Gulf investors in talks to snap up UK metaverse business

The Sandbox

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A UK-based virtual events company is in buyout talks with Gulf investors as Middle Eastern governments seek to build multi-billion-dollar metaverse industries.

The talks are in their early stages but if the deal goes ahead, it would form part of a trend for outward investment into UK technology, particularly in entertainment, sports, clean energy and biotech. 

“It’s a good example of how government-led bilateral commitments are turning into real transactions. We expect to get the deal done some time in the first quarter of 2023,” said George Traub, managing partner of Lumina Capital, which is advising on the deal.

Traub declined to name the UK-based company but told AGBI that it offers an Arabic-language platform for virtual events – which would align it with the entertainment strand of Saudi Arabia’s Vision 2030 strategy as well as Dubai’s ambition to build a $4 billion metaverse sector. 

He predicted that more metaverse-related merger and acquisition deals between the UK and the Middle East would follow.

“The metaverse at this stage is a kind of ‘build it and they’ll come’. The UAE in particular knows all about that, given Dubai’s rapid evolution from fishing village to a global force in tourism, aviation, logistics and a regional financial capital,” Traub said. 

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“Its commitments and willingness to pioneer the future is what will drive the M&A and investment market for the meta-deals.

“Given the applications of the virtual technologies which are being deployed in gaming, social entertainment, retail and real estate, we expect to see significant bilateral investments between the Middle East and the UK in making this future a reality over the coming decade.”

In July, Crown Prince Sheikh Hamdan bin Mohammed unveiled the Dubai Metaverse Strategy, which aims to place the emirate among the top 10 metaverse economies in the world. Dubai hopes to attract more than 1,000 firms in the sector, generate up to $4 billion in extra GDP by 2030 and support as many as 40,000 virtual jobs.

The global numbers are encouraging. Investment giant JP Morgan predicts that the metaverse will generate $1 trillion in annual revenues, while Citibank says the metaverse economy could be worth $13 trillion by 2030.

Asked whether some investors are still sceptical about the metaverse, Traub said: “Investments in these areas are at initial stages, although gathering pace. I think the software and tech is already ahead of the hardware, infrastructure and legislation and so the pace and extent to which those two aspects converge is going to be the catalyst. 

“Deep tech and AI is one of the sectors that continues to attract interest despite the muted valuations of the general tech sector. I think we will see a big distinction in the way investors approach ‘real technology’ businesses with real intellectual property value versus the ‘technology-enabled’ sector.”

A combination of factors – including the increasing availability of 5G, improving technology and affordability of augmented reality and virtual reality headsets – has produced an opening for a shift towards the metaverse, where people can communicate and move virtually as three-dimensional avatars or digital representations. 

In parallel, blockchain has enabled the creation of cryptocurrencies, digital tokens and transaction systems, giving birth to new economic opportunities.     

The UAE has made a number of strides to integrate the metaverse and related technologies such as digital currencies into the economy.

In May, Dubai’s Virtual Assets Regulatory Authority established an HQ on the Sandbox platform, making it the first regulator to have a presence in the metaverse.

Last month, Emirates NBD, Dubai’s biggest bank, announced a global accelerator programme for metaverse startups, in partnership with the Dubai International Financial Centre’s Fintech Hive and powered by Microsoft.

In February, Saudi Arabia announced more than $6.4 billion in investments in future technologies, including the launch of Aramco Venture’s Prosperity7 fund with $1 billion, as well as $1 billion from NEOM Tech & Digital Company. 

As part of its investment, NEOM announced a “cognitive metaverse”, XVRS, that will serve residents and visitors of the smart giga-project, and M3LD, a personal data management platform.

Saudi Arabia’s technology sector is worth more than $40 billion. In February, Abdullah Alswaha, minister of communications and information technology, said: “These investments and initiatives are a manifestation of the kingdom’s push toward the growth of the digital economy for the greater good of people, the planet and the prosperity of the MENA region.”