According to the Israel Health Ministry 2020 report on health care personnel, Arabs and Druze in Israel — who make up about 20 percent of the country’s population — were the recipients of 46 percent of new licenses issued, up from 18% in 2010 and 11% in 2000.
For the Israeli venture capital fund Takwin, which invests only in startups led by at least one Arab founder, that trajectory is a good sign that Arabs will play a growing role in the country’s start-up ecosystem.
“The future is very bright for Arab entrepreneurship in high-tech and for the integration of Arabs into the Israeli society and in its economy,” Itzik Frid, Managing Partner and CEO of the Takwin firm, told The Algemeiner in an interview. “I’m very certain that the same thing that happened in the medical field — that almost 50 percent of new medical licenses were issued to Arabs — the same exact thing will happen in high-tech.”
Considered a primary growth engine of the Israeli economy, the high-tech sector today is comprised of less than 3 percent Arab citizens, while no Arab-founded unicorn or large exit of an Arab company has yet occurred. There are currently an estimated 120 active Arab startups, according to Takwin, compared to almost 6,900 registered Israeli startups cited by the Start-Up Nation Central organization.
At the same time, Frid pointed out that about 20% of the students at top technology institutions like the Technion in Haifa, Tel Aviv University and the Hebrew University of Jerusalem are now Arabs.
“We are now seeing the beginning of a trend, which is accelerating by the day and will burst once we have the first successful exit of an Arab-led startup — because then, the mother of every youngster in the Arab society will tell them to go into high-tech,” said Frid. “This will be similar to what happened to Jews who 20 years ago aspired to be doctors and lawyers, and after a few big success stories like ICQ, their Jewish mother started to understand that the next door neighbor is making tons of money from high-tech, more than they make from being a doctor.”
“The impact on the Israeli economy will be in the tens of billions of dollars,” he added.
Founded in 2014 by Imad Telhami, the Haifa-based Takwin makes early-stage investments in tech companies run by Arab entrepreneurs in Israel. The VC fund describes itself as a “journey enabler,” which brings smart money and acts as a platform for innovators in various fields such as autonomous vehicles, agriculture, seismology, and nanotechnology. To do it, Takwin partnered with the founders of Israel’s two largest investment funds: Chemi Peres of Pitango Venture Capital who is also the son of late President Shimon Peres; and Erel Margalit of Jerusalem Venture Partners (JVP).
“We are investing to make money, because we believe that only economic success stories will entice the appetite with young Arabs to become entrepreneurs,” Frid emphasized.
A recently published survey examined persistent gaps between Arabs and Jews when it comes to the sector, spotlighting opportunities to be part of the Startup Nation’s entrepreneurial space. In the survey conducted by PresenTense, with the support of Citi Israel, Arab and Jewish respondents were asked about their awareness and exposure to entrepreneurship and high-tech. 64% of Israeli Arabs surveyed said they were not familiar with Israel’s high-tech industry, entrepreneurship and innovation, compared with 88% of Jewish respondents who answered that they had heard of or been exposed to the industry.
A further 78% of Israeli Arabs said they had no personal connections with entrepreneurs or employees in the industry, compared with 62% of Jewish respondents. Only 1% of Arabs reported that they work in the sector, according to the survey.
One hurdle has been the importance of the military, which does not conscript Arabs, as a pathway to future work in the sector. Arab Israelis living in the peripheries of Israel and cities like may also be further removed from the tech hub of the Tel Aviv region.
“We build a bridge to provide them with the tools that young Arabs who want to become high-tech entrepreneurs are missing when they come out of university,” said Frid.
Apart from financing, Takwin also provides fundamental tools, support and mentoring by experienced investors on the technical side of how to build a startup and grow a team.
“I have personally seen more than 1,000 Arab entrepreneurs in the six years that we have been active,” Frid said. “We do not ask anybody for a preliminary requirement. People can come to us and just talk about an idea that they have in mind.”
The VC fund has so far raised $12 million from both Arab and Jewish investors, as well as from others in New York and Boston, and has invested $500,000-$1 million in eight companies. One of the fund’s first startups, Imagry — a vision-based autonomous driving company in which it initially poured less than $1 million — has raised funding at a company valuation of $80 million, Frid recounted proudly.
Another company in the fund’s portfolio is Seismic AI, which focuses on technology to predict earthquakes. SooS, a third, has developed a sound vibration technology to change the gender of chicks from genetic males into functional females during the hatching stage.
“Among our eight companies we have eight PhD graduates and four professors,” said Frid. “This is not something you will see in Jewish-led, early-stage startups, as people start after their army service or after a first university degree.”
“We also take great pride that 25 percent of our companies are led by women,” he added.
The aggregated valuation of the startups in the fund was once less than $8 million, and today stands at over $170 million. The companies started with a workforce of 14 entrepreneurs and are now employing a total of almost 200 Arabs and Jews.
Takwin is currently preparing to raise money for a second fund of up to $100 million, with Frid planning a roadshow on the US West Coast to meet investors. Though none of its startups have had any exits so far, the VC fund chief is optimistic.
“We believe we can get to a value of hundreds of millions of dollars, with some of our portfolio companies that are doing very well,” he said.
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Author: Sharon Wrobel
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