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10 Years Forward – The Palestinian Tech Startup Scene

10 YEARS FORWARD – THE PALESTINIAN TECH STARTUP SCENE

10 Years Forward – The Palestinian Tech Startup Scene

When I was part of a team that started PICTI back in 2004, startup definitions and concepts were not clear to the community overall. I always tell the story of the security guard at the gates of the Arab American Uni of Jenin where we arrived to conduct our first ever incubator outreach event. When we told him that we are from the PICTI incubator حاضنة, he looked behind the car and asked us where are the children as he was expecting them. He simply thought that we were a nursery.

From that moment on, the below is my personal observation towards the development of the Palestinian Tech Startup Scene:

Early Years Starting 2004

Now

The Basics

Simple concepts and definitions were not understood. Awareness and outreach had to be done.

Maturation of understanding how the mechanics of technology entrepreneurship work.

The Culture

Culture of “fear and intolerance of failure”, zone of competition and not cooperation, syndromes of “I can do this product internally at my company, why did you incubate it”, “don’t hire my staff for this new R&D project”, and “let us watch them fail” dominated the day. Another toxic problem was any incremental enhancement idea incubated was perceived as a competition to existing companies. In my opinion, one of the reasons why the IT community liked Yooyaland is that is was a blue ocean of a startup that did not infringe on existing revenue streams of existing companies and did not pose a threat to them.

Ongoing filtering of toxicity as we live to see a growing shift of power and attention to entrepreneurs and startups.

The Entrepreneurs

They were older age wise. It was also challenging to change their business models and value proposition to target regional and global markets. Such feedback was perceived as a rejection, which was not taken lightly.

The coachability and team formation requirement is better understood. Business models are no longer focused on local markets for the technology startups. Ideas are more savvy and most likely there is a demo to present and not just an idea. Better pitches overall.

The Incubator Management Experience

Knowledge and know-how of incubator staff had to be self-taught mostly making it more prone to experimentation. Not coachable at times, but stood their ground on many occasions to transform the needed change in the sector. More reserved to incubate and not encouraged to take the highest risks.

There are previous experiences to build on by new generation of managers. However, it seems that there is no experience required today to manage an accelerator as the center of attention is shifting to the supporting eco-system to produce success stories.

Stalemate of the 1st generation incubators facing new business models of accelerators.

Everyone is still risk averse with a demanding selection process and high friction seed funding mechanism. Success Stories are rare gems, if you can find them.

The Eco-System

No active and effective network of knowledgeable Mentors or Angel Investors. Attempts to compensate was to link with such systems regionally and globally.

Still more room to improve for better integration of the value chain elements and to have effective mentors and angel network syndicate. Great organization of events such as Startup Weekend, Startup Cup, etc. Continues to compensate for the dormant eco-system with linkages regionally and globally.

Seed Funding.

No steady sources for seed fund supply with abrupt cut-offs from development agencies. See below note as well.

Better accessibility to equity-based financing funds including seed funding, venture capital and private equity irrespective of perceptions by entrepreneurs on their performance.

The Local Markets

Markets were not receptive to new products or new startups.

Startups are beginning to acquire local market share.

Government

Did not get the Startup economics

Government agencies still “do not get it” in order to upgrade legislation, taxation and company laws as well as other relevant legislation.

Development Agencies and Contractors

Did not fully get the Startup economics

Matured in their understanding of the entrepreneurship process influenced by the political attention that this sector is receiving to create much needed jobs globally and more so in MENA. They are demonstrating more openness and patience in developing the entire eco-system and not just piloting projects with incubators or accelerators.

With USAID help and support from Khaldoon Tabaza we have managed to structure the essential private placement memorandum for the PICTI Seed Fund in 2006. While we did fail to fundraise for a friction free seed fund at PICTI but I would like to believe that our active pitching and circulation of the Seed Fund literature to capitalize the fund helped donor agencies and other local stakeholders to understand the mechanics of how such equity based funds work. I would also like to think that our fundraising has facilitated for two things: that such equity-based funds are needed in the eco-system and that we have indirectly helped in the creation of venture capital and private equity funds in Palestine. An example was the Abraj Capital business relationship with the Palestine Investment Fund as one testimony of launching the Abraj Growth Fund in Palestine.

So, we have made good strides in developing the technology startup scene since the early days while learning it ourselves in the process. Indeed, we were inexperienced and naive to a some extent at PICTI. We were not coachable ourselves at times. At other times we stood our grounds to make the needed transformation and changes in the sector. We experimented with different incubation models and job creation programs to understand what would work in the local context – especially in a difficult and dormant eco-system.

I am personally reaching the conclusion that Palestinian tech startups will be as good as their (guess what) ….. their supporting eco-system.

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