inclusion drive of the Central Bank of Nigeria, growing smartphone penetration, the surge in e-commerce and regulatory impact of the introduction payment service initiatives, Nigeria’s cumulative Fintech funding has surpassed $250 million over the last five years, according to Enhancing Financial Innovation and Access Fintech 2018 report.
Peyman Parham Al Awadhi, senior vicepresident, DIFC marketing and corporate communications at its Dubai headquarters said there was a deliberate effort to diversify the city’s economy into fresh areas of economic potential which the Fintech space features prominently.
The Centre has already seen a marked increase in the number of firms that make up its eclectic Fintech ecosystem, which more than doubled in size from over 80 to 200 companies in the last six months.
It has also witnessed a significant rise in the number of Fintechs wanting to participate in the DIFC’S dedicated accelerator programmes, which have become the first step towards testing the regional market for many global start-ups.
Having recently recorded a three-fold growth of registering more than 100 Fintech firms in 2019, the leading international financial hub in the Middle East, Africa and South Asia (MEASA) is predicating its attraction on three main supportive structures: its Innovation Testing License (ITL), Fintech Hive and Startupbootcamp and an ecosystem of partners and potential investor.
Through the Dubai Financial Services Authority (DFSA), the independent financial regulator, the DIFC in 2017 introduced the testing licence as a new kind of restricted licence to allow Fintech firms to apply for a customised class of financial service licence. ITL was tasked with the mandate to allow qualifying Fintech firms develop and prove innovative concepts under the DIFC guidance, without being subject to all the regulatory requirements that normally apply to regulated firms.
Under it, Fintech firms are privileged to test products or services for six to 12 months, while the DFSA could consider extending that period in exceptional cases. And in instances where firms meet the outcomes detailed in the regulatory test plan, and the full DFSA Authorisation requirements, they will migrate to full authorisation.
In the form of grooming, the DFSA works with applicants to understand the nitty-gritty of viable business proposal and establishes the appropriate controls for the safety of customers involved, on a case-by-case basis.
The ITL initiative followed the launch of the Fintech Hive in June, generally referred to as the Dubai Future Accelerator programme. The focus has been to bring together leaders and entrepreneurs to compete and address the growing needs of the region’s financial services industry, using innovative technology solutions, in a variety of areas including trade finance and alternative finance-based services.
Lately, the programme launched its 6th cohort, which will see about 30 companies from around the world participate and potentially sign MOIS with leading government entities looking to drive the next generation of innovations. With DFA’S efforts in facilitating collaborations, companies will work hand in hand with the government entities to address their industry-specific challenges as well as provide recommendations and smart solutions to tackle such challenges during the programme’s nine-week period.
Also under the jurisdiction of the Accelerator is Area 2071. It has hosted 20 global start-ups valued at over AED 42 million to participate in two renowned global Accelerator Programs. What the initiative does is to serve as an ecosystem that offers start-ups and emerging companies, whether local, regional or global an innovative working space, allowing them to hatch their ideas, develop products and pilot projects, which in turn contribute to the economy and expand growth.
The city’s authority plans to reinforce Dubai’s position as one of the world’s top ten Fintech hubs through an evolving regulatory environment, the quality of collaborators brought into the DIFC as its vision of driving the future of finance becomes a reality, Arif Amiri, chief executive officer of DIFC Authority said, responding to the growing choice of the DIFC by entrepreneurs seeking to scale their business in the region.
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According to the DIFC, its financial services aimed at promoting sector development which features continuous enhancement of its legal and regulatory infrastructure, most recently introducing a new employment and insolvency law. It has also created room for consultation of industry experts through sector-specific associations such as the Wealth Management Working Group.
The centre especially boasts of a financial free zone in terms of legal, economic and tax advantages. It charges zero percent tax rate on profits, zero percent on personal income tax, permits full foreign ownership and removes the restriction on foreign talents or employees.
With the DIFC companies enjoying the same tax benefits as 19 other free zone firms in Dubai, the DIFC has grown rapidly to be considered the foremost financial centre between the European and Asian time zones. It had about 1,853 active registered companies in as of March 2018, up from 1,648 at the end of 2016. In 2017, the DIFC’S total assets increased to US$3.55 billion, representing a 15 percent rise on the 2016 figure. DIFC’S net operating profit also rose, by 8 percent to a total of US$140 million.
The DIFC’S ability to limit barriers to market entry for start-ups is an offshoot the United Arab Emirate management of the proceeds of its rich oil deposits. Although the Emirate’s status as a ‘no tax’ country came to an end in January 2018, when value added tax was introduced throughout the country, the rate, at 5 percent, remains one of the lowest in the world.
However, there are challenges which some start-ups believe have to do with attracting venture capitalists. They believe there is still low competition for investment on the part of institutional investors, especially from outside the region. This is why the government is ensuring that its interventionist initiatives help spike the interest of investors at large.
