Crown Prince of Dubai HH Sheikh Hamdan Bin Mohammed Bin Rashid Al Maktoum has announced the launch of a new $100 million venture debt fund that aims to fuel the UAE fintech sector and entrepreneurship at large.
Led by the Dubai International Financial Center (DIFC), the ‘Venture Capital Fund for Startups’ will officially launch in June 2022 and will look to invest in disruptive startups that have the potential for global expansion over eight years, with a possible two-year extension.
Speaking about the new fund, Sheikh Hamdan bin Mohammed said: “We approved the launch of the ‘Venture Capital Fund for Startups’ to spearhead economic diversification and ignite sustainable economic growth. We are committed to create a vibrant business environment and provide the opportunities to promote excellence.”
The news comes on the back of Dubai-based SHUAA Capital announcing the launch of its own venture debt fund worth $250 million in April, 2022. Venture debt is slowly emerging as a unique alternative method of funding, offering the potential to unlock less intrusive venture investments for growth-stage startups. Typically, it is less expensive than equity financing and has often been used between equity rounds or to supplement them.
It’s especially valuable to growth-stage startups who have limited access to large pools of capital and non-equity financing, and there’s been a small but noticeable increase in venture debt deals, as startups look for alternative methods of funding. The GCC has witnessed a 112% YoY increase in venture capital deals, though the majority have been early stage. Alongside that sharp rise, venture debt has increased 4.2x since 2020, with over $250 million deployed across 14 deals – an indication of the rising demand for alternative financing.