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Optical/IP

Startup Makes Home in Palestine

Life for any startup these days isn't easy. But Exalt Technologies Ltd. is fighting a particularly tough battle for survival.

The tiny 28-person optical startup is headquartered in one of the most widely publicized war zones in the world, the occupied territory of the West Bank. The company, which had been part of the optical division of Siemens AG (NYSE: SI; Frankfurt: SIE), spun out on its own 10 months ago. Since then, Exalt's been working in stealth mode to deliver a suite of metro optical transport products.

While its relationship with Siemens lends technological legitimacy, the company still faces many challenges as Israelis and Palestinians struggle to find peace.

Located in Ramallah, about nine miles north of Jerusalem, the company’s HQ is just a 15-minute car ride from where Palestinian President Yasser Arafat has been holed up for the past two years of Israeli occupation. Despite bombings and raids by Israeli troops throughout 2001 and 2002, Tareq Ma'ayah, founder and managing director of Exalt, says the city of hilltop homes, shops, and refugee camps is relatively safe today.

"If we had the political stability, I’d say that this is the best place in the world to live," Ma'ayah says. Though media coverage paints a dismal picture of Palestine, he maintains that it’s actually an ideal location for a technical startup: Real estate is cheap, and there's access to an almost unlimited supply of well-educated engineers from Birzeit University, located north of Ramallah.

"We would never be able to do what we are doing now in Germany or in the U.S. without raising a lot of capital. We’re going through a nice self-financed stage," he says.

Ma'ayah first began doing contract work for Siemens in 1997. Eventually, Siemens took an interest in Exalt, which developed a demarcation device used to monitor the quality of traffic traveling from one carrier network to another. Siemens later became the majority shareholder in Exalt.

But the bursting of the telecom bubble forced Siemens to make cuts to its optical division (see Siemens Restructures ICN). As a result, it divested its interest in Exalt, and Ma'ayah took over the investment himself. For the past ten months, Exalt has been operating on its own, mostly with money left over from its contract days with Siemens and cash invested in it by Ma'ayah.

While he wouldn't talk about specifics related to the products or the current funding, Ma'ayah says that the company is well positioned financially and should finish product development by the end of the year. It is already contracting with Flextronics Corp. (Nasdaq: FLEX) to outsource its manufacturing.

Like other businessmen in the region, Ma'ayah downplays the current political situation and its impact on his company, but he admits to some inconveniences. Checkpoints in and out of Ramallah and throughout the West Bank make traveling difficult and time-consuming. To alleviate this problem, the company has built a bunkroom upstairs from its office, where engineers can live days and weeks at a time.

There are other challenges that could threaten the company’s survival. Importing components and equipment used in development of products has proven difficult, as many of these items get stuck in customs awaiting security clearance.

The problem has been widespread among technology and telecom companies in Palestine, Ma'ayah says. The Palestinian Information Technology Association (PITA), an organization that represents over 60 technology companies in Palestine as well as Palestinian representatives of international companies (such as Siemens), filed complaints earlier this year alleging that Israeli customs has been withholding communications equipment and computers worth millions of dollars.

At least one analyst says these problems need not hamper Exalt's success in the long run, particularly if the company can form solid partnerships like the one it had with Siemens. "Technology is agnostic to political situations," Michael Howard, founder and principal analyst with Infonetics Research Inc.. "Even though it’s more challenging for them than other startups, if they have the intellectual property, they could still make headway with a Cisco, an Ericsson, or a Nortel."

— Marguerite Reardon, Senior Editor, Light Reading

PeaceMaker 12/4/2012 | 11:32:55 PM
re: Startup Makes Home in Palestine "As for start-ups there and "the war," life goes on, people still go to work and school, even with machine guns in the hands of 20% of the 18 - 22 year olds"

- It is only in the US that children go to school with machine guns!!!

Peacemaker.
verstand 12/4/2012 | 11:33:04 PM
re: Startup Makes Home in Palestine I don't know whether this will work or not...
Palestinian and Jewish intermarriage will get lifetime income tax exemption as long as they remain genuine married. Their children will receive free education to college. Schools teach both Hebrew and Arabic. Religion teaching for both and people have to attend both church services. Design a new set of last names and first names for everyone. Whenever there is a symbol of one kind, there is one for the other and side by side. After all, they are brothers from the same father.
busrider 12/4/2012 | 11:33:32 PM
re: Startup Makes Home in Palestine ************
I think the Middle East and technology development there is very interesting, and I will be looking into the topic more.
************
Maybe Lightreading should hire a foreign correspondant stationed in Israel with a background in covering the Middle East.


************
As the article points out, the company is still in stealth mode.
************
Exalt's technology is listed on their website.
rjmcmahon 12/4/2012 | 11:33:32 PM
re: Startup Makes Home in Palestine I was in a cafe in Jerusalem (a few days before the election of Ariel Sharon), owned by a Muslim, employing Christians, and patronized by Jews and one goofy American.

Good to hear some are determined to find a better way. And for a little humor:

There were five men in an airplane: The pilot, a lawyer, the smartest man in the world, a priest, and a boy scout.

They were flying along when the plane started to crash. Noticing that there were only four parachutes, the pilot grabbed a parachute and jumped out. Now with only three left, the lawyer said "Without me, the world would be dull," so he grabs a parachute and jumps out. Then the smartest man in the world stood up and said "I can't imagine what the world would be like without me," so he grabs one and jumps out.

The priest turns to the boy scout and says, "Son, I've lived my life and I know where I'm going, so you go ahead and take the last parachute." The boy scout replied, "No, we can both go. The smartest man in the world took my backpack!"
Marguerite Reardon 12/4/2012 | 11:33:33 PM
re: Startup Makes Home in Palestine These are all great ideas for follow-up stories. I appreciate the feedback. I think the Middle East and technology development there is very interesting, and I will be looking into the topic more.

The story that was written on friday was about Exalt Technologies--just one startup in the West Bank that's struggling to make a go of it. As the article points out, the company is still in stealth mode. They were unwilling to talk details about their products. I will update you on what they're up to as the information becomes available.
crackbaby 12/4/2012 | 11:33:34 PM
re: Startup Makes Home in Palestine I agree with what you are saying here. To have done the subject justice the writer could have discussed some of the issues that Israeli companies have faced in light of the homicide bombers, the writer could have addressed more of the issues facing the financing opportunities for companies in the Middle East, the writer could have looked into the technology, the writer could have interviewed more companies to determine their comfort level in working with a supplier in the West Bank or the writer could have delved more deeply into the issue of whether or not the high-tech sector could serve as either a growth opportunity for a badly depressed "Palestinian" economy or maybe even as an opportunity for collaboration within non government circles.

However, we must instead eat what's on the menu....
busrider 12/4/2012 | 11:33:35 PM
re: Startup Makes Home in Palestine This topic should really be held on "middle-east-conflict.com"

Its rather strange that this article doesn't mention the startups products or technology.

Exalt Tech's website doesn't mention its location as being within the West Bank or complaints towards the middle-east conflict on its employees or business operations.

Shame on Lighreading for introducing this company as a subject for gossip and controversy instead of as some good engineers trying to improve the tech economy within their area under harsh conditions.


Soup 12/4/2012 | 11:33:35 PM
re: Startup Makes Home in Palestine All,

A few years ago I spent about one month in Israel / Palestine. Very interesting. I saw and heard about the real issues taking place there first hand. Bottom line: the Muslims, Jews, and Christians got along just fine at the "common person" level; for the most part it was the religous extremists and their associated political leaders that kept the fear and hatred alive.

I was in a cafe in Jerusalem (a few days before the election of Ariel Sharon), owned by a Muslim, employing Christians, and patronized by Jews and one goofy American. My taxi driver was translating the TV news reports to me as well as the comments by the people in the cafe. Everyone was laughing at how the news reporter made such an issue out of things the great majority of these people just didn't care about. These people just want to have peace, happiness, and prosperity just like you and me.

As for start-ups there and "the war," life goes on, people still go to work and school, even with machine guns in the hands of 20% of the 18 - 22 year olds and idiot assholes blowing up nightclubs and busses and such. Is Palestine "the best place?" Not in my book, but then again, I wouldn't want to live in New Jersey or Ottawa, either (call me a sissy, but I don't care for the cold anymore than I would care for suicide bombers or tanks in the street). However, there are lots of hot chicks and smart/nice people in the Middel East, and the Mediterranean Sea is pretty darn nice to swim in.

Cheers,

Soup.
Marguerite Reardon 12/4/2012 | 11:33:37 PM
re: Startup Makes Home in Palestine You're absolutely right, any mention of the Middle East stirs up a firestorm of political debate. But the politics of the Middle East have been debated all over the mainstream press for a very long time. I think it would be more interesting to hear what people have to say about startups in this region. Do they stand a chance? Or will the political climate/violence crush them?
crackbaby 12/4/2012 | 11:33:37 PM
re: Startup Makes Home in Palestine Hey, you guys decided to write a story about the Middle East and were sure to sprinkle in several references to conflicts, political instability, Yassar the Terrorist and the Israeli's closing down trade. Plus, there is no Palestine in the Middle East that is recognized as a sovereign state.

Most of the posts here are, in fact, on topic given the above referenced issues that your colleague elected to include in the story.

Secondly, talking about the Middle East will always draw people in with strong personal opinions.
chechaco 12/4/2012 | 11:33:38 PM
re: Startup Makes Home in Palestine What a figure of speach being used in regard to the Midle East problem "can't live as good neighbors"? This is huge lie. The reality is that one side is still denies right to exist to another. What you live would be if your next door neighbor does everything to drive you out of you home - shoots at you and your loved ones, throws grenades? And community leaders tell you to embrace him?
Scott Raynovich 12/4/2012 | 11:33:38 PM
re: Startup Makes Home in Palestine can we try to keep this thread on the topic of startups in the Middle East, please
chechaco 12/4/2012 | 11:33:38 PM
re: Startup Makes Home in Palestine Do you feel lucky today? Do you really wanna pick up this argument here on LR? Who for 55 years was denying right to exist? Who unleashed its armies in '48? And who forced UN to retreat in '68? On which TV stations you see only hatred against neighbor nation? Dare to give answer?
BobbyMax 12/4/2012 | 11:33:40 PM
re: Startup Makes Home in Palestine The following are needed for start-ups:
-- Enough Capital
-- Experience in technology management skills
-- Experience in people's management skills
-- Clarity on what needs to be done
and how it needs to be done
-- Excellent marketing skills
-- Is the product really needed?
-- First rate engineers with experience in
developing products
-- Ability to show increamental development
-- Anility to control and monitor quality

The reson I am stating these points is that in the US, none of the above points are cocerned and the people are seldom hired for their merits. It is because of this about 80% of the start-us fail
in the US.
Jukke 12/4/2012 | 11:34:01 PM
re: Startup Makes Home in Palestine Before you answer you should read the article! No VC money, only own capital.

Very dummy your answer. We must be from western side of the Atlantic, right?

Jukke
mtd 12/4/2012 | 11:34:07 PM
re: Startup Makes Home in Palestine
By your remarks, you show how shallow your knowledge is!

Palestinians are well educated people, and they give a lot of importance to education just like Israelis. It is just unfortunate that can't live in peace with each other. I am sure, left to themselves, they would have achieved some kind of peace (without the Western interference).

BTW, I am not a Palestinian or an Israeli.
OpticOm 12/4/2012 | 11:34:10 PM
re: Startup Makes Home in Palestine How can R&D be done amongst tanks, suicide bombers and guns?
I suppose they are just burning some (stupid)VC money and that's it...
Belzebutt 12/4/2012 | 11:34:10 PM
re: Startup Makes Home in Palestine LR, I had no idea they did this kind of work in Palestine. Thanks for expanding our horizons.
grapsfan 12/4/2012 | 11:34:11 PM
re: Startup Makes Home in Palestine I think it's a great story...a bunch of people pulling together, ignoring the senseless chaos outside their walls, and working on something they believe in.

That said, how can they conduct the business of marketing and selling their product? There's no way they can bring potential customers in for demos and pitches. Just flying in and out must be nearly impossible, and you'd have to leave a ton of schedule leeway and backup plans. Maintaining a lab has got to be a nightmare in a place that probably doesn't have power a lot of times.

It may be a great place to live (other than all the death and destruction, of course), but why would a businessman want to fight all of those obstacles?
slickmitzy 12/4/2012 | 11:34:11 PM
re: Startup Makes Home in Palestine Before i add my 2 cents to this board it's important to say in advance: i'm an israeli.

Rgarding the palestinians startup:
I was very happy to read about it.
Some sanity in the crazy area and era we live in.
I wasn't surprised at all. The palestinians are indeed very talented and educated people.
Much like the jews, the palestinians give great emphsis on education.
In the arab world they are known to hold many technical and positions.

Regarding the politics:
My personal opinion is that between the jordan river and the mideteranian sea there should be to states Israel and Palestine which i hope will be good neighbors.
What i hope will happen is that after peace will be signed by the political leaders it's strength will come from economical co-operation between israelis and palestinians. Both sides could hugely benefit from such cooperation.

Rgarding the Board,

Both sides of the argument here show great ignorance on middle east history.
Also every side sees things in an absolute good and truth aginst absolut bad and constant lier.

Rality is far more complicated then those statements made on this board.

I guess those were the longest two cents i've ever written.

Cheers
slick
chip0145 12/4/2012 | 11:34:19 PM
re: Startup Makes Home in Palestine Maybe this would be the best! Send them all to Iowa!! The State could use some hi tech population.They could both build a fence across Iowa so they would be truely separated.

This way, the Jewish VCs could really invest in America.Tensions in the Middle East would be removed to local containment and we could all visit the timeless land of our religous birth at our leisure and without fear.
ArAmOp 12/4/2012 | 11:34:20 PM
re: Startup Makes Home in Palestine Last time I really checked, I was a Palestinian. my father is, my mother is, my 12 brothers and sisters, and so are over 6.5 millions of people. Now I wonder how anyone can give himself or herself the right to deny us from this identity, which both history and the bible have given us, no matter how much hatred and abhorrence they might have against any human group (I just hope some donGÇÖt even deny us this right either!)
amerhhh 12/4/2012 | 11:34:21 PM
re: Startup Makes Home in Palestine This article gives a great perspective on how technology and innovation has no borders. I give this company a lot of credit for working against "all" odds.
Godzila 12/4/2012 | 11:34:22 PM
re: Startup Makes Home in Palestine there was no country called Palestine. Check your facts dear LR. Even the company itself does not give its location as "Palestine".
Soup 12/4/2012 | 11:34:22 PM
re: Startup Makes Home in Palestine Uh oh, not another BobbyMax?!?!?

The lack of political stability discussed herein likely refers to people running around blowing themselves and a group of innocents to hell in the name of whatever, not a lame-ass state governor and opportunistic celebrities.

BBBoa 12/4/2012 | 11:34:23 PM
re: Startup Makes Home in Palestine "If we had the political stability, IGÇÖd say that this is the best place in the world to live," Ma'ayah says.

*******************

What does that say for California?
fhe 12/4/2012 | 11:34:24 PM
re: Startup Makes Home in Palestine Every single place is the "best place in the world to live" if it doesn't have war/natural disasters/or whatever bad stuff that is happening, etc...

Oh wait, I guess it is yet another "best place to off-shore". LOL!
DarkWriting 12/4/2012 | 11:34:26 PM
re: Startup Makes Home in Palestine "If we had the political stability, IGÇÖd say that this is the best place in the world to live," Ma'ayah says.

*******************

I'd call that a show stopper!

DW
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