Itzik Frid on why Israel’s tech scene has so few Arab-led startups

Arabs only make up 3% of
Israel’s tech industry. Itzik Frid, pictured, thinks he knows
why.

Harrison
Jacobs/Business Insider

• Israel is
  often called the “Startup Nation” due to the sheer number of
  entrepreneurs and tech companies in the country of 9 million
  people.
• While Arabs make up 21% of Israel’s population, they
  currently only make up about 3% of the tech workforce.
• Itzik Frid, a longtime Israeli tech entrepreneur and the
  CEO of a startup incubator focused on Arab-led startups, thinks
  that the lack of Arab representation comes down to four
  factors, including geography.
• Most Arabs in Israel live far from Tel Aviv, Israel’s
  tech hub. But he thinks that could be starting to
  change.
• This post is part of Business Insider’s series on
  Better
  Capitalism.

Israel produces an impressive number of highly successful
tech companies for a country with just 9 million people, from
social navigation app Waze, which
sold to Google in 2013 for $1.15 billion, to autonomous
driving company Mobileye, which sold to Intel last year for a whopping
$15.3 billion.

Israelis have long lovingly referred to the Middle Eastern
country as the “Startup Nation,” thanks to the sheer number
of entrepreneurs building businesses there, particularly in
cities like Tel Aviv.

But, there’s one group in Israel that hasn’t truly benefited from
the red-hot tech industry: Arab-Israelis. While Arabs make up 21%
of Israel’s population, they currently make up 3% of the
workforce in the tech industry. There are likely even fewer Arab
entrepreneurs.

Itzik Frid, a longtime Israeli tech entrepreneur and venture
capitalist, is trying to change that. He is the CEO of Takwin Labs, a venture
capital firm and startup incubator focusing on Arab-led startups.

“We don’t invest in [Arab-led startups] because of philanthropy.
There’s nothing wrong with philanthropy,” Frid told Business
Insider. Investing is about business.

“We’re not sitting here saying, ‘Oh those poor Arabs, we screwed
them for so many years, and we need to make it up to them,'” Frid
said. “Yes, they were screwed, and they were discriminated
against, but you cannot start a startup company from this. Nobody
will care when you release a product to the market whether the
one who programmed it was screwed, or his parents were screwed in
1948 or 1967.”

A view in Takwin Labs in
Haifa, Israel.

Harrison
Jacobs/Business Insider

There are many proposed explanations for why there aren’t more
Arab-Israelis in tech. Some suggest the insularity of the Israeli
tech scene, which draws heavily from army units, puts Arabs at a
disadvantage. By law, all Israelis must serve in the Israel
Defense Forces, but few Arabs do. 

While Frid doesn’t dispute that insularity may play a role, he
thinks there are four major reasons for why there aren’t more
Arabs in Israeli tech.

1. Arab cultural and social attitudes around
failure

Jewish and American cultures tend to have a high tolerance for
failure due to familiarity with the entrepreneurial process.
Generally speaking, Arabs don’t, Frid said.

“With Arabs, it is often ‘failure is not an option’ in the sense
that if you fail once, you will be stamped with that failure for
the rest of your life,” Frid said. “You cannot be an entrepreneur
if you do not embrace failure. Because you will definitely fail
at least once.”

2. There are no major success stories of Arab
entrepreneurs

While entrepreneurial American kids look up to Mark Zuckerberg
and Bill Gates as cultural heroes and Jewish-Israelis aspire to
build the next Waze or Mobileye, there haven’t been any major
Arab entrepreneurs in Israel yet.

Success stories, Frid said, have an amplifying effect, convincing
other would-be entrepreneurs to take the leap. Creating those
kinds of success stories is Frid’s goal with Takwin Labs. All of
the companies in Takwin’s portfolio come from entrepreneurs with
Ph.Ds in highly technical fields and involve deep tech like
computer vision, autonomous driving, and nano-technology.

“If we want to create an ecosystem and successful infrastructure
of the first [Arab entrepreneur] heroes that will pull everybody
after them, we need to create success stories that will be huge
on an objective level,” Frid said. “Not a local level.”

3. A lack of experience

 This goes back to that mandatory army
service for Israeli Jews. Some army units, like the Unit
8200 intelligence team, have become renowned for providing
recruits with high-level cybersecurity skills and producing
alumni who have started many of Israel’s top startups.

In addition to gaining a large social network and prestige from
serving in units like 8200, Jewish-Israelis gain years of
invaluable experience in both management or technical skills
before ever entering university or the workforce.

4. Geography

It may sound strange, with a country the size of New Jersey, but
Frid thinks that the biggest barrier to Arabs entering tech is
geography.

Most Arabs live in the so-called “peripheries” of Israel. Nearly
all of Israel’s tech industry is centered around the city of Tel
Aviv on the coast. Most Arabs live either in the north in the
Galilee region or south in the Negev Desert. While many Jews grow
up far from Tel Aviv, they tend to be more open to the idea
relocating to the city if they have an interest in tech. Arabs,
not so much, according to Frid.

“Even if an Arab guy finishes number one in his class at the
Technion, he will probably still go back to living in his
village. He will try to build a house, get married, and find a
steady job near his village,” said Frid.

Even those who secure jobs at the R&D centers of top
companies like Google often end up commuting two hours every day
back to their village in the Galilee to stay close to their
families.

“That’s not the way to build a career,” Frid said.

The entrance to Takwin
Labs in Haifa, Israel.

Harrison
Jacobs/Business Insider

That may be starting to change. Frid has headquartered Takwin
Labs in the northern city of Haifa to take advantage of its
proximity to the Technion, Israel’s M.I.T., and the Galilee
region where most Arabs live.

Erel Margalit, a legendary Israeli venture capitalist and
politician,
has made developing the so-called “periphery” of Israel his
chief initiative after resigning from the Israeli parliament. His
plan involves
developing seven “regions of excellence” focused on
developing different industries in marginalized areas.

And Arab-Israeli Fadi Swidan has worked with tech entrepreneur
and Unit 8200 graduate Ron Aviv to
co-found Hybrid, an accelerator program that helps startups
with mixed Arab and Jewish teams, in the Arab-majority city
of Nazareth.