For the legions of tech startups in Israel, access to capital, talent, and advice is easy. Not so in the West Bank. Tech companies exist in the nascent Palestinian state, but keeping a business together is full of challenges.
Some are the normal growing pains of any startup, but startups in Palestine face a whole other set of political, social, and economic challenges, all stemming from its deeply troubled relationship to Israel.
One tech company there, the mobile studio PinchPoint, contacted VentureBeat about one of its games a few weeks ago as the violence in the Gaza Strip was escalating. An email exchange followed, with PinchPoint painting a picture of what it’s like to be a game developer in Palestine.
Launched in 2013, PinchPoint is not the first Palestinian game studio, but it is the first venture-backed Palestinian developer doing only games, the company’s CEO Khaled Abu Al Kheir points out. A few other West Bank companies develop games as side projects, he says.
PinchPoint is headquartered at “8 Struggle Street” (really) in the city of Ramallah in the West Bank, which is on the other side of Israel from Gaza. That’s why Ramallah has not been the target of the recent Israeli attacks, which have stopped as part of a cease-fire that began Tuesday.
“The current Israeli airstrikes are focused on the occupied Gaza Strip, so we’re not very close to the current aggression, although Ramallah and other West Bank cities did get its share of military incursion a few weeks ago,” Al Kheir said before the cease-fire. “But it’s relatively calm in the city right now.”
The Israeli army was conducting door-to-door searches of Palestinian homes during June, looking for a rumored “Hamas terrorist” who kidnapped three Israeli teens.
Happy games from an unhappy place
PinchPoint now has five games in the apps stores and another one on the way. These are light-hearted, funny, and addictive mobile experiences.
One, “EggHead Runaway,” is an “endless runner” in which you guide little EggHead on its adventure to break through walls and collect colorful candy pieces. In another, “Spermania,” you help little colored sperms reach their egg (“There is no going back, no surrender, and only one winner.”) In the upcoming “City Cafe” game, you play local Middle Eastern card games and smoke a hookah on the side.
In addition to its own proprietary games, PinchPoint publishes mobile games for other Palestinian and Middle Eastern game developers.
The company has backing from Palestinian venture-capital group Sadara Ventures (which gets funding Cisco), Google (via the Google Foundation), The Soros Economic Development Fund (and affiliated individuals), The European Investment Bank (EIB), and the Skoll Foundation.
“PinchPoint has a fantastic team, and have demonstrated a unique ability to come up with engaging, genuine gaming concepts for mobile and desktop,” said Sadara founding partner Saed Nashef in a statement after his firm made its original investment in PinchPoint. “We’ve made this seed investment to help them demonstrate early traction, and execute on their game design and technical potential.”
The gaming space in Palestine consists of just a few companies, and none are making much money from selling the games. Until just six months ago Palestinian developers were unable to receive payments from the Apple App store, so they couldn’t make money from iOS apps. There’s no iTunes store for Palestine, and Apple does not accept Palestinian credit cards.
Welcome to the West Bank
Compared to businesses in the Gaza Strip, PinchPoint’s problems are more subtle and functional, but they still very much the result of living under Israel’s shadow.
In the West Bank, Israeli security forces control everything, Al Kheir says, which makes getting in contact with potential investors and internationally experienced advisers difficult.
“Israel controls the borders, and they won’t allow anyone who wants to go to the West Bank into Israel,” Al Kheir says. “Some visitors lie about the goal of their visit, but on their way out they go through a rigorous interrogation, and if the Israeli forces find out that they were in Palestine, it would probably be their last visit.”
It’s almost impossible for Palestinian entrepreneurs to meet potential investors in Israel, because most Palestinians cannot go into Israel without a permit, and the permits are difficult, if not impossible, for young Palestinians to get.
The last option is to travel, which is equally difficult. To fly anywhere, West Bank people must leave from Jordan. The border with Egypt has been closed.
“The only way for Palestinians to travel is over the King Hussein bridge to Jordan, which is controlled by Israel, who make sure you are not having a pleasant trip,” Al Kheir says. Taking the bridge adds an extra two days to any journey, and a lot of extra cost, since the bridge operates only during business hours on most days and only until noon on Fridays and Saturdays. And flight times often don’t sync up with the times the bridge is open.
The Israelis also impose limitations on what Palestinian companies can work on — especially IT companies. They fear that what’s being developed could be used for against Israel. “Of course, if a company needs to export or import hardware, it’s complete hell,” Al Kheir says.
Investments improving, long-terms risks remain
Today, Palestine has just one startup accelerator, a few incubators, one early-stage VC, and a few later-stage VCs. But Al Kheir says investors have been warming up to the idea of investing in Palestinian startups in the past few years.
“The reason for their interest is the fact that Palestinian entrepreneurs seem to be very innovative and creative, have access to the Arab and Muslim markets, and have access, to some degree, to the Israeli tech scene to learn from,” he said. “And the reason it’s not huge, is the simple fact that the whole sector is still very young and the risks are high.”
And potential investors are keenly aware of the risks that grow from the legal, social, political “otherness” of Palestine.
“Ramallah is in the West Bank, so you’re dealing with a place that’s controlled by the Palestinian Authority,” says Yoav Leitersdorf, the managing partner at YL Ventures, a VC based in San Francisco and Tel-Aviv that focuses its investments on Israeli tech companies. “It’s just like investing in a different country with a different legal system and regulatory framework.
“And on top of that, there is also the political situation — the state of affairs between Israel and the Palestinian Authority.”
Ramallah, where PinchPoint is based, is seen as a safer place for investments than other more politically troubled places like Gaza. “There are several Israeli and Israel-related funds and other types of investors, including angel investors, that are actively investing in Ramallah-based startups,” Leitersdorf says.
The main reason for this is that the Palestinian Authority in the West Bank has been working to improve relations with Israel in the past few years. “You’ll notice that they [the Palestinian Authority which controls the West Bank] did not materially partake in the current conflict between Israel and Hamas,” Leitersdorf says.
So Israeli and Israel-related investors have been encouraged to look seriously at investments in Ramallah. Leitersdorf believes there are a dozen to two dozen companies there that have received investment from Israeli or Israel-related investors.
“The challenge has been that investors are looking at the long term — a typical investment horizon is one to two decades and investments in Ramallah are dependent upon things remaining quiet between the Palestinian Authority and Israel,” Leitersdorf says. “Unfortunately, it is possible that there could be more conflict in the future. Certainty a third Palestinian uprising could completely wipe out the value of such an investment.”
Searching for talent, money, and knowledge
Not all of PinchPoint’s problems arise from the political situation. “Many of the challenges we face are the same everywhere else in the world,” PinchPoint’s Al Kheir said. “We are always on the hunt for the next investment and we are always short on talent.”
But Al Kheir says artwork designers are particularly hard to find in Palestine, and finding talented game developers has been even more difficult.
“The biggest challenge for PinchPoint has been to find talented designers who can create concepts, game levels, and come up with monetization ideas — there are none in Palestine,” he says. “So we hired a Canadian game designer as a consultant who handles the game design and will train Palestinian game designers.”
PinchPoint didn’t rely on venture capital starting out, but rather got funding from international aid agencies like USAid and the Canadian Aid program. Those groups, Al Kheir says, were initially focused on building a better outsourcing sector in Palestine, but the plans didn’t work out.
So the agencies started thinking about other parts of the IT sector, and the next obvious option was entrepreneurs and startups. “So they started with training programs and workshops, then they started giving grants to entrepreneurs to start new companies,” Al Kheir says. “This paved the way for venture capital firms — which are not that many by the way.”
Later on, in order to access venture capital, PinchPoint had to register the company as headquartered in Delaware USA and list the Ramallah office as a “Palestine branch.” Al Kheir says Palestinian law is currently not investor-friendly, but that a new law is now being introduced to correct the situation.
Despite all of these problems, the tone of the emails that came in from Al Kheir didn’t sound distressed or unhappy. The CEO’s excitement about his company and games in general seemed to radiate from his words.
Whether PinchPoint will be able to continue making games and perhaps expand their business depends a lot on the fate of the West Bank, and it’s tenuous relationship with Israel.
The truth is, you’ll find a wide spectrum of beliefs among Israelis about the Palestinians. Israelis on the left are almost militant in their belief that Israel should recognize, respect and cooperate with Palestinians. But others on the far right don’t even recognize the Palestinians’ right to exist, and will have nothing to do with them.
When political power is concentrated on the right side of the spectrum, as it is now, investment in Palestinian companies becomes more risky.
If Palestine becomes more and more locked down by the Israeli presence, it may become harder for the region’s tech startups to survive.