Governmental Fund for Investment in Arabic-Israeli Hitech?

I have recently participated in a discussion of the Science and Technology Committee of the Knesset regarding the proposal of Dr. Basel Ghattas, Member of Knesset, to establish a governmental fund for pre-seed investment in Arabic-Israeli Hitech companies.

Although the efficiency of affirmative action is doubtable, since Arabic-Israeli Hitech is making its initial steps, I believe it is appropriate that selected Arabic-Israeli ventures shall enjoy governmental support in their pre-seed stage. However, it is not at all clear that a fund for such purpose only is the correct method to support Arabic-Israeli Hitech.

Arab-Israeli Engineers

One of the main concerns behind the idea of the fund is the small percentage of Arabic-Israeli engineers that actually find work in the Hitech field. Of course, this results from discrimination. However, the possibility that such phenomena results from additional causes, such as a lower level of qualifications, which may arise from a less developed education system, a lower level of higher education and skipping the military experience, was not examined. It was also not thoroughly examined whether any discrimination exists in the existing governmental support mechanisms, such as the Office of Chief Scientist. Note that Arabic-Israeli startups do receive support from the OCS and from Incubators (such as NGT).

Further, statistically most startups do not succeed and those that do – do so after functioning as small companies for years. Therefore, it is not evident that support of pre-seed startups will change the situation of Arab-Israeli engineers significantly. In addition, it is not clear whether governmental support of a Hitech sector in its initial stages should focus on startups or on more institutional frameworks, such as universities and the large Hitech companies, from which startups usually grow naturally.

Linkage to Investors

Another reasoning for establishing the fund is the lack of linkage between potential investors and ventures in Arabic-Israeli population areas. This is inaccurate as in recent years several investment funds, such as Sedra, Al Bawader (that is supported by the Government) and FBF, were founded and invest in Arabic-Israeli sector, and many businessman, Arabic-Israeli and others, invest in this field. It may be that allowing investment bodies in the Arabic-Israeli Hitech to continue their natural development is the correct way – the solution of a governmental fund is not necessarily the best.
The thirst for pre-seed financing is not typical to the Israeli-Arabic Hitech, rather it is typical to the entire Hitech field. Further, in addition to the Arabic-Israeli sector, there are additional Hitech sectors that require assistance, such as orthodox Jews, Hitech people older than 45 and Biotech and Cleantech entrepreneurs.

Undue Exploitation

Any fund that is designated to invest in a specific sector only might be unduly exploited by those who are not entitled to receive it. The proposed fund’s money may eventually go to non “Arab-Israeli Hitech companies” – the establishment of such a fund shall strengthen such term and may strengthen discrimination. The concern of undue exploitation may be dealt with through clear criteria, but only partially. Note that bodies such as the OCS, which has relatively clear criteria, are criticized for making the grants to projects that are not innovative or to companies that are not those which need the grants most.

 

In light of the above, I believe that before establishing a fund for investments in Arabic-Israeli Hitech startups, it is essential to examine all of the funds and benefits already available, whether the investment should not better be done in the relevant infrastructures (such as education and higher education) and in creating equal opportunities, which populations are discriminated and in need of support and which mechanism will be best in order to provide such support, if any. In other words, the support of Arabic-Israeli Hitech should be performed out of a strategic point of view, looking at Hitech generally and at the solutions for the discrimination of the Arabic-Israeli generally.

 

What do you think? Should Arabic-Israeli Hitech be seperatly supported by government? How?

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