About DFDF
The Dubai Future District Fund was established by the visionary leadership of Dubai to support innovative technology startups with additional funding and to foster a thriving venture ecosystem in the region. Dubai has long been the leading startup tech hub and has consistently ranked first in terms of number of deals and amount of capital. That said, the emirate has not historically had a concerted effort to invest capital directly into startups or the venture capital funds that support them, though supporting the private VC community is a significant part of the role of government and an effective way to catalyze economic growth. At the same time, there are areas of opportunity in startups (at the Pre-seed to Seed stages, for example), or in key sector-relevant innovations that are strategic and warrant a direct investment.
Our mandate is to invest into venture capital funds (Fund of Funds) and directly into startups in our thesis. Given we’re new on the scene, we thought we would introduce our investment strategy and how we think about the funds and startups we support, which we’ll elaborate on further below.
Evergreen Structure
Patient Capital
One key innovation to note in the way that we’re structured is that we are an evergreen fund, meaning we aren’t beholden to the 10 year lifespan of a typical VC fund. This allows us to focus on investing in technologies with various return horizons and take a longer-term view on returns. The open-ended nature of the fund aligns with our government-backed roots and desire to invest in truly innovative technologies of the future. Understandably, private VCs that have an LP-GP structure, especially in emerging markets, tend to seek out startup investments that they believe will exit with a 7-10 year horizon so that they can meet their target returns to LPs by the end of the fund’s life. For us, our return horizon is theoretically forever, and we’re keen on pushing the envelope on investments with deeper innovation than the typical low hanging fruit. Our structure allows us to support the efforts of the VC community, while allocating more patient capital into the innovative technologies of the future.
Performance Driven
What’s more is that the fund is designed to incentive the team akin to a private VC fund, through carried interest. In the fast-moving Dubai spirit, we are innovating on the fund model in a way we feel best aligns to the interests of our shareholders, while addressing the needs of the founder and investor communities, with a mission-driven team that believes that: if you solve a problem for millions of people or fix a problem for thousands of enterprises then you create value that will generate outsized returns.
Forging Next Generation Innovation
We expect that as we build out our funds portfolio, about half of our direct investments will be co-investments with our fund managers and the other half will target areas where there are still gaps in private VC funding, specifically in deeper tech companies that may require longer R&D cycles or higher CapEx. The private VC fund landscape in the region still mostly invests agnostically across sectors given the nascence of the region and into companies that have a 7-10 year return horizon. Our aim is to start shifting more capital attention towards deep(er) tech — the more meaningful innovations solving issues facing millions of people now and in the future — that require capital to be invested beyond a 10 year horizon.
Geographic Focus
We believe it is important to be thoughtful about how we’re building, to ensure a healthy foundation for the future. When we look at international funds or startups, we are keen to work with sector-specific funds/startups to add more capital, subject-matter expertise and talent in verticals that align with our mandate. It’s vital that we’re considerate of the complementarity of our efforts in order to not cannibalize efforts on the ground locally, fueling a strong, sustainable ecosystem for the long-run. For now, given we’re still in our first year of operations, we’re centering our attention on the core of our geographic coverage and evaluating startups with a presence in Dubai and the UAE.
Stewards of the Ecosystem
Apart from allocating capital to funds and startups building the innovative companies of the future, we take our role of ensuring a healthy development of the local and regional ecosystem seriously, notably in terms of governance, societal impact and the Sustainable Development Goals of the UN. To do this, we value our partnerships with fellow LPs, VCs and founders to implement best practices and global standards to investing and company building.
As we’ve seen in the recent bull market, growth at all costs is not a sustainable strategy for startups, particularly when it comes at the cost of good governance. Furthermore, we try to be thoughtful about building the ecosystem in a balanced way. Our portfolio model aims to address the needs of the VC community, the startups they back and a variety of technologies across markets that are relevant to our region. In addition, we think a lot about complimenting the local ecosystem with international funds or startups that can bring unique talent, know-how and businesses that aren’t already being addressed by the startups on the ground.
Stay tuned for our next posts as we examine our two thematic pillars in more detail.
If you think you’re a fit for DFDF, we would love to hear from you.