The News
Gulf startups are staying private for longer, part of a global phenomenon of weaker exit and IPO activity amid public market volatility, according to private capital tracker Pitchbook. The UAE is the only Gulf country to rank among the top 20 venture capital markets, but the value of VC exits is low at just $402 per capita, compared to more than $8,000 for Singapore and $12,600 for the US.
“Everything is AI,” Nalin Patel, the director of research for EMEA private capital at Pitchbook told Semafor, and the US’ dominance in that arena is driving investment into only a few marquee names like OpenAI and Anthropic. The same dynamic is siphoning capital away from local markets and placing it into the world’s largest economy. As those big names prepare to go public, there is a wait-and-see mentality.
The subdued exit environment in the Gulf is also directly linked to the war in Iran. For companies preparing to sell and hoping to max out valuations, the single biggest challenge is geopolitical uncertainty, Patel said. The war is affecting both domestic capital, because local investors are delaying or sizing down, and foreign investors, who may hesitate on Middle East listings or potential buyouts. But after the initial shock, Patel said the region has returned to “business as usual.”
Know More
Exits create virtuous cycles that are crucial to the region’s push to build a market dependent on intellectual property rather than hydrocarbons. When Dubai-based Careem was acquired by Uber in 2019 for $3.1 billion, for example, the buyout made 75 of its employees millionaires, creating a new generation of potential founders and backers in the region.
But as a relatively new venture capital market, the Middle East is also more sensitive to shocks, and, like its counterparts in Asia, tends to have higher transparency and financial disclosure thresholds, Patel said. This can make it harder to gauge true performance and fair value when preparing a company to be listed or sold.
Global investors will closely watch the performance of blockbuster IPOs like SpaceX and any eventual listings of frontier AI companies as critical bellwethers, Patel said. A series of successful market debuts could boost confidence and lead to more exits globally, including in the Gulf. Weak performances would reinforce a reluctance to list and keep the exit window narrow.
A lack of exits is “not a fact of these companies not being ready to exit or being potentially not great candidates to exit,” Patel emphasized. “It’s because of market conditions. No one really wants to list at the moment.”
Notable
Saudi Arabia’s stock market regulator is investigating the poor performance of recent initial public offerings, according to people familiar with the matter, and questioning the advice given by investment banks to companies selling stock.