Meet Israel’s newest startup – Jerusalem

One of StartUp Jerusalem’s goals is to transform the city into a major location for contact centers.What do you do for a city which is in economic decline and whose residents are crowding the unemployment lines? If you’re Israeli hi-tech …

One of StartUp Jerusalem’s goals is to transform the city into a major location for contact centers.What do you do for a city which is in economic decline and whose residents are crowding the unemployment lines? If you’re Israeli hi-tech entrepreneur and former Jerusalem mayoral candidate Nir Barkat, you start a business.

But not just any business – Barkat has founded StartUp Jerusalem, a non-profit organization that aims to create jobs in Israel’s capital by increasing its attractiveness to businesses. The hoped-for result will be more jobs for all Jerusalemites, including the city’s 200,000 Arab residents, its thousands of ultra-Orthodox (haredi) Jews, as well as the multitudes of younger, secular residents of Jerusalem who have been fleeing for the suburbs in recent years.

And as a dividend – if the philosophy behind Startup Jerusalem proves correct – the flourishing economy will help ease political tensions between the city’s Jews and Arabs.

According to the organization’s CEO Eli Kazhdan, StartUp Jerusalem will fill the void that exists due to the absence of an economic development organization in the city of 680,000 – a feature which most major cities in the world have.

“StartUp Jerusalem was created to fill that niche – to be the place that thinks about how to bring capital to the country’s capitol,” Kazhdan told ISRAEL21c. “And it’s not like Jerusalem doesn’t need it – it’s in a fairly lousy situation. We have one of the poorest large cities in the country, there’s a very low number of adult aged people who work, and there’s a net emigration from Jerusalem of young and educated people.”

But Kazhdan – an American immigrant to Israel who formerly served as the chief of staff at the Israeli Industry and Trade Ministry under Natan Sharansky – believes things can be turned around.

“At the same time, Jerusalem has advantages: one – it’s the cradle of three religions and attracts people worldwide; two – it has very strong universities, hospitals, biotech and science infrastructure; and three – it boasts a wide variety of people who speak many different languages fluently and with strong cultural affinities to their countries of origin,” he said.

Those are the foundations by which StartUp Jerusalem plans to fulfill its aims – utilizing the techniques developed by Harvard Business school professor Michael Porter, who is honorary chairman. Porter’s philosophy involves identifying the features that make Jerusalem economically competitive and focusing on ‘clusters’ – geographic concentrations of companies and institutions in particular fields – that will exploit those attributes.

“It’s very easy to talk about creating jobs – but we decided to take a methodology that works and not try to reinvent the wheel,” explained Kazhdan. “Dr. Porter has been working on the issue of competitive advantages around the world for the last 20 years. The idea is fairly straightforward. In any city or country – if you look closely what it’s made up of – you’ll always be able to find those clusters of industries where they have a competitive edge. And once you focus on that, you can leverage the potential that exists there and maximize the effects of those clusters.”

StartUp Jerusalem has selected three clusters that it will concentrate on: Health and Life Sciences; Outsourcing and Business Services; and Culture and Tourism. According to Kazhdan, Health and Life Sciences was chosen because of Jerusalem’s existing infrastructure in this area. Hebrew University has 1,200 MSc and Ph.D candidates in the field, while 23% of Israel’s biotechnology companies are located in the city, as well as a number of medical device and pharmaceutical companies.

Culture and Tourism was chosen to take advantage of Jerusalem’s religious and historical sites, its conference centers and luxury hotels Outsourcing and Business Services was chosen because Jerusalem has an educated workforce, cultural affinities with North America and Europe, diverse language skills, and knowledge of North American customer service.

“There’s a real trend right now in the world to outsource. The United States and Europe are outsourcing tremendous amounts – the market is $150b and growing,” said Kazhdan. He explained that while India is thought of as the primary source of outsourcing for customer service contact centers, other countries like Canada, Singapore, Ireland, and the Czech republic are also high on the list, and not just because wages are lower.

“Other big factors are languages – whether there are many languages in the country that people can speak fluently, and technical infrastructure – does it exist and is there something to build on? Here is where Jerusalem can be very strong. You have a company here called CSM which has succeeded in introducing outsourcing to Israel. It’s a New Jersey-based company which was established two years ago with 20 workers and they now have 500,” said Kazhdan.

Outsourcing has the potential to bring Jews and Arabs together in joint projects, explained Jafar Sabbah, the Outsourcing cluster manager for StartUp Jerusalem.

“Contact centers should ideally be operated on a 24/7 basis, otherwise it’s not efficient” Sabbah, a resident of east Jerusalem, told ISRAEL21c. “The Jewish community has a problem with Saturdays and Jewish holidays – here is where the Arab population can fill in the gaps.”

According to Kazhdan, such cooperation can do wonders for the atmosphere in the city, which has been hit hard by almost four years of Palestinian unrest.

“One of the great successes of outsourcing has been Northern Ireland. What we’ve seen there is that it’s brought a lowering of the conflict – when people have jobs, you can see why it’s ‘the economy stupid’. When the Protestant and Catholics started working together in outsourcing, or when Jews and Arabs work together in outsourcing here, somebody in Arabic, someone else in English, somebody in French, that is something that can lower tensions and slowly but surely work to minimize the conflict,” Kazhdan said.

“We certainly know that if the economic situation is bad in the western Jewish part of the city – the intifada has hit the eastern part of the city even worse. StartUp hopes to bring together people from the west, from the east – haredi ,secular, new immigrants, veteran Israelis from all walks of life for the simple reason because ‘it’s the economy.’ ”

Sabbah, a lawyer and former high tech manager who got his degree from Hebrew University in 1994, is attempting to involve east Jerusalem’s young population, who are generally well educated with language skills. But with unemployment at more than 25% – and only 6 to 7% of Arab women even participate in the workforce – that education level has not been exploited the way it should be, he said.

“The idea is to prepare students and other graduates with language skills and a special diploma. Canada has succeeded in making a contact center job a career – not just a job – and we’re hoping to create a one-year diploma program for it,” said Sabbah.

“The edcucational level in east Jerusalem is one of the highest in the Middle East. There’s a tremendous potential in getting contact center work from other Arab countries, and from European countries with large Moslem populations” added Kazhdan. “Just as the Jews of Jerusalem have a competitive edge because their educational level is very good, so do the Arabs of Jerusalem.”

Having identified the clusters, StartUp Jerusalem is now implementing the next stage, which is to bring together the different players in each cluster in an attempt to foster co-operation. Chaired by Alan Feld – a Jerusalem venture capitalist – the organization has received wide-spread support and has board members from across the religious and political spectra. They include Adina Bar Shalom, the CEO of a college geared towards haredim, and Sami Abu-Dayyeh, who owns the Ambassador Hotel in East Jerusalem, as well as other business leaders, council officials and academics. Israeli ministers Binyamin Netanyahu, Ehud Olmert and Natan Sharansky have also sent letters of approval.

Sabbah’s contacts with business leaders and potential job pool candidates in east Jerusalem has left him enthusiastic about StartUp Jerusalem’s chances of success.

“There’s positive feedback from the people because there’s the sense that it’s pure business. As long as there’s no hidden political agenda, people are happy about it. As one businessman from east Jerusalem said, ‘if it’s about creating jobs, I’m in.’ “