Dubai funds Indian VC raising $225m to back domestic growth

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• Investment Corp of Dubai backs India’s Fireside Ventures
• UAE-India ties strengthen as startup funding dries up globally

Indian VC firm Fireside Ventures has raised $225 million for its third fund to back domestic consumer brands, with backers including Investment Corp of Dubai (ICD).

The investment in 25 to 30 Indian startups is the latest bet on Asia’s third largest economy, as startup funding dries up globally.

The early-stage investor said the new fund would invest in startups focusing on the health and wellness, lifestyle and consumer goods categories.

• India reaps early benefits from its trade deal with UAE
• How technology is transforming the UAE-UK trade relationship

According to Reuters, ICD joins other backers of the fund including India’s largest public-sector lender State Bank of India, cigarettes producer ITC Ltd and Premji Invest, the family office of Azim Premji, founder of Wipro Ltd.

ICD is the principal investment arm of the government of Dubai. It manages a broad portfolio of local and international assets across a wide spectrum of sectors that support Dubai’s economy.

Many prominent venture capital firms, including Sequoia Capital, Accel Partners and Lightspeed Venture Partners, have raised large funds for India and South East Asia this year as they chase high-growth companies in developing markets.

But they have been slow to write cheques on fears that stubborn inflation and rising interest rates globally could spark an economic slowdown.

Funding in Indian startups in the September quarter was down 57 percent from the preceding three months and down 80 percent year-on-year, according to the latest data from investment tracker Tracxn.

Fireside Ventures, whose portfolio includes personal care products retailer Mamaearth and IPO-bound electronics brand boAt, had raised $118m for its second fund in January 2021.

It has a portfolio of 31 companies and $395m in assets under management.

India’s non-oil exports to the UAE have recorded double-digit growth since the two nations signed a trade deal earlier this year – growing to $5.92 billion in June-August, from $5.17bn during June-August 2021

Trade volumes between India and the UAE are projected to reach $100bn by 2030.

Gold bars from the UAE and jewellery from India are the two essential items that have caught the most market attention, according to Dubai-based financial services provider Century Financial. 

India imports around 800 tonnes of gold every year and Dubai could compete with Zurich, which currently accounts for half of India’s gold imports

“The UAE is India’s third-largest trading partner, so investments should follow trade and the overall numbers should go up substantially in the coming years,” said Deepa Sachanandani, deputy head of research at Century Financial. 

“Agriculture and food-related sectors in particular should see a spike in investments from UAE to India.”

The digital economy could be another area where the UAE benefits from a migration of Indian Web3 startups.

India’s growth in non-oil exports comes despite macro-economic headwinds such as the conflict in Ukraine, inflation, expected policy tightening in advanced economies and a global growth slowdown.

The Gulf’s demand for Indian workers has also rebounded significantly this year, signalling the end of the coronavirus-induced reverse migration. An increase of nearly 50 percent in fresh migration to the six GCC members – Saudi Arabia, Qatar, Bahrain, Kuwait and Oman, as well as the UAE – was recorded in the first seven months of this year, compared to the whole of 2021.

The UAE hosts the largest concentration of Indian nationals outside India, making up 3.42m of its total population of nearly 10m.