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Sunday, September 20, 2015

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In the shadow of Tel Aviv, Ramallah's young tech scene takes flight

A tech sector largely fueled by low-level outsourcing work is starting to see its own startups thrive. We made a stop there on CNET Road Trip.
Check out all the places we've been on CNET's Road Trip 2015.
RAMALLAH, West Bank -- "The Entrance For Israeli Citizens Is Forbidden, Dangerous To Your Lives And Is Against The Israeli Law."
A series of these large, red signs -- written in English, Hebrew and Arabic -- greeted me last month at the entryway to the Qalandia checkpoint, north of Jerusalem. The area around the checkpoint, separating Israel from the Palestinian-controlled West Bank, was dusty, jammed with cars and surrounded by concrete walls, guard towers and barbed wire. The scene seemed far removed from the glittery skyline of Tel Aviv, just an hour's drive away.
"This is a first-class occupation," my guide, Nuha Musleh, a motherly, assertive woman, told me as we met at the Qalandia entrance and walked to her Volkswagen sedan.
Yet the view at the wall -- built by Israel more than a decade ago to prevent terrorist attacks from the West Bank -- belied what I was about to see down the road. There stood Ramallah, a modern, bustling city with tall buildings made of glass and pale limestone. The seat of power for the Palestinian Authority is now home to a small startup community, which is emulating  Israel's internationally recognized tech scene and which offers new opportunities for young Palestinians to build up a territory still heavily dependent on outside aid.
Just past the Qalandia checkpoint, on the way to Ramallah.Ben Fox Rubin/CNET
Musleh first drove me to see Mashhour Abudaka, a former Palestinian Authority minister and the executive director for the Palestinian Information Technology Association, or PITA. The business group, with about 160 members across the West Bank and Gaza, brings together a mix of software developers, hardware resellers, and, most of all, IT outsourcing companies. These outsourcing firms, tasked with completing menial projects in a tech firm's development process, have become the backbone of the West Bank's burgeoning tech sector. The jobs aren't glamorous, but the work from Israeli and international companies is steady.
With the blinds drawn in his office to keep out the hot morning sun, Abudaka -- a bald, thick-accented Gaza native with a mechanical engineering Ph.D. -- drank Turkish coffee from a small, striped mug and described the difficulties of growing a technology industry in the Palestinian territories. The Israelis, he said, control the Palestinians' international borders, wireless frequencies, and exporting and importing.
The Israeli government says many of these restrictions are for security, though Abudaka countered that they have more to do with "political and economic domination."
"I think our IT industry can expand if it wasn't for the Israeli obstacles," he said. "I hope things will change."

'They called us crazy'

While outsourcing represents a sizable chunk of the West Bank's tech industry today, there are a handful of smaller Internet and mobile startups run by young Palestinian founders who hope to make it big by focusing on the underserved Arab world. They aim to become early entrants in that emerging market and to gain influence far beyond the West Bank by building online, where borders disappear.
PinchPoint CEO Khaled Abu Al Kheir shows off Spermania, the company's first game.Ben Fox Rubin/CNET
One of those entrepreneurs is Khaled Abu Al Kheir, the 35-year-old co-founder and CEO of mobile gaming startup PinchPoint. His 18-person company, whose work space includes a poster declaring it "Palestine's Hottest Gaming Studio," gained a rush of media attention last year after it came out with its first title, Spermania. The cartoon-animation racing game lets users play as a sperm trying to dodge acid pools and white blood cells en route to inseminating an egg. Apple's App Store rejected the game five times, but it's available on the Google Play store for Android devices.
"Everyone we talked to about the game, they laughed," Kheir said in his small office, while a group of youthful employees seated nearby at two long wooden tables toiled away on PinchPoint's next titles. "Of course, they called us crazy."
The company started with worldwide ambitions but quickly realized that competition on that stage was staggering. Kheir thought it better to create games that speak to an Arab audience but still have some bite to them. A newer title is Al Mamlaka, which offers Middle Eastern card games that include virtual gambling -- a taboo subject among Muslims.
At PinchPoint's offices, artist Yasmin Eid is hard at work making games.Ben Fox Rubin/CNET
After releasing four games, PinchPoint is still waiting for its big hit. However, Kheir said that despite the limitations of being in the West Bank, including tight travel restrictions and some potential partners being scared off by the security protocols and checkpoints, he's happy to be a big fish in a small pond. Funding is relatively easy to come by since there isn't a lot of competition for it, and that money tends to last longer since Palestinian wages and rent are low.
"I always say that if we did it in a different place, I don't know if we could've reached this far, even with less obstacles," he said.
Musleh then took me back to her store, an art gallery on the outskirts of the central district. From their second-floor kitchen, Musleh, her husband and I ate salad mixed with mint, along with plump orbs of pumpkin and zucchini stuffed with rice and meat, and doused in a goat milk-based sauce. Musleh invited her 19-year-old son, Abdel Naser, to join us for the rest of the day so he could absorb some of the entrepreneurial spirit and ideas of the West Bank's up-and-coming tech leaders.

'We're just hungrier'

The next stop was at startup Yamsafer, where CEO and co-founder Faris Zaher has built a 55-person company that offers hotel bookings in the Arab world. The brightly lit 11th-floor office overlooks the rest of Ramallah, and the interior was built to look like an outdoor promenade, complete with a bicycle, benches and street lamps. There was a buzz of activity at the marketing and hotel departments. Behind glass doors, a handful of workers wearing headsets chatted with customers in the 24-hour call center.
The irony is that Yamsafer is a travel-booking site with most employees restricted by Israel from freely traveling abroad.
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Yamsafer CEO Faris Zaher hopes to encourage other Palestinian startups to grow in the West Bank.Ben Fox Rubin/CNET
Early on, the 4-year-old company faced about five competitors from Jordan and Dubai, but Yamsafer outlasted them all. The firm is now the second-largest room-night provider in the Gulf Region, Zaher said, after Priceline's Booking.com.
"At the end of the day, we're hungrier," said Zaher, a UK- and Hong Kong-educated 28-year-old with a short-cropped beard and big smile. Referencing Palestinians' tougher lives when compared with some Arab neighbors, he added: "I think that just makes people fight much harder."
Yet even as his startup has grown quickly, Zaher said it has faced problems from its own government, which for years has been dogged by corruption. Yamsafer ended up in a payment dispute with one partner hotel, he said. In an attempt to intimidate Yamsafer's leaders, the hotel's owners got a government agency to raid his business.
The Palestinian Authority's Ministry of Information didn't respond to a request for comment about the incident.
Despite such problems, Zaher said the West Bank was the best place to create his business. "The reason we think we're going to win," he said, "is because we're here and our customers are here."
As my day in Ramallah was ending, Abdel Naser asked if I wanted the see the real face of the city, considering that I'd been bouncing around office spaces all day. He drove me to the central market, a noisy area filled with jewelry and clothing storefronts, small fruit stands, and men darting through traffic in bright-red costumes selling sweet drinks out of long, brass flasks they hoisted on their backs.
We returned to Musleh's shop, where we drank tea. Musleh gave me a hug and asked me to return soon. Abdel Naser drove me back across the checkpoint, where two men with large guns on the Israeli side asked us a few questions and waved us through.
By then, the sun was setting and I was on my way back to the bright lights of Tel Aviv.
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F-U-N-D-E-D: Silicon Valley bets $100M that computers can help you look good

Beauty and fashion startups hope to edge out the local mall by creating software that learns and anticipates what people want to wear.
Silicon Valley wants your next beauty consultant to be an algorithm.Kirsten Ulve/Corbis
What if Siri could give you beauty tips?
Silicon Valley got a step closer Monday when venture capitalists wrote a $100 million check to a startup called Ipsy to build the next-generation, global beauty brand.
Ipsy's doing it with a $10-a-month subscription for a themed "Glam Bag," which is filled with five types of cosmetics like eye shadow, brow gel or lipstick. On the outside, Ipsy's bag looks the same, but that's where the similarities end for most Ipsy customers.
"A couple of months ago, the bag was themed around Bohemian Beauty...but the products are customized to the individual subscriber," said CEO and co-founder Marcelo Camberos. Ipsy customers receive one of 200 different combinations of cosmetics based on their answers to 12 questions that give the company's software a sense of what they like. "The products in the bag would be completely different for you as it would a young black woman or a white woman who's really into red lipstick."
Welcome to Silicon Valley's answer to the beauty industry. Startups like Ipsy believe the future is super-intelligent software that knows your tastes so well it will send products you're guaranteed to like.
It's not a new idea. Netflix and Pandora changed the movie and music industries by offering recommendations based on what their users watched and listened to. Now, the venture capitalists backing startups like Ipsy believe they can do the same thing to the mall's corner beauty store.
There's a large prize if they succeed. Worldwide revenue for beauty care products is expected to jump to $461 billion by 2018, up 21 percent from 2013. So far, San Francisco-based Ipsy has grabbed about $150 million of that total each year from its 1.5 million subscribers.
There are others, like NYC-based startup Birchbox and Berlin-based GlossyBox, that send out a monthly box of cosmetics products for men and women after they answer a questionnaire like Ipsy's.
The idea doesn't just apply to beauty. Le Tote, a San Francisco startup that's raised $12.5 million from venture backers, sends subscribers three garments and two accessories each month (in a tote bag, of course). Meanwhile Stitch Fix, a Le Tote competitor that has raised $47 million, saying the clothing and accessories it sends are gleaned from a "personal style quiz."
Last year, venture capitalists invested $765 million in beauty and fashion startups, according to venture research firm Pitchbook. By mid-September of this year, they had invested $712 million.
Expect the trend to continue, says Sonya Brown of Norwest Venture Partners whose investments include startups focused on women's beauty such as PCA Skin and Madison Reed. Brown said the technological change will push companies to try to personalize their products further, possibly including even the cosmetic giants.
Sephora, for example, is already feeling the heat. Last month, the French company said it would begin delivering a mixed bag of cosmetics to subscribers for $10 a month, just like Ipsy.
With $100 million in new cash and three years of profitability -- a rarity among Silicon Valley-backed startups -- it's hard to argue with Ipsy's algorithm. But a quick glance at some users' responses indicates Silicon Valley hasn't cracked the beauty code just yet.
"I'm a black woman but Ipsy constantly sends me skin products for white or light-skinned women," Phoebe M. wrote on a product review site earlier this month. "Ipsy is a fantastic lovely little surprise every month, but I really am tired of receiving all of the wrong skin and hair products."
Ipsy's Camberos acknowledged that there are still kinks to work out. "That's where the algorithm is not foolproof," he said.
F-U-N-D-E-D is a regular column looking -- and sometimes laughing -- at what Silicon Valley has backed in the last week.