A hi-tech ecosystem for the benefit of all its inhabitants

Efforts are under way in both the public and private sectors to support initiatives led by Arab entrepreneurs

By EYTAN HALON
Inaugural Nazareth Hi-Tech Investor Conference (US Embassy) (photo credit: US EMBASSY)
Inaugural Nazareth Hi-Tech Investor Conference (US Embassy)
(photo credit: US EMBASSY)
Speak to aspiring entrepreneurs or accomplished businessmen worldwide, and they’ll likely cite Israel’s reputation as the Start-Up Nation.
Multibillion-dollar acquisitions, disruptive innovation, global cybersecurity leadership and eminent academic research are just some of the many sources of pride for Israel’s innovation ecosystem. Only this week, American technology giant Nvidia acquired Israeli chipmaker Mellanox in a deal worth $6.9 billion.
Yet as chapters continue to be added to Israeli hi-tech’s success story, the innovation sector is continuing to grow significantly beyond the local supply of talent.
The number of skilled workers has lagged behind the sector’s demand, leading to a shortage of approximately 15,000 qualified workers needed to fill open positions, according to a study by Start-Up Nation Central and the Israel Innovation Authority (IIA).
Filling that gap has led the public and private sectors to increasingly recognize the lack of diversity in the hi-tech sector, which, so far, has primarily relied on the employment of Jewish, non-ultra-Orthodox men.
This is underlined by the underemployment of Arab-Israeli citizens, representing over 20% of the country’s population but just 8% of Israel’s GDP and only 3% of the Israeli hi-tech workforce.
“The shortage of talent has become a national issue, and the government passed a decision two years ago defining a national plan to increase the number of skilled people for the tech industry,” Naomi Krieger Carmy, head of the IIA’s societal challenges division, told The Jerusalem Post.
“If you believe that intelligence and ability are distributed equally across all parts of society, then something is wrong if 65% of the tech industry is Jewish, non-haredi men in the center of the country,” said Krieger Carmy.
“Added to that, as a society we want to make sure that any individual has the opportunity to realize their potential, wherever they are.”
While the percentage of Arab Israelis in Israel’s workforce remains far from mirroring its population share, IIA data show some encouraging trends. As recently as 2015, Arabs occupied fewer than 1% of hi-tech research and development positions, compared to 3% today.
Academic trends are also reassuring. In 2016 alone, there was a greater number of Arabs studying hi-tech courses than all the Arab graduates over the previous three decades. Today, 18% of all computer science students in Israeli universities are Arab, and over 2,000 Arab graduates complete computer science and engineering degrees annually.
Last year, the IIA widened its program for supporting initiatives led by Arab entrepreneurs, providing high levels of R&D funding over an extended period of two years. Arab entrepreneur-led projects benefited from approximately 11% of the IIA’s early-stage start-up funding last year.
In addition to government assistance through the IIA, boosting Arab-Israeli integration in the workforce has become a multidisciplinary effort, bringing together nonprofits, private business and even garnering international support.
One of those leading the effort is Takwin, a unique venture capital fund making early-stage investments in hi-tech companies run by Arab entrepreneurs.
Located in Haifa, in close proximity to large Arab population centers, Takwin was founded by businessman Imad Telhami and is a cooperative venture between Israel’s two leading venture capital firms, Pitango and Jerusalem Venture Partners.
“The Israeli hi-tech ecosystem is like a garden that has the best soil for agriculture in the world, but the garden is fenced off, both in terms of perception and in terms of geography,” Takwin CEO Itzik Frid told the Post.
One of the primary barriers to greater integration, Frid believes, has been the concentration of the Arab population in Israel’s north, far from the hi-tech hubs of Tel Aviv and Herzliya. A second barrier, Frid said, is internal challenges facing Arab society.
“The Arab sector is still more conservative than the Jewish population, so the option of failure is considered a threat,” said Frid. “You cannot be an entrepreneur if you cannot tolerate the option of failure.”
In order to tap into the Arab sector’s talent pool, Takwin, one of the few venture capital funds outside central Israel, both positioned itself close to potential entrepreneurs and developed a different approach to recognizing entrepreneurs worthy of investment.
“Most of the Arab entrepreneurs are not as ripe and ready for investment as many of the Jewish entrepreneurs,” Frid said, adding that Takwin accelerates selected companies for a year prior to making an investment.
“One of the key reasons is that Jews go to the army and they gain the experience, confidence and networking that Arabs do not possess, although they are just as talented. The second reason relates to a level of confidence. The Arab community does not have success stories that they can relate to,” Frid said. “Just like 20 years ago, Jewish mothers would have not told their children that they need to be entrepreneurs. Arab society is lagging behind 10 to 15 years.”
To date, Takwin has made pre-seed investments worth up to $1.1 million in eight companies, ranging from egg gender determination technology to an algorithm-based earthquake early warning service.
“Five years from now, you might see all the leading Israeli venture capital firms scouting for Arab entrepreneurs, because I see the talent and motivation there. Today, for a regular venture capital firm, they have enough Jewish entrepreneurs that they can pursue,” said Frid. “None of our eight companies are philanthropy investments. All of them are pure, straightforward business investments. Arab society is maturing its entrepreneurs, and Israeli venture capital firms will eventually follow.”
Operating in Nazareth and Kafr Kassem, nonprofit organization Tsofen was founded in 2008 by Jewish and Arab hi-tech professionals aspiring to develop the hi-tech sector in the Arab community, as both an economic lever and a catalyst to create a shared society in Israel.
The organization won the 2016 speaker of the Israeli parliament’s Quality of Life Award for promoting mutual understanding between Jews and Arabs.
It aims to increase the percentage of Arab citizens employed in hi-tech to at least 10% by 2025 by bridging together stakeholders from Arab municipalities, Arab students and graduates, government and business, to establish hi-tech hubs in Arab communities and integrate Arab engineers into hi-tech firms.
“We are capitalizing on the growing human talent in the Arab sector to lead more companies to evaluate the possibility of opening a branch, mainly R&D, in Arab cities,” Hans Shakur, head of business development at Tsofen, told the Post.
“So far, we have seen some success in this domain. Taking Nazareth as a model, only 30 engineers worked in entry-level positions in 2008. Today, we have 1,200 engineers working in 50 companies, including multinational corporations, Israeli companies and start-ups. The number is growing.”
A key factor behind the increased pursuit of academic studies and attraction to jobs in the hi-tech sector in recent years, Shakur added, is “simply because they’re seeing lots of role models and hearing about personal and professional successful stories of Arab talent who occupy high-level, executive jobs.”
Prof. Ziyad Hanna, corporate vice president of Cadence Design Systems and R&D manager of Cadence Israel, is one of those high-level, executive role models for young, aspiring Arab entrepreneurs today. Hanna has published more than 30 articles, possesses 15 patents and twice won Intel’s highest achievement award during a 17-year career at his former company.
“Entrepreneurship in the Arab community is still a green field that requires strong mentoring and guidance, with essential education starting from schools, through seminars and government and private-funded entrepreneurship centers,” Hanna told the Post.
Challenges to integrate in big companies have included risk factors, lack of business acumen and connections to investors and the overall ecosystem, Hanna added.
“Imagine we have one big exit or IPO in the Arab community. This will become a significant role model and will ignite the entrepreneurship engine for fast growth and integration of the hi-tech industry in Israel and the world.”
Successfully integrating the Arab community into the hi-tech industry, Hannah said, not only provides a “perfect solution” to solve the shortage in skilled workers, but also enables hi-tech companies to give back and develop the communities responsible for creating the next wave of innovators and leaders.
“Investment should be focused on weak communities like the Arabs in Israel, and I am glad to highlight that there are several international companies with offices in Israel, such as Cadence, that have a strong culture of integrating Arab talents in their workforce,” Hanna said.
“Once the culture of giving, equal opportunities and accepting the other is part of our daily life, I believe we will see strong prosperity and a real bridge to coexistence.”
Haifa-based IoT (Internet of things) start-up MindoLife serves as a prime example of coexistence through business and innovation.
CEO Rami Younes co-founded the company in 2014 with fellow Arab-Israeli software engineer Rami Khawaly, IDF cyber unit 8200 graduate Yoav Rosenthal and former Rafael Advanced Defense Systems engineer Noam Levi. The company provides a software platform enabling secure development and rollout of IoT solutions for both home and industry.
“If we call ourselves the Start-Up Nation, then all the economy needs to be a partner to this. Others have proved that diversity brings better results, and major companies have already adopted this,” Younes told the Post.
“We are four founders, two Arabs and two Jews with a shared background in computer engineering, and specializations in data protection,” he continued. “Even when we were working together in a small room during Operation Protective Edge in 2014, we would speak about it and simply express our opinions.”
Today, the company is home to a diverse list of 10 engineers, a variety of Jews, Muslims and Druze employees. For Younes, such diversity is the natural outcome of the makeup of Israeli society.
“We aren’t Google, which has made a policy decision regarding diversity. I met Noam because our daughters went to the same kindergarten. I worked together with Yoav in a previous company. If Arabs and Jews don’t work together, they won’t get to know each other.”
The promotion of Arab-Israeli innovation has also become an area of international interest. In December 2018, 30 Arab-led start-ups pitched their solutions to Israeli and American investors at the inaugural Nazareth Hi-Tech Investor Conference sponsored by the US Embassy and the Social Equality Ministry.
In November 2018, the British Embassy’s UK Israel Tech Hub launched Arabtech Port, a unique online resource aiming to empower the next generation of Arab entrepreneurs. Tools include a start-up video library and a start-up database for Arab entrepreneurs seeking to connect with investors, mentors and customers.
“Our vision is to offer a single go-to platform for Arab entrepreneurs or anyone aspiring to become one. It will be a facilitator and platform to share tech content, with equal opportunities for all,” Besan Asbi, Arab sector lead at the UK Israel Tech Hub, told the Post.
“Going forward, the Arabtech Port may also serve as a platform for Arab entrepreneurs to connect to other markets, ecosystems and build bridges regionally in the Middle East and beyond.”
If instilling values of diversity and opportunity into Israel’s youth is key to ensuring the equal representation of Arabs in Israeli hi-tech for generations to come, then the Peres Center for Peace and Innovation, founded by former president Shimon Peres, is leading the way.
The Jaffa-based center counts Bridges for Peace, Starting-Up Together and Education Generating Innovation among its many leadership and entrepreneurship cultivation programs based on diversity.
“One of the main goals of the Peres Innovation Center is to highlight and empower entrepreneurs from diverse backgrounds – including from the Arab sector – so that schoolchildren from all across the country can get excited about the prospects of their future as part of the Start-Up Nation,” Yarden Leal-Yablonka, deputy director-general at the Peres Center, told the Post.
Slowly but steadily, the growing public-private multifaceted approach to increasing Arab representation in hi-tech is starting to bear fruit.
An encouraging pipeline of talent and interest, combined with an increasing list of role models and opportunities, paints a promising picture of a diverse future for Israeli hi-tech.