Funding options on the rise for Palestine startups

Pexels/Mikhail Nilov

• Bank of Palestine incubator launches next year
• VC fund has invested $15m
• 30% of funding for Palestinians in Mena

Palestine is home to a wealth of entrepreneurial talent but its startups have struggled to gain access to funding.

A number of initiatives are aiming to change all that by doubling the amount of startup funding available and offering mentoring opportunities.

Support is also being offered to Palestinians living in the Middle East and North Africa (Mena) region.

• Innovation hub helps launch Palestinian startups in Gulf
• Saudi Arabia launches $200m fund to invest in tech firms
• Dubai SMEs turn to banks as VC funding declines

Intersect Innovation Hub (IIH), a startup incubator that is backed by the Bank of Palestine (BoP), is committed to providing entrepreneurs with access to a network of private sector players and tailored financial products that meet entrepreneurs’ needs.

The IIH is planning to launch a grants programme in January 2024. It aims to provide startups with $5,000 to $15,000 to help get their business off the ground. 

“We want to make it easier for them to scale up and expand,” Rateb Rabi, CEO of IIH, told AGBI. “We have only one condition, which is that their main office remains in Palestine – we don’t support brain drain.”  

IIH also works to ease startups’ access to funding by helping them move from the idea stage to the minimum viable product and income-generating stage.

“Each startup is teamed up with a mentor and a financial adviser. We have also established a financial clinic to help them understand how to create their own Excel sheet that is tailored to their business model.

“Previously most of the startups were copying Excel sheets online and just changing the names and numbers.” 

IIH was launched by BoP’s chairman, Hashim Shawa, in Ramallah in 2020. It now operates in Ramallah, Nablus, and Hebron, and bases in Gaza City and Jerusalem are on the way.

Shawa is also the founder and chairman of Palestine’s only venture capital fund, the Ibtikar Fund, which is playing a critical role in funding the growth of Palestinian startups. 

“We share the same management office in Ramallah with Ibtikar,” said Rabi. “So, this means that when many of our startups visit us, they benefit from the expertise of the fund managers. 

“Ibtikar professionals will frequently sit with them and tell them ‘This idea will work but this tool won’t work’ and they’ll support them in every possible way.” 

Increasing investment

Ibtikar’s anchor investor is the BoP, but it is also supported by the Netherlands’ Good Growth Fund and the International Finance Corporation, as well as Palestinians living overseas. 

Ibtikar’s inaugural $10 million fund was launched in 2016 while its second fund was launched last year. 

The latter invested $1.4 million last November in three Palestinian startups – healthtech company Alma Health; software development firm Algebra Intelligence; and Vatrin, a platform that enables small- and medium-sized enterprises to easily set up an online store using their WhatsApp number in seconds. 

To date, Ibtikar Fund II has invested a total of $15 million, and its target is to reach $30 million by the end of the year. 

Palestine’s Al Quds Bank and telecoms company Mada will be joining the second fund, while the Good Growth Fund has increased its investment from $1 million to $6 million. 

Last month, Ibtikar Fund II announced its investment in a Palestine-based AI data training startup, DataQueue.

The funding seeks to provide DataQueue with the resources to develop its technology, strengthen its research and development capabilities, and expand its customer base.

Notably, 30 percent of Ibtikar Fund II can be allocated to Palestinians living in the wider Mena region. 

Startups in Palestine are increasingly expanding into the Gulf, with the UAE and Saudi proving the most attractive markets to date. 

According to Rabi, IIH and Ibtikar Fund are currently in talks with global tech accelerator Techstars to launch a sizeable funding programe for Palestinian startups by June next year.

“Having an international accelerator in Palestine would really help shift the needle, so it is exciting,” said Rabi. 

Feras Nasr, innovation manager of UK Palestinian Tech Hub, which is helping to foster commercial ties between Palestine and the UK, is also optimistic about the growth prospects. 

“I think the Palestinian startup sector has huge untapped potential,” said Nasr.  

“There’s now a big focus on trying to bring in international investors and VCs and create angel investor groups.

“I think we have a really good chance of creating a very viable and prosperous tech ecosystem in Palestine.

“Eventually, we’d like to get to a point where Palestine is known for a specific sector in the tech world.”