Gulf investors are slowing down and trading hype for fundamentals, but Indian founders still want Dubai

The US-Iran war hasn’t driven Indian startups away from Dubai, but it has changed the way investors deploy their capital. VCs are slowing investment, holding more liquidity, and becoming increasingly selective, with cheques moving away from hype-driven sectors like AI toward businesses with stronger fundamentals.

“Recent events have had an impact, but that is very temporary. Dubai is increasingly the headquarters of convenience, while India remains the engine,” Sidharth Sogani, founder and CEO of Manama-based BlueAster Capital, tells EnterpriseAM. The pattern shows up across the industry in India, where startup funding fell 43% y-o-y to USD 7.8 bn between 1 March and 15 June. Late-stage funding was the hardest hit, down 61% to USD 1.5 bn.

Where the money’s going: Manufacturing, industrial tech, and process-led plays are gaining favor, while AI-first startups face tighter scrutiny. “The concentration of capital in the AI bubble in the US is draining liquidity from other sectors and increasing risks of a sharp correction,” Sogani adds. Crypto infrastructure and advanced manufacturing look best positioned.

UAE incentives are helping keep confidence: The CBUAE’s AED 1 tn (USD 270 bn) resilience package from March, alongside another AED 1.5 bn in fee waivers and customs relief, has reassured the expat community. Indian companies make up more than 30% of Dubai's startup community — around 3.9k new Indian firms joined the Dubai Chamber of Commerce in 1Q 2026, up 11% y-o-y.

Founders are still coming: Bengaluru-based fintech OnFinance AI is opening its third global office in Dubai, CEO Anuj Srivastava tells EnterpriseAM. Fermion founder Mehul Mohan chose Dubai over San Francisco and Singapore for his post-exit relocation. The message: Dubai remains a top global gateway — but Gulf capital is no longer chasing growth at any cost.