Small businesses begin their journey of growth with modest targets. As they grow, they aim to have a global footprint. For many Indian startups, nations in the Gulf Cooperation Council (GCC) offer a lucrative opportunity to take the first step in their international expansion.
Since 2016, more than 50 Indian-origin startups have expanded into the Middle East and North Africa (MENA) region with the UAE being the preferred gateway into the Gulf. Among these, 20 were unicorns even before scaling their operations. Examples of this trend are seen across fintech, edtech, and online retail such as Lenskart.
What makes the Gulf so attractive?
A key differentiator in the MENA region is the need to maintain an active local presence. Government support and incentives for businesses that choose to maintain a local office make it a relatively smooth experience to set up business.
Sovereign wealth funds (SWF) of many GCC nations also play a key role in financing and funding Indian startups that are set up locally. Over 25% of Indian startups with a presence in the Gulf are funded by GCC venture firms, family offices, and angel investors.
Two of the largest SWFs in the region, Saudi Arabia’s Public Investment Fund (PIF) Abu Dhabi’s Mubadala Investment Company, together contributed approximately $60 billion to Softbank’s first Vision Fund.
The UAE as a gateway to growth
Among six member nations in the GCC, the UAE emerges as the best option. According to the World Bank’s 2020 Doing Business report, the UAE scored 80.9 out of 100 placing it at 16th place globally – the strongest overall performer in the MENA region. Strong and stable governance in the UAE and attractive tax breaks enhance UAE’s reputation as a business destination.
Ease of raising capital, attracting new investors, and the well-educated Indian diaspora in the Emirates enhance its positioning. The Indian community in the UAE is estimated at close to 30 percent of the country’s population. This simplifies hiring and communication with businesses in the region. A local presence also aids in the acquisition of large clients, helps manage and maintain partnerships, and allows for better servicing of existing clients.
Setting up your first overseas office
Most Indian startups structure their overseas unit as a subsidiary, usually in one of the UAE’s 40 free zones. This includes detailed documentation of the Indian parent company, attestation by the UAE embassy in India, director KYC, and fees.
The industry where the business operates in also influences the city. For instance, a media or tech business would benefit from being in Dubai Media City (DMC) or Dubai Internet City (DIC). As an international trade hub, Dubai is a melting pot of cultures making it the ideal demographic to discover talent. Free zones also enable easy access to visas. If a firm is struggling to find the right mix of local talent, relocating a team from India is another option.
Challenges to keep in mind
The first major pitfall that Indian startups must avoid is underestimating the duration of the overall setup process. Despite steps taken by the GCC and the UAE within their borders, setting up overseas businesses continues to be a challenge.
The second challenge is hiring. Besides higher salaries, talent in the GCC regard quality of life and the workplace very highly.
As Indian startups revive their international ambitions, the GCC is ideally positioned as a gateway to the world. By working together with authorities and the industry, Indian businesses have the potential to create a win-win ecosystem for every stakeholder involved.
Written by Mr. Neel Kothari, CEO, iZooto