Habibi DON'T come to Dubai: 10 reasons why NOT to start your business in the UAE

Feb 10, 2024

Many are excited about Dubai (UAE) and consider it a go-to destination to start/scale their business.
Today, I’m here to tell you why not to do it. Not because you shouldn’t, I have my startup based in Dubai for a reason! But let’s put the rose-colored glasses off and talk about the cons that are important to consider too. Not everything is sunshine and rainbows - even in Dubai.

Your network comes first, your idea second.

This was probably the biggest cultural shock. Without a proper network, personal meetings, reading between the lines, it’s very difficult to do business here. So if you’re thinking about doing business here, don’t jump straight in, give yourself a few months to meet as many people as possible, be personal, ask about guidance and introductions.
My favorite founders/investors communities for networking? 24SIX9 and Taco Stars.

No more "zero-tax."

In 2023, the UAE introduced a 9% corporate tax, even for free zones. Some industries still enjoy 0% tax, but the activities are mainly outside the usual tech startup world (ships, manufacturing, wealth management, etc.). So very likely, you’ll be paying 9% corporate tax, 5% VAT, 0% income tax.
If your only goal was to optimize taxes, you’ll probably find more efficient places to have your company than the UAE.

8 months to do business in a year.

The UAE is dead over the summer, for an obvious reason. Not many people enjoy +40 degrees heat like me. It’s unlikely you’ll meet anyone here and do business from June to August. And one month of the year is dedicated to Ramadan, when things slow down a lot too.
You basically have 6-8 months a year when people are "open for business."

You’re never "home."

This is a key reason why most people have the UAE as a transiting spot. You have no chance to apply for citizenship and get a UAE passport. Unless you’re a billionaire.

If you have a strong passport already, you probably won’t even think about this as a problem. But many people weren’t that lucky, and their life is significantly more complicated only because they were born in certain countries.

Conservative funding.

I’m not an expert on VC funding, I wasn’t exploring this path with my startup properly yet. However, from discussing this with other founders & investors, I’d say getting funded here isn’t that straightforward. Many local founders even found US investors after not being able to raise locally.
The market here is more conservative, more risk-averse, and overall likes to invest in startups with strong traction. Getting investment for an idea in a pptx is highly unlikely, unless you are a serial founder with a strong track record and network.

Limited market size and expansion complexity.

For a startup, the local market is fairly small. A population of 10 million isn’t a lot to scale properly. So very soon, you’re thinking about expanding to other GCC countries. But it’s not that straightforward as in the US or EU, where everything is more connected and legislation is more united. Most local startups expand to Saudi, Oman, Egypt, Qatar… those countries have completely different rules and market specifics. Thus expanding to new markets is just a bit more complex.

High cost of starting & running a business.

You may be attracted by low taxes compared to most countries, but keep in mind running a business costs something too. Every year, you have to renew your business license, renew your visa every few years. It’s not free. Keep in mind you’ll need 10k-20k AED to just run your business in the UAE.

Too multicultural.

I consider this a huge benefit, but it can go both ways. For many, it’s just too much, and dealing with different cultures and trying to make it work is tiring.
Especially when it comes to hiring and scaling your team, you have to be extra cautious about how you manage diversity and set clear values.

Legal system & restrictions.

The UAE is a young nation and it’s progressing really fast. But sometimes, clear regulation is missing, is implemented on the go, rules are changing more frequently compared to other systems. You have to keep an eye on what’s happening all the time, if your business isn’t getting restricted by new laws and adapt quickly.

The list wouldn’t be complete without - the heat.

I think this list couldn’t be complete without people's favorite topic - the weather. I hope that when in the UAE, you’re not expecting rainfall every week and 4 seasons. You’re in the desert. If you don’t like heat and dust then probably don’t move and do business here.

Keep all these points in mind when getting excited about Dubai. I personally really like it here and find way more positives than negatives. But be realistic, nothing is perfect - even Dubai 😉.

Did I miss any other reason why you should NOT start a business in Dubai? Let me know in the comments.

Habibi DON'T come to Dubai: 10 reasons why NOT to start your business in the UAE

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