\Startup Life Places/ https://sifted.eu/articles/insider-view-palestines-startups/ Insider view: Palestine’s problem-solvers Amid the curfews and the checkpoints, Palestine is developing centres of innovation. BY CARLY MINSKY 4 FEBRUARY 2019 Launching a startup in Palestine is no easy feat. Civilian infrastructure has been crippled by decades of conflict. Much of the water is undrinkable and electricity is often spotty. Checkpoints make travelling around difficult — even if the roads are functional. Not only this, but foreign money is heavily scrutinised before it can come in (for fears it will fund terrorism), the banks are risk-averse and locals say the best way to raise money is still the “Triple Fs” – friends, family and fools. Despite all this, Palestine is developing key centres of innovation, including a “digital city” in the West Bank. Homegrown startups such as Gamiphy and RedCrow are attracting attention globally for their creative solutions, often developed as a direct response to the challenging environment. Palestinian entrepreneur Hasan Qasem already had a mobile app startup under his belt before founding his business development consultancy, Limitless KWB. Although he relocated to Jordan last year to expand the reach of his business, he believes the progress in Palestine’s startup community indicates that there are opportunities amid the significant challenges. What is this region’s biggest strength, as a startup hub? It is a “virgin market”. There is talent and there is interest, and so there are opportunities to drive the entrepreneurial mindset towards startups. Palestine was delayed in implementing up-to-date technologies and ideas compared to other countries. Now there is willingness and readiness from the market to adopt new solutions, especially in the information technology sector. We are investing in building businesses on the cloud so that we don’t necessarily need physical offices, we don’t need to purchase as much equipment. We just build and invest our resources in mobile app. This way, the business is not threatened by the 1 Israeli occupation, if they [physically] destroy it or block the roads or increase the tax on our equipment. Technology helps to solve many of the challenges which have a huge negative impact on the economic situation in Palestine. Women are more prepared, they are eager to succeed, they are willing to go the extra mile and they are working harder to develop themselves. What is the biggest challenge? The political situation and the occupation affect us in many ways. It puts pressure on different levels, like extra taxes and approval processes from the Israeli side. For example, we had a longstanding issue getting 3G networks to Palestine. The telecommunication companies were ready and had already developed the equipment and infrastructure to launch a 3G service for many years, but the Israeli government wouldn’t approve it. [Israel rolled out 3G networks in 2004 and 4G in 2014, but did not approve the permit applications for 3G from Palestinian network operators in the West Bank until January 2018). Many entrepreneurs are innovating in a regular business, rather than working in the tech sector or a startup environment. For them, the challenge is trying to bring new technological equipment into Palestine. Some equipment is not allowed in at all, or else there are so many restrictions that it becomes too costly. Another challenge is that entrepreneurs are rarely given a second chance if they fail. This is unfair, particularly considering the gaps in resources and education for young people in business. I had to learn everything about running a business from my mistakes; no one was helping me. Mentoring is important to help us solve this problem. We need to start preparing the next generation through education in schools, rather than focusing just on supporting adult entrepreneurs. What is the cultural environment like for entrepreneurs? While young people understand the importance of innovation, we still need to explain the concept of entrepreneurship to the Palestinian leadership. As a country, we need to take more risks to support this ecosystem. We need successful people — the business leaders and politicians — to support new generations going through that journey. It is time for young leadership to take over. 2 Palestinian mindsets need to be more flexible. We encourage entrepreneurs to embark on a risky road to innovate and make a difference, but we aren’t open-minded or supportive if they fail. Failing is a real possibility. Many entrepreneurs with good ideas are put off by the prospect of failing, and not having the support structures to recover from it. In Palestine it feels like everyone knows everyone. This is a country of only a few million people, so word of mouth spreads very quickly. If someone’s venture fails, the story spreads like a wildfire. It is human nature to talk about other people’s mistakes, but we need a more forgiving mindset. In what ways has the startup environment changed over the last five years? The entrepreneur community in Palestine hasn’t yet reached the point where it is thriving, but over the last two years it has been moving forward; slowly but at least it is moving. There are now more “enablers” — incubators and individual supporters — who are trying to support this ecosystem. People are starting to recognise the opportunity for entrepreneurship to create solutions to challenges we face. More investors have starting coming to Palestine. Politically, unfortunately it is always ups and downs. Over the last five years there have been months when the roads were unsafe to travel between cities or times when they [the Israeli army] would just bomb a whole area. Sometimes the curfews mean we can’t stay late at work. In spite of this, I believe it is possible for the environment to move faster here. We have the capabilities. We need young leadership in both politics and business – that would be a change-maker. With all due respect to the current leaders for their efforts, it is time for young leadership to take over. Has Palestine’s “digital city”, Rawabi, had an impact on the startup environment? Rawabi is not a “digital city” but it is a modern city. The investor behind Rawabi, Bashar Masri, is a long-term visionary. He knows that building a modern city is part of the route to success, but it is not the future. Masri knows that technology has a huge role to play in our future and so he is focused now on supporting the entrepreneurial tech environment. The success we have already seen in Rawabi is not the final result. Even though Rawabi is 20 minutes away from Ramallah, for Palestinians that is a long distance to travel. It is hard for some people to relocate to Rawabi, especially if they regularly need to visit big corporates based in Ramallah. 3 Bashar Masri shared the 10-year “photo challenge” contrasting a photo of him in 2009 and in 2019 in the same place in Rawabi 4 How easy is it to hire people in Palestine? We have talent, but we need a huge shift in our education systems to bridge gap between the education outcomes and the employment needs. We needed it yesterday, not tomorrow. In my opinion, women in Palestine are much better candidates than men in the last few years. Women are more prepared, they are eager to succeed, they are willing to go the extra mile and they are working harder to develop themselves. Recently the Dubai-based investment firm Wamda published an article about the importance of Palestinian entrepreneurship which noted the fact that Palestine has the world’s highest proportion of startups led by women (20%). To improve recruitment, we need better hiring policies and a more progressive hiring mindset. Hiring is still very traditional and very few Palestinian businesses are implementing different techniques. Recruiters should select people based on their potential, instead of expecting to find the perfect candidate. Companies need to put more effort into retaining their talent and supporting employee development. Currently, people are still hired just based on informal phone calls among personal networks. How easy is it to find funding? The bank needs to guarantee the money, but these requirements are not designed for startups. I have never seen any place harder than Palestine to get funding. The only thing you can depend on is “Triple Fs” — friends, family and fools. In traditional financing, the banks and other lending organisations are all completely risk-averse. They won’t do personalised evaluations for loans, they simply go through the eligibility criteria and if you don’t have one you are ruled out. Of course the bank needs to guarantee the money, but these requirements are not designed for startups. For example, I know a startup that applied to a bank for a small loan for a marketing event, with a proposal explaining why the initiative was important to build client relationships. The bank wouldn’t lend the money, reasoning that the loan would not be funding a revenue stream, it was just an expense. In other cases, if a startup founder does not pay themself a salary, the bank will not issue a loan even if the business has good cash flow. For these banks, being able to show a $600 monthly salary is more credible than having over $100,000 cash flow in a year. We are starting to see more private investment into entrepreneurship there is room for a lot of improvement. It is really difficult to get funding from outside Palestine because any amount more than a few thousand dollars has to go through security checks on the Israeli and Palestinian sides and it might be considered to be funding terrorism.