Behind the success of the Start-Up Nation lies a dark truth that everyone knows, but few will talk about. For a large sector of Israel’s citizens, the start-up nation is a foreign country; they do things differently there.
Picture: Magic Lens for Mercy Corps
“It is like the South in the United States,” says Smadar Nehab, the charismatic founder of Tsofen, a Nazareth-based organization dedicated to increasing Arab-Israeli engagement in the high-tech sector. “The blacks and the whites live in different neighborhoods. In Israel it’s like this with Arabs and Jews.”
Tsofen seeks to use the high-tech sector to break down the barriers. “When we started in 2008, out of an industry of 100,000 engineers, only about 350 were Arabs,” she says.
According to Hans Shakur, founder of MobileMonday Nazareth, a tech networking organization based in Israel’s largest Arab city, although Arabs comprise 20% of the population, “Arabs are only 8% of gross national product. According to the Prime Minister’s office, the lost potential to the economy is almost 31 billion shekels (€7 billion) a year.” The reality is that for most Israeli Arabs, the opportunities to break into the high-tech community are considerably fewer.
Arab-Israelis do not serve in the Israel Defense Forces so they are closed out of many of the networks that exist in the close-knit start-up nation, say Rami Khawaly, a serial entrepreneur, a rarity in the Arab-Israeli community. His first start-up failed in 2006; his second is doing better. He is co-founder of Haifa-based MindoLife, a cyber security company targeting the Internet of Things. Two of the co-founders are Arabs, two are Jews.
“When I had my first start-up, my partner was Jewish. He was in the navy. I could not believe he knew so many people from the IDF. It was a shock to me that he knew so many of these people and they are at a very high position in a lot of places. You need these connections.”
MobileMonday’s Shakur accepts that nothing can replace those kind of connections. “What we are trying to do is to try to mitigate these barriers, to break some of them by offering some alternatives.
“Because we do not have networking experience that happens in the IDF, that is why we have created MobileMonday Nazareth, which reaches out to more than 1,500 people to create this networking experience.
It seems to be working. Tsofen’s Nehab says in just six years, the number of Arab engineers employed in the Israeli high-tech industry has gone from 350 to 2,200. “It is still relatively small, but the momentum is with us.” Shakur says there are ambitious targets. “We believe that within 15 years, 15% of the high-tech employees in Israel will be Arabs.”
Lack Of Progress Harming The Peace Process
Dell, Microsoft, Intel, Broadcom and Cisco have all been supportive of the nascent Arab-Israeli tech sector. In Nazareth, an accelerator geared towards Arab Israelis has been launched. Nor is progress limited to that city. Takwin Labs, a Haifa-based accelerator for Arab Israelis, was created in 2014. Its backers include Erel Margalit, founder of Jerusalem Venture Partners; Chemi Peres, co-founder of Pitango Venture Capital and chairman of Al Bawader, the first government-backed fund to target Arab Israelis; and Imad Telhami, founder of Babcom Centers, which helps Arabs integrate into the job market.
But if Arabs living in Israel are nonetheless still finding it hard to build a high-tech ecosystem, their problems are dwarfed by those living in the West Bank and Gaza. And lack of progress, say those working in the Palestinian territories, could be harming the chances for stability in the region.
Ayman Arandi is co-founder of Iris Solutions, a start-up based in Ramallah in the West Bank that produces “sensory rooms” to help autistic children. The company has built 14 installations in the West Bank and Gaza, serving around 4,000 children. According to Arandi, “we have managed to bring the cost down from around $15,000 to $2,000. We hope within the next year or two we will be able to export this to the U.S. and Europe and Asian markets,” he says.
Building a hardware company in the West Bank, he admits, is challenging. Because of security concerns, Israel operates a rigorous policy of inspections for goods coming into and going out of the Palestinian territories.
“You go into checks that you do not know anything about. You just get a paper and a bill that says your goods need a security check. The bill for that is sometimes 300% of the goods price. Once we had a project that needed three projectors. They got stuck for six months at the border.”
The Israeli government declined to comment on its border controls.
But entrepreneurs and investors say the problems are more than just rigorous border controls. Ismat Tuffaha is CEO of Bold Gadgets, maker of an innovative smartphone charger. Although he comes from the West Bank, as does co-founder Lama Mansour, they are living in Tartu, Estonia, part of the BuildIt accelerator.
Tuffaha says there are significant obstacles. While there are many high-quality software engineers, other professions are missing altogether. “If you go and say, ‘I need an industrial designer,’ no one knows what that is. The profession does not exist in Palestine.”
Challenges abound. How about trying to build a start-up when you only have two hours of electricity a day? Alaa Saqer, the CEO of Datrios, a sports social network based in Gaza, said this is typical for the city. “Everyone has a power supply at home to give power to the router and the laptops only.”
Ironically, the biggest problem, for entrepreneurs in the West Bank although not Gaza, says one investor, is too much aid money. “There are too many donor funds available,” says Michal Zalesak, an investor with PALinnO, a European-backed initiative to help develop the high-tech ecosystem in the Palestinian territories. “There are so many donors that are pouring money into the country. This free money spoils the country.”
Zalesak and others are desperate to break the dependence on aid. With closed borders it is very hard to build a physical economy, so it must be done online. If the Palestinian economy is to thrive, it needs to grow its high-tech sector, he says.
But like everything else in the region, even that is not simple. Payments remain extremely complicated (there is no PayPal in Gaza, for example). Entrepreneurs talk of creating companies in Amman, Jordan to allow them to be paid and then transferring the money, a costly and time-consuming process.
A Bigger Change
One thing that unites all of the Palestinian entrepreneurs is hope. “We always have hope that things will get better and we will be able to have a life,” says Omar Jouda, another Gaza-based entrepreneur. “Or even something as simple as we would have electricity for more than two hours a day.”
“People always talk about the bombing and war. That is the image that Gaza has in the world. That is the image we want to change.”
Entrepreneurship is a way to do that with the country’s young population. In Gaza, 43% of the population is under 14 years old.
Tuffaha says, “With the big challenges that are facing the world, ISIS and all these extremists, if you support start-ups, then you create a need for skilled people who think. And once people start to think for themselves, a bigger change will start to happen.”
According to PALinnO’s Zalesak, “Currently Hamas is very strong because the young generation are not given much hope. They are not given any future.
It Is Okay To Take On Israel
“If you come with support for creating young entrepreneurs, that will eventually create jobs, you will give them a different perspective of the future life.
Can there be a happy ending? “Unfortunately for many people, the happy ending would be leaving,” says Jouda. “Even for me, a happy ending would be me leaving Gaza. Not because I do not believe in Gaza, but I could live somewhere I could be more effective.”
What is it going to take to make people stay? “If I look in the future and what is critical for success, then you can see some parallels with what happened in Israel and ICQ,” says Zalesak. “A guy — an ordinary guy — sold the company for $200 million. People said, ‘If he made it, then why should I not make it?’”
“It is okay to take on Israel, but not with weapons and stupid things, but by making your start-up more successful than the Israeli competition. That is the way to take on Israel.”