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Investment Mechanisms Driving the Tech Startup Boom in Palestine

Booming startup tech sector in Palestine provides hope for future industry success. Source: The Technews

Booming startup tech sector in Palestine provides hope for future industry success.
Source: The Technews

Despite the ongoing Israeli military occupation, Palestinian technology startups have flourished in recent years, providing a glimpse of an independent economy and overall improved quality of life for Palestinians. While more traditional forms of industry—such as textiles, agriculture, and manufacturing—have failed under the obstacles of the occupation, the tech sector is uniquely poised to transcend physical barriers like strict import restrictions and lengthy export delays. With just a laptop and an internet connection, Palestinian startups are able to thrive in the international economy and valuably contribute to global tech development. A host of individuals and entities have invested in Palestinian tech startups over the last two decades and new investors continue to grow by the day. Below, we will examine just a few of the venture capital funds and tech incubators that are making a positive impact in the Palestinian economy.

The Palestinian startup boom is due, in large part, to a carefully cultivated, Silicon Valley-esque ecosystem of startup incubators and accelerators, venture capitalist funds, and seasoned business owners and mentors. In the West Bank, many startups have received their initial funding from private investment funds like Sadara Ventures and the IbPreviewtikar Fund. These venture capital funds are exceptionally effective in impacting tech in the region because many of their managers and investors are Palestinian, or of Palestinian descent. These individuals are representative of the greater VMCE_V9 return of the Palestinian diaspora, often Western-educated and trained in buzzing tech cities around the world. Upon returning, these Palestinians bring with them the desire to improve Palestinian quality of life and the requisite skillset to do so.

Sadara Ventures, for instance, seeks to “build the first wave of world-class, high-growth, tech companies in Palestine.” In 2011, Palestinian software innovator Saed Nashef established Sadara Ventures and secured startup funding from financers that include George Soros, Google, Cisco, and the European Investment Bank of the EU. Nashef and his partner, Israeli businessman Yadin Kauffman, founded Sadara to capture the “promise for investment and growth” in the Palestinian tech market. Before creating Sadara, Nashef spent almost twenty years working at Microsoft and other tech companies in the United States Pacific Northwest. When he returned to Palestine, Nashef was able to use the entrepreneurial skills acquired in the U.S. and leverage his Silicon Valley contacts to jump start Sadara Ventures. To date, the fund supports six highly successful Palestinian startups that operate in an array of industries, from freight shipping to healthcare to travel.

Incubators and accelerators are another source driving Palestine’s startup tech sector forward. Palestine’s Information and Communications Technology Incubator (PICTI), for example, receives funding from private investment, crowdfunding, and foreign government aid such as USAID and the EU. It is the express mission of this non-profit incubator to “improve the economic situation in Palestine” and “support Palestinians in becoming active participants at the global level.” This clear purpose and directive sets PICTI and other Palestinian incubators apart from the many profit-driven incubators of Silicon Valley.

The tech startup wave has also reached the Gaza Strip. Founded in partnership with Google and the international NGO Mercy Corps, Gaza Sky Geeks is the leading incubator, accelerator, educator, and mentor for tech startups in the territory. It regularly hosts startup weekends and programs in business education for Palestinian businesses. These events regularly attract mentors from around the world to support Gazan entrepreneurs. In addition to supporting the Gazan startup community, Gaza Sky Geeks must of course cope with operating a business under the Israeli occupation. One salient example of this was the incubator’s crowdfunding campaign to purchase an independent electricity generator. The generator was necessary to offset “Gaza’s most severe energy shortage to date,” and keep the incubator’s doors open despite frequent and lengthy power outages that consume the area.

Most investors are well-aware of the uncertainties associated with investing in Palestinian tech startups. Operating a startup under the occupation is risky because, among other things, there is an ever-present threat of Israeli military engagement. Despite—and in spite of—the occupation, investing in the Palestinian tech sector is a worthy effort. There are many indicators that suggest the Palestinian labor force is primed for success in a tech startup economy. Palestinian universities turn out an estimated 2,000 Information Technology graduates each year and demographics reveal that 56.7% of the Palestinian population is “working age.” Without opportunity for participation in traditional economic activities, these well-educated youths are already leading the tech sector forward in Palestine. This, combined with the returning Palestinian diaspora with tech backgrounds and capital to invest, will certainly continue to propel the tech startup industry in Palestine.

The growth of Palestine’s technology sector is not without opposition as some Palestinians consider the growing startup tech sector be an action of normalization. Within the context of the Israeli-Palestinian conflict, “normalization” essentially refers to the acceptance of activities that deviate from the larger Palestinian struggle for self-rule and independence. By investing in a new economic sector, tech startups normalize Palestinian life under the occupation. Although this argument may have merit, poverty and unemployment rates persist at levels above the global average and the economy is in desperate need of innovative revitalization. Through the tech startup sector, Palestinians can participate in the global economy and propel their “desire to see Palestine prosper, to rise above stereotypes and to project 810-403 a positive image.”

Rachel Ronca is a third-year dual degree student (J.D. and LL.M. in International Business Transactions) at the University of Denver Sturm College of Law. She is the Senior Managing Editor for Volume 46 of the Denver Journal of International Law and Policy.

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University of Denver Sturm College of Law

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