Israel's tech future lies with Arab entrepreneurs

An increasing number of Israeli Arabs are taking the bold step of launching their own startup companies.

The Takwin VC Fund announced March 30 that it was going to raise $80 million to invest in startups founded by Israeli Arab entrepreneurs. It has already raised tens of millions of dollars for this venture. This is the second time that Takwin is embarking on such a mission. Investors include such well-known figures as the chairman of JVP, former Knesset member Erel Margalit, and Chemi Peres, son of the late President Shimon Peres, who is a founding partner in the venture capital fund Pitango.

Although Israeli Arabs make up about 21% of Israel’s total population, it suffers from serious underrepresentation in the high-tech sector. As of today, there are only 7,500 Israeli Arabs working in high-tech, where they make up just 2%-3% of the workforce. When it comes to startups founded by Arab entrepreneurs, the picture is even more dismal. “Of the 10,000 startups in Israel, only about 100 were founded by Arab entrepreneurs,” said Khalil Shawahna, an entrepreneur from the town of Sakhnin. Shawahna was on a panel discussing entrepreneurship and high-tech in the Arab sector, during last month’s second annual conference of the Arab Economic Forum.

“Arab society is rich with talented young entrepreneurs whose dreams are restricted by the limited opportunities they face in Israel’s high-tech sector. Geographic and societal factors pose significant but not insurmountable barriers,” said Imad Telhami, founding partner and chairman of Takwin. “Addressing these barriers not only helps to advance the aspirations of a large, ignored segment of the population, but also advances the collective good of all Israelis, if the high-tech industry is to meet the increasing demands for talent and innovation. We founded Takwin with the principal intention of leveling this playing field and bringing bright, ambitious Arab Israelis into the fold.”

There is no doubt that the Arab society has experienced real growth over the last few years, when it comes to integrating into high-tech industry. In the past, the focus was on including Arab employees in existing firms. A general shortage in Israel of qualified high-tech employees encouraged many companies to launch recruitment campaigns in Arabic and to exploit social media networks targeting the Arab population to recruit new staff. As mentioned, the number of Israeli Arabs in high-tech is still low, and has yet to break 3%. Nevertheless, that is already an enormous improvement, compared with a decade ago, when the number of Arab employees was just a few hundred, or less than 1% of all Israelis employed in the industry.

The real change occurred in the field of entrepreneurship in the Arab society. If, in the past, the goal was to integrate into existing firms, today there is a new generation of Arab high-tech specialists who are thinking a few steps ahead. Their goal is to establish a company of their own, instead of making do with the title of engineer in an existing high-tech company. They want to live the Israeli startup dream.

This phenomenon did not exist in the past. In fact, it only started to gain momentum in the past few years. It certainly has not been ignored by the government. Upon the founding of the new coalition last year, the government announced that it plans to advance a special long-term plan costing over $500 million shekels ($155 million), to bolster and support high-tech and science in the Arab society. This was the conclusion of an agreement between Minister of Innovation, Science and Technology Orit Farkash-Hacohen with the chair of the Ra’am party, Knesset member Mansour Abbas.

As part of the government’s plan, the Innovation Authority and the Authority for the Economic Development of Minority Populations launched last January a five-year comprehensive program to promote high-tech and innovation in the Arab society, at a cost of 225 million shekels ($70 million). The program includes the creation of an incubator to encourage Arab entrepreneurship, with the goal of promoting the establishment of new startups in the Arab sector.

One of this new generation of entrepreneurs is Mohammad Owesat. He began his career as an engineer at Intel, and is now a founding partner in the startup Kideo. Founded in 2018 in the town of Tamra in the north, Kideo develops educational games for children ages 3-14. As of today, it has 250 million users around the world. The company is now looking for new investors.

In a conversation with Al-Monitor, Owesat congratulated Takwin for its statement, saying, “Every initiative intended to contribute to high-tech industry in the Arab society should be congratulated. Recently, we have witnessed significant momentum in overall exposure to technology in the Arab society. It is the result of many years of hard work by nongovernmental organizations and individual entrepreneurs, who made sure to create a new generation of people, who want to change the rules of the game.”

Owesat recounts that when he started five years ago, it took a lot of courage and self-belief. “Together with some friends who worked with me at Intel, we decided that we are able to create something new, and that we can do it ourselves. That’s how we started Kideo. Looking back, I’m convinced that the chances for success today [for young Arab entrepreneurs] are much higher than they were in the past."

He added, "One reason for this is that now we have a community of entrepreneurs in the Arab society who support every such step. If, in the past, people’s backgrounds and origins were an obstacle, we can say today that this is much less of a factor among significant investors. As of now, our company has 20 employees, including engineers from the Jewish sector. We have recently started to consider approaching venture capital funds like Takwin in order to raise funding for investment in the company.”