Stewart Rogers – Israel: ‘Startup Nation’ — the good, the great, and the one fatal flaw
Re-post from venturebeat.com
Like many small countries across the world, Israel punches well above its weight in the global startup ring.
Until my recent visit to Tel Aviv and Jerusalem to find out why Israel was doing so well, I — like many before me — had assumed the Startup Nation‘s “per capita” success was due to just one reason, but I couldn’t have been wider of the mark.
My journey of discovery started with an invitation from the Israel Ministry of Foreign Affairs, who encouraged me to visit the region as part of a delegation of journalists from across the globe. What followed was a whirlwind tour of startups, accelerators, and co-working spaces designed to showcase the best of Tel Aviv- and Jerusalem-based startups. The first part of my visit concluded with an annual tech conference called the DLD Innovation Festival, but I chose to stay on for an extra week to discover more about what makes Israel such a special place.
My preconceptions were challenged throughout the tour, but let’s start with that “one thing” everyone thinks is the reason for Israel’s success.
The Israeli Defense Forces (IDF) is — without a doubt — a key reason innovation is so rampant in Israel. Mandatory conscription for all Jewish Israelis leads to a whole range of government-supported skills, contacts, and resources. Conscription in the IDF also helps develop leadership skills that align perfectly with the non-hierarchical nature of a startup.
But while there is no doubt that conscription has a positive effect on the Startup Nation, is simply isn’t the only reason for the success Israel has seen in recent years. With each founder that I spoke to, and every supportive organization I chatted with, a broader set of factors became apparent.
Of course, every leader that lectured the delegation, and everyone I conversed with myself, focused on the one massive exit Israel has enjoyed recently. And while we heard the name again and again throughout the tour — to the point that we wondered if there had been any other exits in Israeli history — there is no doubting that Intel’s $15 billion acquisition of Mobileye is worth shouting about.
And at least Mobileye has stopped everyone talking about Waze.
But it is the next generation of startups I was more interested in.
At the Peres Center for Peace, we heard from the likes of Bancor, the blockchain secure token company that raised a record-breaking $147 million earlier this year. The startup has gone on to provide core technology for everything from Ethereum-based ICOs to VC firms that want to solve the liquidity problem and prediction platforms that want to become regulated and licensed.
At the other end of the funding scale, we heard from Shupperz, a community app that connects local shoppers with global buyers. The idea is simple — buy products around the world through local people who know where to get the best deals, and then have those purchases shipped to wherever you are. Shupperz was founded by Tal Rubinstein and Tsion Sade earlier this year, and I’ll admit I grilled them intensely regarding the legalities of buying certain products and having them shipped elsewhere, and the potential for fraud. I shouldn’t have worried — the team has thought everything through in detail, and it seems like an exciting prospect.
A visit to SimilarWeb showed us what it’s like to be in a late-stage startup in Tel Aviv, with a high-rise office view that would rival any you’ve seen in San Francisco, New York, or London. The digital market intelligence company has raised over $112 million since 2007 and is now one of the leading sources of app and website intelligence anywhere.
But Tel Aviv is a tale of two cities. Across the street from one of the richest parts of the city is South Tel Aviv, an area that — if you’ve ever witnessed it — reminds you of the Tenderloin District in San Francisco. The divide couldn’t be more obvious. Literally crossing the street was the difference between billions of shekels in glass and steel and squalid, favela-like structures.
In the middle of this sits The Platform, a startup hub that is trying to elevate the area by allowing locals to become founders of their own businesses. Billing itself as a municipal tech social impact hub, The Platform is an inspiring co-working facility and community support group. A discussion with Asaf Zamir, Tel Aviv-Yafo’s deputy mayor, highlights other reasons founders do so well here.
No fear of failure
Israelis don’t mind failing at all. They get back up, dust themselves off, and start all over again. And again. And again. It’s in their nature. In fact, their attitude to life seems to be an interesting mix of modern-day millennial nihilism and good old-fashioned fatalism. It could all end tomorrow, so live for today. And if things don’t go well, that’s life. Just start again. Keep on going, because you never know when that option will be taken away from you.
Nothing quite highlights this more than a tour of Jerusalem. A city that has been destroyed and rebuilt (at least) two times, attacked 52 times, and besieged 23 times, it is a place that constantly reminds you of the human condition — the disagreements, battles, and differences that constantly pull us apart, even when we want to come together. Our tour was made all the more special thanks to Ron Yekutiel, cofounder, chairman, and CEO at Kaltura, whose knowledge of the history of Jerusalem is unparalleled.
Beyond the awe and sadness that a tour of the Old City delivers, however, is another beacon of Israeli startup culture — OurCrowd.
In their own words, OurCrowd consists of “entrepreneurs, venture capitalists, investors, and geeks with decades of combined experience building businesses, raising capital, and investing in Israeli and global startups.”
The team selects what it thinks are the best ideas being developed by startups in Israel and elsewhere and then shares those opportunities with investors. It’s a smart setup and another reason Jerusalem’s startup ecosystem is booming.
A visit to Jerusalem Venture Partners (JVP) was another eye-opener. It was during a keynote at JVP’s facility that yet another reason for Israel’s startup success became apparent.
Israelis are incredibly passionate about their country, and their culture. While it borders on rampant patriotism at times, I truly wish other populations had this much love for who they are and what they believe in. The U.K. is apathetic in comparison. In addition to conscription and the ability to deal with failure, passion underlines everything an Israeli founder does to succeed. It is the bedrock. Without it, you feel that all plans would crumble and fall. With passion comes drive, and with drive comes work ethic, and with work ethic comes the potential for success, or the gumption to get back up when things don’t work out.
We saw this passion on the first day of the DLD Innovation Festival. Again I saw it again in an old friend of mine, Hillel Fuld. I’ve known Hillel for a decade, but — would you believe — this is the first time I’ve met him in person.
His passion for Israel is almost unmatched. He exudes it. Since we were together for the first time ever, he took the opportunity to interview me for his vlog, where we discussed everything from the future of augmented reality to life lessons and startup advice.
Hillel’s passion extends to a number of local startups too. We discussed (and he demonstrated) Syte, which has an AI-powered chatbot and Chrome extension that magically turns images of clothes into shopping links. He told me about Hometalk, a YouTube for DIY projects. Saga was also on his mind. It’s a slick solution for publishers that lets you add the now-popular “stories” feature, akin to Snapchat’s or Instagram’s, to any website. And, finally, Proov — a “proof of concept as a service” platform that has already raised over $21 million to date.
And in a private keynote from Ron Huldai, mayor of Tel Aviv, the press delegation heard how passionate he is about Israel being a hub for research, with 300 R&D centers located in the country. He also spoke about how delighted he is that Google, Apple, Samsung, Philips, IBM, Intel, Facebook, and dozens of other multinational corporations have major operations in Tel Aviv.
But if there’s one thing that could impede Israel’s efforts to reach the next level, it is the fatal flaw I heard time and time again throughout my tour.
“When it comes to AI,” one director of an accelerator told us, “there’s only China, the U.S., and Israel. Nobody else matters. Nobody else is doing more.”
I winced when I heard this. Using almost any measure you care to mention, I know that Israel is not even in the top half of the table for AI worldwide, let alone number three. Whether you’re talking about the number of AI startups, the number of AI research papers filed, or the total AI company funding, Israel doesn’t make the top 10 on any scale. That’s not to say that AI isn’t doing incredibly well in Israel. It is. But this was just one example of a trend I saw everywhere.
“Israel is the number one startup location in the world per capita.”
Sure. I’m the funniest man in the world “per capita.” The richest man in the world “per capita” too. It’s easy to be great per capita when you’re a small country.
The problem with overblown opinions is that when I hear something that is patently false or overblown, it makes me question everything else that you’re telling me. And that’s not the reaction you want — from a journalist, analyst, investor, or anyone else you want on your side.
In fact, the phrase “per capita” became a bit of a joke during our visit, as did some of the graphs and charts we were shown, which were, on occasion, disingenuous. One had a double y-axis with different scales on each side to make the two lines intersect in the middle, rather than right at the end of the timeframe, making it seem as though things had moved faster than they had. That’s FOX News level “graphery” right there, and I don’t like it.
I understand it, of course. And the need to tell everyone how amazing you are is driven by the passion I love so much in Israeli culture. But telling it like it is — with passion — is better than overselling, in my book. For me, this is the one trait holding Israel back. “Fake it until you make it” works for a lucky few, but not on a countrywide level. I prefer “underpromise and overdeliver.”
During my final week in Tel Aviv, after DLD and the wonderfully organized Ministry of Foreign Affairs press delegation tour, I visited early- and mid-stage startups and successful businesses and talked with the founder community at large.
In a “speed dating” session organized by local PR powerhouse, Blonde 2.0, I had an opportunity to hear pitches from the likes of LivePerson, Missbeez, Zebra Medical Vision, Glispa, Spotad, Viber, and Arbe Robotics.
What struck me was the variety on show.
LivePerson is the chatbot company that you may have interacted with a thousand times already when visiting websites or sending messages to a brand. Having provided chat services for over two decades, it is now providing incredibly smart chatbot solutions to power the “messaging generation.”
Missbeez is a sharing-economy solution that allows women to provide beauty and health-related services — such as manicures and massages — to consumers in their own homes via its app. It’s like Uber for a mani-pedi. I can promise you it works well, having enjoyed an amazing massage at my Airbnb in Tel Aviv via the service. I needed it after two weeks of walking 20,000 steps per day.
Zebra Medical Vision is combining AI with medical imaging to identify anomalies, illnesses, and health risks faster than a human can ever hope to. Its algorithms help radiologists by finding often overlooked indications of disease. The speed with which it does this helps process patients faster than ever, reducing waiting times and cost.
Glispa is a mobile adtech company that we’ve covered extensively in the past. The company made yet another acquisition just one day after my speed dating session, this time adding playable ads startup JustAd to its armory.
Spotad is an artificial intelligence and mobile advertising technology startup. It was the first Western demand-side adtech platform to enter China, connecting clients to both Eastern and Western ad exchanges.
Viber is one of the most popular messaging apps on the planet, with over 800 million users. It recently acquired Chatter Commerce, helping it to move into the lucrative ecommerce and online shopping space.
Arbe Robotics is doing something very special, and I’ll tell you more about it in the future. Yes. I’m a tease. But in short, it has some incredible radar technology that can help the self-driving car industry in the near future.
All of this variety reminded me of another reason Israel succeeds as a Startup Nation.
Tel Aviv’s startup community embraces diversity. It embraces people from all walks of life, all countries, all backgrounds, and all religious (or non-religious) persuasions. And it is better for it.
Although there is no doubt that divisions of all kinds exist in Israeli people’s day-to-day lives, the region has embraced diversity within the startup community, working with meritocracy in mind. You can find talented people speaking almost every language in Israel, and that helps with another piece of the puzzle — not the final reason Tel Aviv and Jerusalem are so successful despite their size, but certainly another spoke on the hub.
The need to be global from inception
You see, when you have a country that includes only 8.5 million people, of which around 480,000 live in Tel Aviv, you have to think differently. When you consider only half of those people to be consumers, and fewer still to have access to free capital, one thing is clear: Unless you want to start a lifestyle business, you can’t count on launching your product or service locally with any real measure of success.
So Israeli startups think globally from the outset. They don’t have the luxury of not doing so. In the U.S., it is common for apps and services to only be available within the country. In Israel, many types of startups launch outside the country by default. Building a product that can scale from day one requires a completely different mindset, and it is one that favors the Israeli startup.
It is this attitude that has helped social trading platform eToro scale massively since its founding in 2007. Almost $73 million in funding later, it has become one of the defacto stocks, commodities, and currency trading platforms globally (despite not yet being available to use in the U.S.).
My tour of Israel’s startups also included a visit to Target Global VC’s own event, which showcased portfolio companies such as Datorama. During my visit, Target Global announced a new $100 million fund focused on early-stage startups in Berlin and Tel Aviv. And I met with the team from Appnext, a company that is delivering a smart solution for mobile marketing and attribution. More on them another time. Yes, I’m still a tease.
On this trip, my eyes were opened to the many reasons Israel does so well “per capita.” It isn’t just the mandatory conscription to the IDF that makes the difference, though that is an oft-cited factor. And I can only imagine how much more effective the region would be if its penchant for overselling could be quashed in preference for realistic self-promotion. But if that’s the only negative in a sea of positives, it is clear that the Startup Nation is set to continue punching above its weight in every category for a long time to come.
Disclosure: The Israel Ministry of Foreign Affairs paid for flights and a portion of my accommodation. All other accommodation costs and expenses were paid for personally.