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Palestinian startups are growing fast. But they face huge challenges
Tech startups in Palestine address multiple issues, but the ecosystem still languishes behind many of its regional counterparts.
If you visit tech startups in Ramallah, the West Bank city, you will be impressed by the innovation-friendly working conditions. With climate-controlled offices and ping-pong and foosball tables in cafeterias being the standard, office blocks appear to have been lifted straight from Silicon Valley.
If there is a future for the moribund economy of the West Bank, this is likely it. And over the last decade, tech innovators have been creating tailored tech solutions for Palestine and the wider region.
Gamiphy, a retail-growth platform that helps online retail brands enhance their customer experience via loyalty programs, gamification, and personalization, is one of the startups in the small but burgeoning Palestinian tech sector on the verge of big things.
“Palestine is an emerging market, and technology is playing a bigger role every day in solving different types of problems,” says Aws Alnabulsi, founder & CEO of Gamiphy. “Being an entrepreneur is starting to get the traction and attention of the ecosystem, providing the right environment for a shift from employment to entrepreneurship.”
Compared with other industries that the anemic West Bank economy might look to develop, the tech sector has an advantage: it is much less affected by impediments to movement, like the barriers, checkpoints, and permit requirements imposed on the territory in the name of security.
STILL EARLY DAYS
But despite its potential, the Palestinian high-tech industry is still tiny. In 2021, the value of the Palestinian startup ecosystem was estimated at $66 million, with a total investment of $9.5 million.
Several tech startups in Palestine address multiple issues, including mental well-being and online Arabic programming skills. But these are still early days – the ecosystem still languishes well behind many of its regional counterparts.
“It is not easy as the ecosystem is still young,” says Suna Zaobi Othman, founder and CEO of Tawazon, a wellness startup. “But directing this amazing talent to business development and proper mentoring can help.”
“Networking must be the next step opening the opportunity to present our progress and ability of expansion not only in MENA but worldwide,” she adds.
Similarly, Thaer Samara, CEO of Safra, a travel technology startup, says, “The ecosystem is young, thriving, and growing year by year. But at present, being an entrepreneur isn’t attractive. If the ecosystem keeps growing, entrepreneurship may become attractive in a couple of years.”
However, efforts are being made to boost the growth spurt. One example is the launch of the International Conference on Entrepreneurship in Palestine (ICEP) launch in 2019, which brings Palestinian entrepreneurs together with investors, enablers, and regulators to shape the next phase of their business.
Earlier this month, 20 promising Palestinian entrepreneurs across fintech, edtech, insurtech, AI, and healthtech gathered in Dubai at the 4th edition of the ICEP for seed and Series A funding. The two-day event was held in strategic partnership with the DIFC Innovation Hub with the support of the Dubai Future Foundation.
“It is rare and inspiring to witness Palestinian entrepreneurs overcome geopolitical challenges to innovate and create platforms that can have a real impact on their communities and hopefully the region,” said Tarek Aggad, Chairman of Arab Palestinian Investment Company.
ECONOMY IS SMALL AND LIMITED
For all the talk of an emerging ecosystem, the startups grapple with some challenges confronting the wider Palestinian economy and society.
The Palestinian economy is small and limited, and many startups stop because market conditions are not optimistic.
Among the many challenges, startup founders find it difficult to raise funds at attractive valuations as the market faces a steep capital crunch.
“Being a Palestinian founder does not place you high on the list of regional and global investors for many reasons, mainly perception,” says Alnabulsi. “A big part of the solution falls on our side as entrepreneurs to go out and show ourselves.
But there is a need, they say, to overcome the world’s image of the territory as a volatile conflict zone.
“The assumption that Palestine is a non-stable and inaccessible country is a turn-off for many investors,” adds Samara.
Agreeing with him, Ra’fat Masri, founder and CEO of Vatrin, a startup helping small-business owners to set up websites to facilitate and track online orders and payments, says. “Early-stage funding in Palestine is considerably low, which leads to less competitive products and hesitancy from local funders.”
According to a World Bank report, the key strength of the ecosystem is the presence of talented people with highly educated founders (85% with a university degree and 27% with graduate degrees). Most founders have limited managerial experience, resulting in limited business acumen.
To address this issue, the report identifies access to formal education and foreign investors as the most significant factors for the long-term success of tech ventures.
“Running a startup in Palestine is not an easy task. In addition to the barriers many startups face, lack of funding and a stifled ecosystem growth are of particular concern,” says Masri. “The Palestine startup ecosystem requires a robust technological infrastructure, investment-friendly environment, and cultural preparedness, including acceptance of failures and recognition of challenges.”
Even the World Bank report stated that a key to increasing infrastructure support quality is attracting mentors with practical entrepreneurship and business experience in accelerators.
“Directing this amazing talent to business development and proper mentoring can lead to a number of exits,” says Othman.
What does the future look like for the Palestinian startup ecosystem?
“The future looks more promising than ever,” says Alnabulsi. “We all need to unify our efforts and focus on creating success stories, which would greatly contribute to the country’s financial stability.”
The entrepreneurs acknowledge that the industry is still in its infancy; they say it can be an attractive option because of the talent of Palestinian engineers and their loyalty to their companies.
Over these past few years, Masri says, Palestinians in the diaspora have established startups and run their R&D centers out of Palestine. “We hope one day to see an exit that can create a ripple effect on the wider ecosystem. Similar to what happened with Paypal or Careem. Former employees and founders of these companies ended up being the most influential entrepreneurs.”