Coding for the challenges of the Arab world: Palestine's growing startup scene
Startups from the US, Europe, or other developed countries, often complain about the lack of investment, tough tax regime, or a culture that doesn't really favor entrepreneurship.
These are real problems, of course, but they pale in comparison to those their Palestinian colleagues have to face on a daily basis. Frequent electricity shortages, lack of 3G connectivity, border restrictions, difficulties in moving in and out of the country, not to mention the ongoing tension with neighboring Israel, are all factors that could demoralize even the most well-intentioned businessman.
In spite of this - or perhaps partly due to it - the Palestinian startup scene is alive and kicking.
Flagship companies include Yamsafer, a Booking.com-like website, which is focused on the Arab world, active in 18 countries, and recently received a $3.5m series B funding from Global Founders Capital; Souktel, which helps people in developing countries with no broadband an basic mobile phones receive alerts, information, and multimedia content through a SMS-based platform; WebTeb, which provides health and medical information; and Batuta, an online travel portal with more than 1.5 million monthly unique users that secured in June a $2.5m investment by Siraj fund. Last year, ICT accounted for around six percent of Palestine's GDP.
Funding
Most of these companies are based in Ramallah, in the West Bank, where the tech ecosystem is thriving in ways that has led some to define it as "a Tel Aviv, without the track record".
Dubai Internet City
Things are taking off. "A year and a half ago, when we started FastForward, the first accelerator in the West Bank, people first of all didn't understand what a startup was, so our applications were quite low," former FastForward's manager Ambar Amleh told ZDNet. "We had maybe 25 applications. Since then, we're now in the fourth round of accelerations. They're four months each, and this is number four. The last round we had 175 applications. There's been a tremendous growth in interest."
Amleh is now the COO of Ibtikar, a local fund that was launched recently with the aim of bridging the funding gap that exists between acceleration and seed-level investments to VC funding.
International funds are also starting to see the possible benefits of investing in the region, where there is no scarcity of young, well-trained, and highly motivated employees - many of them coming from Birzeit University or Al-Azhar University - and where a monthly salary is just a fraction of that of their US counterparts (an average Gazan developer earns around $400 a month).
"When we started fundraising for our current fund in 2008, there wasn't much to speak of in terms of tech entrepreneurship, particularly when speaking about homegrown startup activity. Most people didn't even know what venture capital was. Now we have six active funds [not just tech-focused, and including growth stage] and a couple of accelerators. At least 15 startups have received funding ranging from seed to Series C, not counting accelerator-funded teams," Saed Nashef, founding partner of Ramallah-based early stage VC Sadara Ventures, told ZDNet.
According to the Palestine entrepreneurship ecosystem map, released last week, the country hosts one VC fund focused on tech, Sadara Ventures, as well as three seed stage funds (Ibtikar, Bader, and Arabpreneur) and a number of private equity and micro-finance funds.
Even in Gaza, where the political situation seems much more volatile and tough, the startup scene is slowly gaining traction, driven by the pioneering work of the Gaza Sky Geeks, a mix of an accelerator, incubator, and coworking hub run by Mercy Corps, an international humanitarian organization.
Launched in 2011 thanks to an initial $900,000 investment from Google, the accelerator started operations organizing startup events, and providing training to would-be entrepreneurs. Then, from late 2013, it began securing investments for four of the startups it's helping to grow.
"The main challenge is funding for the startup accelerator itself. Whereas in Europe and the US, an angel investor or the government might fund a startup hub, incubator, or accelerator, in Palestine we have few local donors and have to turn mostly to international donors," Iliana Montauk, digital economy program director for Mercy Corps, told ZDNet.
When last year the initial funding from Google came to an end, the accelerator turned to crowdfunding to stay open and the result exceeded expectations, with $267,000 collected - far surpassing the initial goal of $70,000.
Other funding is coming from the fees investors pay to accelerate a startup in their portfolio, but according to the accelerator's own forecasts, it will take at least five to 10 years before the facility can become fully self-sustaining.
Local challenges, local content
The second main challenge the Sky Geeks have to face is the lack of contact with the outside world. "Because Palestine is quite isolated, most of our entrepreneurs have never had the chance to witness global trends, or attend the dozens of events you have in a place like Silicon Valley or Germany or Poland," Montauk says.
"We've bridged that gap by bringing entrepreneurs and investors from around the world to Gaza, and by taking Gazans to places like Jordan and Berlin. It's incredible to see how much they advance their skills and their thinking through such exposure," she adds.
Most Palestinian startups are focused on mobile and web apps (hardware startups are almost impossible, due to border controls and the difficulty to import all the necessary components) and are created to solve problems and build products for Arab markets.
This is due by and large to the fact that, despite having over 140 million Arab users online in the MENA region, there's still relatively little content available in Arabic (compared to other languages like English) and there's a lot of low-hanging fruit for entrepreneurs who know how to address this need.
"MENA markets are also closer to home [for Palestinians], and so local entrepreneurs can better relate to and understand the needs of their local markets, and can execute on that better than most foreign companies who can't understand the local consumer quite the same way," Nashef points out.
The dark cloud of political turmoil also has a silver lining: some Palestinian startups have turned the conflict they have to face living in the region into an opportunity, using it as the basis of their unique selling proposition.
One such example is Redcrow, a platform that sifts material from social media and other sources to provide clients like embassies, NGO workers, and journalists with information on potential threats. Once tested in the local market, the product could be exported to other areas with similar conditions, such as Libya or Syria.
The future
Hussein Nasser-Eddin, Redcrow's co-founder, thinks the political situation in Palestine is far more promising that it might initially appear. "There are a lot of barriers like limits on movement. Still, I think we have actually an opportunity. A lot of investment firms are looking towards the West Bank. I believe there is a chance, there are possibilities, and we need people to be more motivated to take steps forward," he says.
Success stories coming from the region could be a powerful incentive for Palestinians living abroad. Many of them are employed in IT companies in Europe or the US, and plan to return home and try to use their skills to help their homeland grow.
Salah Amleh is one of them. Some years ago, he left a good job in Italy to become an advisor on international relations for the Ministry of Economy in Palestine, working on decentralizing the ministry's processes. "One of the components we have implemented is to give the opportunity for people to open their companies in two days. The next step is lowering the fees to open a startup, which now are around $1,200, for the lawyer and the registration," he says.
After his stint working for the government, Amleh became the CEO of Bader Technology Incubator, which is based in Rawabi. It's a high-tech hub built from scratch between Ramallah and Birzeit, using funding from Qatar'sDiar Real Estate Investment Company.
The hub offers fiber broadband connections with speeds of up to 120Mbps to homes, and 320Mbps to offices, plus an academy to teach digital and business skills to would-be entrepreneurs. Helped by tech players such as Microsoft, Google, and Cisco which are opening offices close to the incubator, its creators hope the centre could become the poster child of a Palestinian tech renaissance.
But perhaps it's local entreprenuers' resilience and positive attitudes which could in time prove their greatest advantage, even more than smart cities, or rising funding for startups.
"People often ask me whether running a startup accelerator in Gaza is hard. Actually, I think that running one in Gaza might be easier than many other parts of the world, such as Kuwait. In Gaza we have neverending access to passionate, smart, hardworking talent. That's the most important part of incubating an early-stage startup idea successfully," Montauk says.
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