Liquidity Group has facilitated late-stage funding ranging from $20 million to $50 million across various industries in the Emirates and the Middle East through its Mars Growth Capital fund, contributing to over $300 million in funding for UAE start-ups in recent years. This has been achieved as part of the firm’s efforts to bridge the funding gap between early and late-stage start-ups.Mars, a joint venture between Liquidity and Mitsubishi UFJ Financial Group, was established in 2021 with offices in Abu Dhabi Global Market, Tel Aviv, London, Singapore, and New York. The fund manages assets worth approximately $1.5 billion, with a focus on North America, the Asia-Pacific, Europe, and the Middle East. Mars aims to provide comprehensive financial growth solutions to startups, accelerating their potential contributions to the economy and consumers. According to Mr. Daniel, the region lacks growth funds, and Mars aims to fill this gap. Recently, Mars announced the initial closing of its first equity fund, Dragon Fund I, with an initial limited partnership commitment of up to $500 million by MUFG, with a final close expected in 2024.Dragon Fund I represents Mars’s foray into the realm of equity investing, with a specific focus on growth equity investments in private, mid-to-late-stage tech and tech-enabled companies. Initially concentrating on the Asia-Pacific region, the fund will engage in deals ranging from $20 million to $100 million, offering the flexibility to engage in both primary and secondary investments.

According to Mr. Daniel, there exists a market void between the early and late stages of investment, where most growth capital is provided by large investment organizations. However, these organizations are unable to process deals of this size due to their magnitude being considered too small. 

Over the past few years, start-ups have played an increasingly significant role as catalysts for digital adoption and growth, providing consumers with convenient access to services. Governments have also recognized start-ups as crucial drivers of economies, particularly in the context of preparing for a future society that is heavily focused on digitalization.

In the Middle East and North Africa, start-ups have secured $643 million in late-stage funding during the first half of 2023, surpassing global figures by a significant margin, as reported by start-up data platform Magnitt. Consequently, the region’s late-stage funding landscape has experienced an annualized growth rate of 20% since 2018, in stark contrast to the 49% decline observed globally during the same period.

The development of start-ups and their contribution to the economy will play a pivotal role in achieving the UAE’s goal of doubling its gross domestic product by 2031, as stated by Abdulla bin Touq, Minister of Economy, in a recent announcement.Countries in the Middle East in which start-up ecosystems have the most potential include the UAE, Saudi Arabia and Egypt, the three largest Arab economies, Mr Daniel said. 

“The UAE is very international and cosmopolitan. It attracts a lot of foreign investors, brings a lot of know-how and even liquidity … and is very good in attracting talent from all over the world,” he said.

This is reinforced by Liquidity’s research and development centre in ADGM, in which it has 50 developers from around the world helping create market solutions, he said.

Mr Daniel does not believe the start-up ecosystem is oversaturated; rather, it has been going through a “natural evolution” in which markets and sectors require more of these companies to address challenges with their solutions.

“If you don’t have many start-ups and there’s no competition, you will not get better. You need competition in the market to get better with your own product,” he explained.