(This is the first in a series of posts.)
After attending several business conferences recently and hearing countless people sing the praises of Israel as “Startup Nation,” that is probably leading accounting trends in some areas, I noticed one glaring omission from the new companies: Arabs. Where exactly, I wanted to know, do Israeli Arabs fit into the country’s much vaunted high tech scene and are there any Arab entrepreneurs in Israel.
Israel is now known in the international business community as the place to go to find innovation – cutting edge if you prefer – in the world of technology. Waze, Checkpoint, Mobileye… the list of Israeli tech startups which have had successful exits goes on and on.
Boycotts be damned! Investors come from all over the world, from Europe and China, Jews and non-Jews alike, to put their money into Israeli firms and to learn how to innovate. (See this article for more on that.)
But it seems that the typical Israeli entrepreneur – or would be entrepreneur – is always Jewish. What about the Arabs, Christian and Muslim alike? Don’t they have any startups?
Well I finally had a chance to find out about a few such companies and entrepreneurs at the launch of the Mass Challenge which was held last week at a social hall at Jerusalem’s new “First Station” entertainment complex. Set at the location of an old rail station, First Station – Tahanah Rishona in Hebrew – is filled with restaurants situated in a renovated old building as well as several new outdoor shops. It also marks the starting location of Jerusalem’s new bicycle and pedestrian trail which runs along an old train line.
It was there where I met Anan Copty and Hafeth Zughayer. Anan and his partner Butros Hallac are two PhDs from Jerusalem whose new company, Noninvasive Medical Devices (NIMD), is developing a new and safe way to treat cancer tumors with microwaves coupled with nano technology. Hafeth has a new app called UBcard which lets people do away with traditional printed cards.
I was impressed because this was the first time that I actually met Arab entrepreneurs after having covered a number of such events in Israel. They were at the Mass Challenge kickoff manning tables to promote their companies. It was too loud to interview them there, so we agreed to meet at a later date at their respective offices.
NIMD has a small office on the second floor of the Azrieli Technical College in Jerusalem’s Beit Hakerem neighborhood, right near the Shaarei Tzedek hospital. Its founder and CEO, Anan, picked me up in front of the hospital and drove me the 5 minutes to the school. It’s not so easy to get there these days because you have to take the light rail down Herzl Blvd and from the stop near the hospital there is no bus that goes into the neighborhood.
So much for Jerusalem’s supposedly new and improved public transportation.
Anan and my talk began in his car and this is where I first learned that he and his partner are both Christian Arabs. Unfortunately, this does not make it any easier for them in the Israeli business world, nor at the airport. (More on that later.)
Their large one room office, which is also their lab, has a beautiful view of the surrounding area. The school is just above the little valley where the Begin highway runs. On the opposite hilltop lies the Givat Ram campus of the Hebrew University. You are at eye level with the campus from NIMD’s office.
Their window looks straight out at rows of old bunks or trailers which once housed dormitories for the University. They are now mainly used as a new high tech startup park. The fact that Anan and Butros are not situated there is telling.
Three people work here, Anan, Boutros and a Muslim Arab woman. The company currently has $600,000 in funding, $500,000 from the office of Israel’s Chief Scientist and the rest from private investors in Israel and Canada. As is usually the case in these situations, they did not wish to identify their private investors.
The office of the Chief Scientist of Israel has programs which provide capital for startups. Usually it requires the recipient to get 40% of the needed seed funding, but under a special program to encourage Arab entrepreneurship NIMD only needed 15% in matching funds.
The firm is currently looking for $4 million in further investment and anticipates a need for $20 million in total. These funds are necessary primarily for the expensive process of conducting formal studies in order to get FDA approval in the U.S. The Food and Drug Administration is the biggest hurdle for medical companies because getting its approval means it’s easier to get similar approval around the world. The FDA does not accept trials conducted in countries like Israel.
There will also be the obvious expenses of hiring more staff, paying for lawyers and consultants. NIMD hopes to have 10 employees by January, 2017. The company expects that it will take four more years to complete the necessary R&D and go through all of the trials.
Anan, 44, has 2 kids and lives in the Beit Safafa neighborhood on the southern end of Jerusalem. It is essentially a little Arab village which is now surrounded by new Jewish neighborhoods like Gilo. He has a PhD in physics from the Hebrew University. He also has worked in research at Harvard physics, astrophysics and medical schools. His partner, Butros Hallac, is 35 and has 4 children. Butros has a PhD in physical-chemistry from the Hebrew University and a background in medical tech. He lives in the Beit Hanina neighborhood in Jerusalem. The two men met during their tenure on the staff of Intel’s Israel division.
So what does NIMD do? The one and a half year old company offers a new way to treat cancer tumors with microwaves. Yes microwaves. This is not new. Microwaves are currently used as an alternative to radiology and chemotherapy for fighting cancer. All three reduce the size of, and hopefully kill, cancer tumors. But they all have bad side effects. With microwaves, which are “fired” at a tumor to use heat to kill the cancer cells, the problem is that healthy tissue around a tumor is also damaged.
But NIMD has an innovation which utilizes nano-tech. The nanoparticles (meaning very very small things) know to attach only to cancer cells and leave healthy cells alone. In this way there would be no negative side effects from the treatment.
The device is a big metal box. I was only allowed to look at its back side. They would not let me see the side that actually does the work so I cannot even describe it to you. The need for such secrecy in high tech startups is understandable. What I can tell you is that, even though it is a big box which uses microwaves, you cannot cook your lunch in it while treating cancer. I know because I asked.
What was it that led two scientists with secure careers and jobs at a major company like Intel to forsake their positions in favor of trying the highly risky world of startups? Speaking of startups, when my friend started his, he decided to make use of one click upsell shopify. He tells me it increased their ROI. I have also heard that having the right small business management is critical to startup success. Consider taking on some small business management tips to improve your chances of a business success story.
Anan and Butros got the idea for NIMD while working together at Intel. They wanted to do something more meaningful that would help better the world.
“All of us here are more touched by things that have a more humanizing impact. We are here to make some change in our lives in order to hopefully impact others for the best,” explained Butros. “If you don’t take a risk then you don’t get to do what you really want and lie the way that you want.”
Butros put it best when he turned to Anan and said “remember what we said back then, we decided that it was now or never. The best time to plant a tree that has yet to be planted is now.”
As far as being Arabs trying to succeed in a field in a country which is dominated by Jews they pointed out that their product, a medical device, does not distinguish between any patient’s religion or nationality. That being said they have had problems when it comes to trying to raise new investments. Anan said that most people assume at first that they are Jewish and not having served in the Israeli army makes it harder for them to network. People always ask where they served, what they did. Indeed, the book “Startup Nation” assumes that service in the IDF’s tech units has been a major boost to Israeli entrepreneurs.
As Anan explained, when companies in Israel, like Intel where he worked, look to hire new people they are impressed most by those who served in the IDF’s tech units like the well-known 8200. If you served in one then “you’re a big hit. If you haven’t been in those you are less of a hit,” he said.
Anan feels that Israeli VC firms and potential investors are not so quick to invest with Arab startups. He said that no one will say it out right but they never hear back from many the places where they have sought funding. That being said, VCs do not generally tell startups why they got rejected, especially if the chose to go with a new company which has a similar idea.
“We want to show that people can work together in spite of religious differences. Arabs and Jews, Christians and Muslims, all working together,” said Butros. He added that they want to serve as an example for cooperation between Jews and Arabs and to show that separation between the two groups is not necessary. They believe that professional cooperation between the different ethnic groups in Israel is really needed and they are certainly planning on bringing in Jewish employees.
In fact, even though they are Israeli citizens, the two are treated differently at the airport than other Arabs from Israel’s North. They believe that is because they live in in Jerusalem. As an Arab, “when you live in Jerusalem you get special treatment and I don’t mean that in a positive sense,” Anan said. He explained that when he travels the person who performs the initial security check at Ben-Gurion always places a red sticker on his passport. Because of this, when he gets to the main security check before passport control the two are always taken aside and have every item in their carry on luggage checked by hand.
So where do Israeli Arabs go to get started in the high tech sector? NIMD was helped by an organization called JEST: Jerusalem Entrepreneurial Society of Technology.
Most people who read articles like this on line have a short attention span and do not like it when they run long. So I will save the story of JEST, Hafeth’s company and more for the next installment of this series on Arab run startups in Israel.