DIFC unveils world’s first regulatory framework for venture building to boost start-ups

The Dubai International Financial Centre has unveiled the world’s first venture studio regulations as Dubai seeks to further develop its start-up infrastructure and promote itself as a centre for innovation.

DIFC, one of the fastest-growing financial centres in the Middle East, Africa and South Asia region, is seeking to promote the growth of innovative start-ups and scale-ups in the region, according to a statement on Thursday.

Venture studios build start-ups, starting from idea conceptualisation to launch, while also providing capital and guidance. It also supports their growth using internal capabilities and external support.

“The regulations provide the first legislative framework for venture building globally, forming a tailored ecosystem for venture building, entrepreneurs, start-ups and investors to operate from the DIFC,” Jacques Visser, chief legal officer at DIFC, said.

Dubai has introduced regulatory changes such as golden visas, green visas, and freelancer and entrepreneur visas to support the ecosystem as the emirate seeks to become a global centre for start-ups and scale-ups.

The emirate, which is home to 39 per cent of the Middle East and North Africa’s scale-ups, accounted for almost 57 per cent of the scale-up funding in the region last year, a report, developed by Dubai Chamber of Digital Economy with Mind the Bridge and Crunchbase, showed.

The DIFC launched a venture studio platform exclusively focused on “ubiquitous finance and digital asset technologies” in April 2022.

The DIFC’s new Studio Launchpad will be supported by an international group of venture building experts, digital asset operators and emerging technology strategists, and it aims to attract a consortium of start-up and corporate venture studios.

Over the next five years, more than 20 venture building studios are expected to set up in the DIFC and launch more than 200 ventures, including more than 100 scale-ups (a company with 10 or more employees that has an average annual growth of 20 per cent over the past three years) and 10 that will be valued at more than $1 billion.

These companies are expected to create more than 8,000 innovation-focused jobs in Dubai, the DIFC said at the time.

The financial hub has already broken ground on a new 13,935 square metre purpose-built facility that will house the Studio Launchpad team.

The DIFC also entered into pacts with banks and venture companies that will help to attract more than Dh2 billion in venture capital. It signed corporate partnership agreements for its DIFC Launchpad with Mashreq, Commercial Bank of Dubai and global payments company Mastercard in March this year.

Following a 30-day public consultation period in February, the board of directors of the DIFC Authority enacted the Venture Studio Regulations, which supports the DIFC Studio Launchpad initiative by providing a legislative framework for venture building.

The regulations will establish legal certainty around the venture building model and clarify how venture studios, entrepreneurs and start-ups interact with each other and the wider market, the DIFC said.

It will also make it easier to do business within the venture studio model by implementing specific operational measures to enable the incubation of new business ideas, sponsorship of entrepreneurs and reduced costs for scaling new businesses.

The regulations came into effect on April 26.

The DIFC recently announced proposed amendments to the Data Protection Regulations to enhance the current data protection framework within the financial free zone.

The proposed regulations have been posted for a 30-day public consultation period with the deadline for providing comments ending on May 17.

The DIFC also made minor amendments to the Prescribed Companies Regulations to align the definition of “family”, in the context of family-operated businesses that benefit under the regime, with the recently enacted DIFC Family Arrangements Regulations.

The regulatory framework will govern how UAE, regional and global family-owned businesses, and ultra-high net worth individuals and private wealth offices operate from the DIFC.

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