Yadin Kaufmann, who invested in Israeli startups that gave the world the USB flash drive and satellite communications systems, and Palestinian software entrepreneur Saed Nashef recruited an initial $28.7 million from companies like Google Inc. and Cisco Systems Inc.
They said their aim is to boost the West Bank's community of software entrepreneurs and build a robust economy for an eventual independent state.
"It's not a political statement," the US-born Kaufmann said Thursday. "It's an interesting business opportunity and an opportunity to participate in the creation of something very important ... we're all interested in seeing a knowledge-based economy develop in Palestine."
The Sadara Fund, also called the Middle East Venture Capital Fund, boasts a list of high-profile backers, including the EU's European Investment Bank and an investment fund of billionaire George Soros.
The fund, set to be launched this week, intends to invest its $28.7 million in about a dozen companies over the next five years.
It's a modest sum by international venture capital standards, but Kaufmann said it's almost identical to the amount of money that Israel's first venture capital fund, Athena, began with in the late 1980s.
Since then, Israel has gained an international reputation for its start-up culture, creating technologies like Internet telephony and instant messaging.
Many Palestinian high-tech entrepreneurs have been learning from their Israeli counterparts. Some Israeli-based tech companies have broken the political and cultural barrier and begun doing business with Palestinian engineers.
The Israeli branches of Cisco, Microsoft Corp. and Intel Corp. have all begun to outsource work to Palestinians, according to Mercy Corps, an aid group working to forge Israeli-Palestinian high-tech ventures.
'Good investment opportunity'
Nashef, who spent nearly 20 years working at Microsoft and other software companies in the US, said the startups they choose to fund will benefit from their proximity to Israeli companies.
"When you have something available to you next door in Israel – partnership deals, exit opportunities – why go halfway around the world to do it?" Nashef asked. "We'll be able to open those doors."
Nashef said the Palestinian territories are proving themselves a breeding ground for technology entrepreneurs. According to the Sadara Fund, there are about 300 new high-tech companies and more than 2,000 engineering and technology students graduates each year.
It's also a good investment opportunity, he said. Salaries in the West Bank are low, in comparison to Israel and the West, but workers are talented, and the high-tech market in the Middle East is booming.
Nashef said Palestinian entrepreneurs today are developing all kinds of innovative products, from Twitter-like social media platforms to voice-delivered online advertisements.
The fund has not yet announced which companies it will support. Fund managers are evaluating potential investments in Palestinian startups that are developing mobile phone applications, social media and software.
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