Can Startup Nation be an incubator for Palestinian high-tech entrepreneurs?
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Can Startup Nation be an incubator for Palestinian high-tech entrepreneurs?

Initiative brings high-potential IT grads from West Bank, Jerusalem, to intern, soak up experience in multinational and Israeli companies

Dov Lieber is The Times of Israel's Arab affairs correspondent.

Interns from the Palestinian Internship Program (PIP) on a visit to Microsoft R&D center in Herzliya on July 20, 2016.  (Courtesy)
Interns from the Palestinian Internship Program (PIP) on a visit to Microsoft R&D center in Herzliya on July 20, 2016. (Courtesy)

When Sari Taha, 28, began his mechanical engineering degree at Birzeit University in the West Bank city of Ramallah, in the back of his mind he knew this would mean he’d be looking for a job in Saudi Arabia or the United Arab Emirates four years later.

Taha did not manage to land a job in the Gulf. Instead, he worked for a short stint in a local construction company before landing a job for six months in Nigeria. Afterwards, he returned home, to work in the restaurant management business. Finally, he decided he was going to go back to school to study business at the Technion Institute in Haifa.

Sari’s troubles are part of a much larger challenge for young Palestinians looking to break into the tech market.

Palestinian universities produce around 2,000 IT graduates annually, according to a 2014 Paltrade report. But there are not enough jobs for them in the West Bank, nor according to the report, are these graduates “adequately skilled” to work in the local Palestinian IT market. The result is that most grads need look for jobs in the Gulf. And competition there is fierce.

Fast-forward four years and Taha has sold his shares in a tech startup he cofounded and is now busy putting together the first-ever Palestinian tech park, which he hopes to transform into a Silicon Valley of the West Bank. The city of Rawabi — the first pre-planned Palestinian city touted as an example for what can be achieved in a future Palestinian state — has been earmarked to host the park.

The fortunes of Taha, an East Jerusalemite, were changed by the Palestinian Internship Program (PIP), a three-year old USAID funded initiative that handpicks Palestinian IT graduates and sends them on internships in multinational companies and Israeli startups.

The aim is for these Palestinian interns to soak up the knowledge of how to operate a successful and competitive tech startup and bring this knowledge back home to help build a Palestinian high-tech sector.

Bereft of natural resources and without control over their own borders, Palestinians hope high-tech can play a major role in their flagging economy. According to the World Bank, the Palestinian gross domestic product (GDP) has been shrinking since 2013, mostly due to declining foreign aid.

‘Experience you can’t find in West Bank’

The PIP initiative was set up by Yadin Kauffman, an American immigrant to Israel who in 2011 co-founded Sadara (Arabic for “forefront”), the first venture capital firm to target Palestinian tech startups.

PIP founder-chairman Yadin Kauffman, who is also a co-founding partner of Sadara Ventures/The Middle East Venture Capital Fund, the first fund targeting investments in Palestinian technology companies. (Courtesy)
PIP founder-chairman Yadin Kauffman, who is also a co-founding partner of Sadara Ventures/The Middle East Venture Capital Fund, the first fund targeting investments in Palestinian technology companies. (Courtesy)

The $30 million investment fund gathered by Sadara, which is backed by first-rate investors including George Soros, AOL founder Steve Case, and former eBay president Jeff Skoll, as well as Google, Cisco and the European Investment Bank, has so far backed six Palestinian companies, three of which are start-ups.

But Kauffman’s PIP initiative, which began holding its first internships in the summer of 2014, aims to provide the Palestinian tech sector with another kind of capital: experience.

“I’ve seen through my work investing in Palestinian companies that there were lots of talented young graduates coming out of Palestinian universities who did not have any opportunity to work and gain experience in a sizable tech company,” Kauffman said in an interview with The Times of Israel. “That is something that is important for the professional development of these young graduates.”

Kauffman, who took part in Israel’s tech-boom in the 1980s-90s as a venture capitalist, compared Palestinian internships in Israel to the valuable experience Israelis took home from working in Silicon Valley.

PIP internships are paid three-month stints, supplemented by workshops, company tours, networking events and mentoring. Kauffman admits there is a limit to what one can learn in such a short period of time. “But,” he said, “at least it’s a taste of what a significant company looks like.”

Nadine Handal, a female alumna of PIP from East Jerusalem who did software development while interning at Intel, said the program provided a “unique experience…not the kind you can find in the West Bank.”

“PIP tries to put you in an environment with professional people who have deep experience in the industry and exposure to global markets. I wanted to gain that kind of experience,” she added.

After she finished her internship, the East Jerusalemite was hired by Intel and worked there for a few years.

After leaving her job in Israel, Handal, who studied computer engineering in the West Bank, is now studying data analytics in the United States. Her goal is to open up her own Palestinian data analytics company.

“I hope to be one of the people who will bring this new knowledge to my community and to the Palestinian IT-sector,” she said. “It can provide job opportunities to a lot of talented Palestinian youth that are seeking opportunity. They will learn about a new and growing field and gain exposure to the advancements in technology in the world,”

The unemployment rate in the Palestinian territories at the end of 2016 was at 27 percent (18% in the West Bank and 42% in Gaza) and job creation has not kept pace with the growth of the labor force, according to the World Bank.

Handal said the PIP business seminars, in which top teachers, including from Harvard and Brown, train the interns in entrepreneurship, were the most useful to her.

“I found these very helpful for me, especially because I come from a technical background with little knowledge of business and management,” she said.

A win-win, strictly business relationship

PIP, which incorporated in the US and receives funds from USAID, is intentionally kept apolitical. It’s strictly business.

But PIP’s founder argues the result is one both Palestinians and Israelis—minus the political extremists on each—will welcome.

“Pretty much everyone agrees it’s in Israel’s interest to have a Palestinian economy that is growing, able to employ people and succesful. Most people here [in Israel], on the right as well as on the left, understand it’s not in our interest to have unemployment or brain drain,” said Kauffman.

Jesse Divon, 31, originally from England, is charged by Kauffman to run the PIP program.

PIP program coordinator Jesse Divon speaks to prospective applicants in Jerusalem on November 14th, 2016. (Courtesy)
PIP program coordinator Jesse Divon speaks to prospective applicants in Jerusalem on November 14th, 2016. (Courtesy)

“PIP does all the groundwork for its host companies – recruitment, selection, permits, accommodation near the company, signed agreements, and so on. Host companies are left only to interview PIP’s proposed candidates and – if there’s a fit – begin work.”

Divon said that, while the logistics of bringing Palestinians from the West Bank into Israel are not straightforward, Israel’s Civil Administration, the military body responsible for Palestinian civil affairs, has been “cooperative” in the issuing of interns permits for the duration of their stay in Israel.

The approval process for PIP interns is “very selective,” according to Divon. Only those who show true potential to fulfill the goal of PIP—to invigorate the Palestinian hi-tech sector— are taken on. So far there have been 30 PIP interns. In the latest round of internships, starting early 2017, Divon estimates that only around 10-15% of applicants will make it to intern at a host company.

So far, more than one-third of the interns have stayed on working at their host company following the end of the internship, which, according to Divon, “is especially high given the logistical obstacles,” Divon said.

“On the company side, there is often surprise at how much they benefit from participation in the program. Interns often greatly exceed expectations, while companies also appreciate the importance of increasing employee diversity and engaging in corporate responsibility,” Divon said.

The Palestinian hi-tech sector is largely comprised out-sourcing companies, or copycats of existing businesses adapted to the Arabic language market. For example, the pre-eminent Palestinian start-up is Yamsafer, which is essentially the bookings.com of the Arab world.

To date, no Palestinian tech company has been bought up by a larger firm or multinational. If just one Palestinian company would be acquired, Kauffman said, it would inspire other Palestinian entrepreneurs to try the start-up route and create some momentum.

The ‘universal language’ of tech

Taha, the mechanical engineer who could not find a decent job out of university, was hired by back in August by the developer of Rawabi, Palestinian businessman Bashar al-Masri, to join a team to create a tech-hub in the new Palestinian city. The hub, still in its early planning stages, could prove pivotal for the Palestinian high-tech sector, and if all goes to plan, according to Taha, it can be a boon to Israel’s high-tech sector as well.

In this Friday, April 5, 2013 photo, Palestinians programmers attend a Ramallah Startup Weekend workshop in the West Bank city of Ramallah. .(AP Photo/Majdi Mohammed)
In this Friday, April 5, 2013 photo, Palestinians programmers attend a Ramallah Startup Weekend workshop in the West Bank city of Ramallah. .(AP Photo/Majdi Mohammed)

“The high-tech/IT sector is one of the few options we have in order to create jobs and grow the economy to the size that the state won’t be as dependent on foreign aid as it is now,” said Taha.

In 2005, the high-tech sector accounted for less than 1% of the Palestinian GDP. In 2008, after Cisco invested $15 million to create three big outsourcing companies in the West Bank, the sector has grown to almost 7% of GDP, employing some 5,000 people, a 2014 Paltrade report said.

The Palestinian economy is largely dependent on foreign aid, and almost a quarter of the workforce is employed by the Palestinian Authority, according to a 2014 World Bank report.

“What we hope to do in Rawabi tech-hub is to relocate the Palestinian high-tech companies, and try to bring in small multi-nationals to open operations in Palestine. This will increase the quality and competitiveness of the local talent,” said Taha.

Taha’s capacity to shoulder the responsibility of creating Rawabi’s tech-hub is inextricably linked to his PIP experience, he said.

He did his internship at Takwin labs, a Haifa-based venture capital that works specifically with high-tech Arab-Israeli companies. After his internship, he was hired to work at Takwin on a part-time basis.

While at the Israeli VC firm, he conducted market research, performed due diligence, business development and financial budgeting, while also working on his own tech start-up: a manufacturer of renewable zinc-powered batteries that could help provide power to third-world countries.

Taha sees Rawabi’s tech-hub as having a natural future partnership with Israeli R&D centers.

“It will be better and less of a hassle if they could outsource to the Palestinian sector,” he said of Israeli hi-tech companies, some of which still outsource jobs to places like India and Ukraine. Israel is facing a shortage of skilled engineers and workers and is looking to tap into new sources of workers, including women, Arab and ultra-Orthodox populations that have been left at the fringes of the high-tech boom.

“Palestine is closer in time-zone and in culture. You can arrange meetings between teams. In this generation, the technology crowd all speaks the same language. It’s universal,” he said.

Large multi-nationals in Israel, including Cisco, Microsoft, HP and Intel already outsource to Palestinian companies in West Bank. The Israeli company Mellanox Technologies has been outsourcing programming jobs to Palestinians in the West Bank since 2010.

Needed: just a guy with a laptop

 

Dr. Paul Rivlin, a senior fellow and the Moshe Dayan Center and the editor of the Iqtisadi, a monthly publication on Middle East Economy. (Courtesy)
Dr. Paul Rivlin, a senior fellow and the Moshe Dayan Center and the editor of the Iqtisadi, a monthly publication on Middle East Economy. (Courtesy)

The still untapped population of skilled workers bodes real potential for a Palestinian high tech market, said Dr. Paul Rivlin, a senior fellow and the Moshe Dayan Center and the editor of the Iqtisadi, a monthly publication on Middle East Economy.

“Based on the fact that there is an educated and skilled population, one can be optimistic about the potential for the Palestinian high-tech sector,” he said, expecially in the Arab language based technologies.

“The [Palestinian] market is very small, but size isn’t everything. The fact that they are small means less in hi-tech than anything. You don’t need a factory. You need a guy with a laptop,” he added.

Israeli restrictions make it harder for Palestinian entrepreneurs to travel abroad or invite others to visit them, which hampers their ability to “build trust” with potential donors or colleagues. The business market in the Palestinian Authority is also often hobbled by the need to know “the right person”, he said, something which makes it harder to maneuver a business.

But even considering all this, Rivlin said, the Palestinians can look to Israel as an example of a high-tech market overcoming the odds of being both small and bogged down by conflict.

“Look at Israel. It’s not exactly how you would design a country to succeed,” he said. ” Yet with constant conflict, both internally and externally, the economy has grown enormously.”

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