The decision to establish the Arab-Jewish partnership with elite 8200 military alumni could indicate positive change for Arab Israelis in hi-tech
After a long wait, the Nazareth Business Incubator Center (NBIC) announced on Tuesday the launch of Hybrid, the Ministry of Economy and Industry-supported program aimed at bringing startups from Israel’s Arab community to the next level.
The program is being run in coordination with the 8200 Alumni Association, representing the veterans of the Israel Defense Forces’ elite intelligence and technology unit that has become synonymous with the leaders of the Startup Nation.
Leading the initiative are Fadi Swidan, the director of the NBIC, and former entrepreneur and 8200 alumnus Eitan Sella.
According to their release to the press, the program will select ten startups that they will support with workspace and mentors with experience in entrepreneurship, investment, and other important aspects aimed at helping them to succeed.
The program is set to begin in April, working along major players in the Israeli industry. Partners include names like EMC, Bank HaPoalim, SAP, Shibolet & Co, and Galil Software.
Challenges facing Israel’s Arab startup scene
On a visit to the NBIC last week, Swidan presented the goals of his center to a group of international journalists, highlighting the organization’s role in the community. He told reporters that they wanted to help raise living standards of the Arab community through advancing entrepreneurship.
The NBIC’s vision of integrating Arab Israelis into the hi-tech sector fits into a wider framework of policies that the government and members of the technology center have identified as a potential driver for changing their lower socio-economic status in the country. Founded in 2012, the organization itself is a hybrid model of accelerator and incubator, funded by the government, that cooperates with groups in the private and nonprofit sectors.
Swidan explains that the Arab startups face significant challenges in fully entering the market. First off, he says that they lack the business know-how and practical elements for new entrepreneurs that are starting to build their businesses. In general, they also fall behind due to their minimal network connections with the tech core in Tel Aviv.
Swidan adds that Arab startups face problems with funding, from both Arab and Jewish investors.
On the one hand, Arab investors he says are still skeptical of the hi-tech industry and its general dearth of tangible assets. Swidan tells Geektime that harder assets like real estate with more stable valuations are likely to seem far more attractive than more volatile startups, despite the possibility of much larger returns on investment.
When it comes to the Tel Aviv VC and angel crowd, he says that while they are impressed with the progress of the Nazareth-based startups, the young and underdeveloped ecosystem is still considered far too risky for investment.
In attempting to close some of these gaps, the NBIC organizes classes with experts to learn skills and puts together exchange visits between Nazareth and Tel Aviv to build connections that they hope may later bear fruit.
Swidan told reporters that he hopes that through the Hybrid accelerator, Nazareth could see its first unicorn emerge.
Additional government support
In 2007, the Israeli government defined the integration of the Arab community into the hi-tech sector as a national priority.
Ella Eyal Bar David, Employment Infrastructure and Projects Manager for the Arab sector at the Ministry of Economy and Industry, tells Geektime that the government is making additional efforts to support the startups.
She cites the fact that the office of Israel’s Chief Scientist, a major player in the industry, provides grants of 85% of seed funds for Arab startups. This is significantly more than the 50% given to Jewish companies.
There is no doubt that Israel’s Arab startup community is producing a cadre of talented companies that will hopefully pave the way for more successes down the road. They face significant challenges ahead, with some clearer than others.
Love it or hate it, Israel’s hi-tech sector is highly focused in the greater Tel Aviv area, spanning from the south of the city to as far out as Petach Tikva. While some more established companies have succeeded in reaching out as much as an hour or so north, they are almost entirely out of reach of the Arab cities and towns. With limited employment options available in their vicinity, startups could offer an ideal alternative for homegrown solutions.
Nazareth has been very successful in making itself a northern capital in the tech sector, building a base of some 800 tech jobs in the city, including a growing number of startups. Interestingly, 100 or so of these workers are actually Jewish Israelis that are working in joint ventures with their Arab counterparts.
One of the smaller companies that will be joining the project is Nazareth’s own Galil Software, led by CEO Dror Gonen. Galil works as a service provider for many of the tech giants in Israel, offering QA automation, R&D outsourcing, and a variety of software solutions.
They are also a shining example of Arab-Jewish cooperation in opening up the field of tech to a segment of the population that has been vastly underrepresented in the sector. Many of the Jewish Israelis are able to bring their experience and perhaps more importantly connections to their networks to help bring their Arab colleagues into the fold.
The decision to establish the partnership with the 8200 Alumni Association could be indicative of positive change for the sector. Members of this elite unit are a deeply ingrained element of the Israeli ecosystem. It has become known as a key source for recruitment, with former members calling on their old comrades to join them in their latest ventures. This “bring a friend” model, while producing impressive results in finding trusty talent, has been exclusionary to Arab Israelis who do not generally serve in the military, let alone in sensitive intelligence units.
MindoLife, an IoT security startup that was founded by Arabs and Jews and spoke with Geektime at the NBIC, includes a former 8200 member as a co-founder. More of these kinds of mixed companies will hopefully lead to breaking down barriers for Arabs as they build more robust networks in the industry.
Networking plays a very important role in Israel’s tightly knit tech community and has traditionally been a problem for the Arab community when it comes to breaking into hi-tech. If Arab tech workers can branch out deeper into the wider national tech scene, then they can help bring along others and boost employment for the largely untapped pool of qualified engineers in the community.
Realistically, the Nazareth startups still have a long ways to go before they will be able to compete with the hub in Tel Aviv. The Hybrid project comes as yet another part of the overall effort to bring the Arab community in as full members of the Startup Nation.
Thankfully, through programs like the NBIC and Tsofen, a group that works to integrate Arabs into the tech sector, the situation seems to be moving in a positive direction.