Palestinian Startups Push to Overcome Closures, Politics
Hi-tech projects active in West Bank, Gaza Strip having trouble attracting funds
Six months into the coronavirus crisis in the Palestinian territories, the economy has ground to a near standstill.
Startups are looking to minimize the damage and find cost-efficient ways for this small, emerging sector to prosper under the double challenge of anti-virus measures and a complex socio-political situation. Having emerged amid a swell in the talent pool and an improvement in the hi-tech ecosystem, it has now been dealt a serious blow.
Laila Akel, an American-Palestinian entrepreneur and chief operating officer of the security startup RedCrow, says the scene is experiencing a bottleneck because of a rough patch with venture capitalists and other investors – who are no longer as excited as they once were about entering the Palestinian market.
Without sovereign borders, Palestinians are tied to the decisions of their three neighbors: Israel, Jordan and Egypt. They will be “the last nation to be released from the lockdown once [the borders] reopen,” she says.
“This means that Palestinians will be last to resume all the public relations and marketing plans and events that were suspended,” she continues, adding that most investors are shifting their focus from external ventures to domestic ones owing to their reduced appetite for risk in the current climate.
“There is so much uncertainty that most people decided to wait longer before dispensing funding, which means that overly unstable or fragile startups do not stand a chance, not to mention that startups that were doing well up until [the coronavirus crisis] are now at risk,” she notes.
“The whole startup community and the entrepreneurs in Palestine have been shaken,” she explains.
The whole startup community and the entrepreneurs in Palestine have been shaken
One of the older Palestinian startups, the Arabic-language Yamsafer hotel booking platform for the Middle East and North Africa, is seeking new ways to overcome the blows to the tourism industry in general, and to startups in particular.
For Faris Zaher, the 33-year-old founder of Yamsafer, West Bank startups are no longer attractive to investors and, despite the strong talent pool, the scene is unable to expand. He blames the limited ecosystem for burdening young talents with a constant need to find solutions to obstacles in their way.
“Startups take up a lot of space in the headlines, but when it comes to action, people do not pay a lot of attention,” he notes.
In a small market like the West Bank, the “operating environment created after the COVID-19 outbreak has made financing much more difficult,” especially since international investors are now focused on their home economies and the political situation is no longer calm, Zaher says.
Yet the pandemic is not entirely to blame for the logjam being experienced by the nearly 50 active startups in the West Bank and Gaza Strip.
A quick glance over the past six months reveals clear indicators of promise, with top talents emerging but unable to maneuver and take risks for innovation because neither they nor their investors are given solid guarantees of support by local authorities.
The Palestinian Authority has a plate full of challenges after severing ties with both the Israeli government and the Trump Administration, exacerbated by the precarious regional situation, poor infrastructure and a shortage of revenue amid its fight against the coronavirus.
Anan Abu Rmeileh, communications director at Leaders International, a Ramallah-based economic development organization, told The Media Line that even before coronavirus struck, the sector had been suffering from a lack of investment, particularly since late 2019, when political tensions began to resurface in the region.
“When the pandemic broke out, Palestinian startups weren’t ready because they were already suffering from poor access to finance and a lack of resilience in the way they did business, so they didn’t get attention [from investors and local governments] before and after the pandemic,” he states. “With the lockdown and the social distancing, the business incubators are unable to provide adequate space.”
With the lockdown and the social distancing, the business incubators are unable to provide adequate space
Abu Rmeileh says his organization immediately responded with its Digital Transformation Initiative, which brings experts to assist Palestinian startups online through a new form of business incubator that is an online platform.
“The negative impact of COVID-19 in much bigger for the startup sector in Palestine compared to the region,” he stresses. “The only solution now is digital transformation – and it’s no longer a luxury; it’s a matter of survival.”
The negative impact of COVID-19 in much bigger for the startup sector in Palestine compared to the region. The only solution now is digital transformation – and it’s no longer a luxury; it’s a matter of survival
Despite solving numerous problems, digital transformation has not created a breakthrough with such issues as payments and dedicated gateways, says Abu Rmeileh, adding that an important dimension still requires work in order to help stabilize the local economy.
Ending on a more positive note, Abu Rmeileh explains that he sees this push for the local economy coming in the form of job creation, capacity-building for young entrepreneurs, and a local entrepreneurship ecosystem that is being expanded.