Tuesday, April 17, 2012

New Fund Bets You'll Agree Palestinian Start-Ups Are The Way To Go!

Israeli Yadin Kaufmann and Palestinian Arab Saed Nashef have started Sadara Ventures to invest in the Palestinian Territories:
The firm, Sadara Ventures, which has the backing of prominent institutional investors including Cisco, the European Investment Bank, the George Soros Fund and Google, is poised to make its first investment.

“There’s a small but significant number of very educated entrepreneurs who need capital and access to international markets,” Mr. Kaufmann said.

Sadara Ventures is joining a growing wave of investors plowing money into the Palestinian territories. Rasmala Investment Bank, a regional investment banking group with a head office in Dubai, started a Palestinian fund last May with plans to raise $100 million over the next three years. Siraj Fund Management began its $60 million private equity fund, Siraj Palestine Fund I, last year. And last month, Abraaj Capital raised $36 million for its Palestine Growth Capital Fund. Sadara plans to invest exclusively in Palestinian technology start-ups and aims to take stakes in about 15 companies over 10 years.
This sounds impressive, and I'm sure these experts know what they are doing.
And the facts Nasher gives do sound impressive:
With the backing of such companies, Sadara is evaluating start-ups to make the fund’s first investments. Mr. Nashef estimates that there are more than 300 technology companies in the West Bank and Gaza Strip, with about 3,200 people working on mobile apps and innovative Web sites like yamsafer.me. Mr. Nashef, 42, the founder of the software consulting firm Equiom and a former Microsoft software engineer, said that potential encouraged him to return to the region from the United States.

The broader economy, too, is proving resilient amid the revolutions that swept the regions. Last year, the Palestinian stock market was among the best performing in the Middle East.
Still, some of the comments do invite cynicism:
“Our investors often ask us about political sensitivities when fund-raising, especially during the Arab Spring, but the truth is that Palestine is not new to instability,” Mr. Nashef said in a telephone interview from East Jerusalem. “Palestinian people have been living under occupation for a long time and despite hardships, people still need to put food on the table. This has resulted in a lot of savvy entrepreneurs with resilient, adaptive business models.
Perhaps, but does tunneling and smuggling really qualify as a business model?
Even though venture capitalists often expect to wait years for a payoff, Mr. Kaufmann said potential investors were initially skeptical that Palestinian start-ups would ever yield good returns, given the changing political climate in the Middle East. He reminded them that Israeli technology firms faced similar concerns in the 1980s, when many foreign investors refrained from putting money into Israeli technology companies for fear of possible war and because the sector was still unproven.
I'm not a business person, but I'm sure there are enough significant differences between Israel and the Palestinian Territories (a history of corruption and incompetence in the latter come to mind) that such a comparison does not really hold.

Finally, throughout the entire article, there is no mention of the 2 major investors in the Palestinian Territories without which this whole venture is unlikely to work: the United States and the European Union, without whose consistent funding of the Palestinian Territories themselves the territories themselves--forget about the technology sector--would collapse.

Technorati Tag: and and and .

No comments: