We’re heading back to the “Startup Nation”, Israel, this September for another edition of our learning tour.
Watch the highlights below!
Some updates about the startup scene, 2015 was another BIG year for Israel with exits and fundraising continuing the success of 2014!
Ahead of our learning tour in September, we’ve identified 4 key developments that are changing the startup nation.
#1: Asia’s Growing Presence in Israel
Asia increasingly sees Israel’s innovativeness as a source for continued development especially in the high-tech scene. Singapore’s Innovfest unBound, an event showcasing Singapore’s smart nation aspirations, was co-chaired by Yossi Vardi.
On the acquisition front Asian giants like India have made significant advancements. Panaya, an enterprise software solution for organizational resource management and client relations was sold to the giant Indian software provider Infosys for $200 million.
But China’s 3-step strategy to Israel is the most impressive:
- they “buy” talent through investments.
2015 was a big year for China-Israel investment relations after China launched their 1st technology fund targeting Israeli companies. In total for 2015, Chinese venture capitalists have invested about $500 million in the local startup scene. Israeli companies such as Lumenis, a medical cosmetics device company, was sold to the Chinese-British investment fund XIO for around $500 million and Travelfusion, which specializes in finding low-cost flights has been sold to the Chinese Ctrip for $160 million.
- they want to encourage manufacturing in China.
This is best illustrated by the Experience Center being built by Internet-of-Things giant IngDan in Tel Aviv that will feature actual products made by Chinese manufacturers to attract Israeli business to leverage on IngDan’s vast industrial network and produce in Shenzhen. IngDan already has over 10,000 companies and startups in its fold, all manufacturing weird and wonderful Internet of Things things – physical objects linked to the Internet via electronics and sensors. Under this Gateway to China initiative, the company says it can open Asian markets to Israeli innovation.
- they want to catch “Israeliness”
With China’s aging population putting stress on their productivity, the government hopes to employ the innovative go-getter entrepreneurial mindset of Israelis to continue China’s development. Recognising the need for greater cultural exchange, China hosted its Third Global Entrepreneurship and Innovation Conference in Israel’s Ben-Gurion University of the Negev instead of back home which it has done for the past two years. Following this, the establishment of an innovation center by China’s Jilin University and Israel’s Ben-Gurion University was also announced.
#2: Israeli Fintech Continues Its Expansion
Israeli startups combining skills in tech and finance have attracted the attention of major financial institutions. According to the Israel Venture Capital Research Centre, in 2014 there were 379 companies and 14 foreign R&D centers working on financial technology in Israel. Fintech start-ups raised $369 million in 2014, up from $13 million in 2009.
Just last October, Barclays, one of the leading British bank groups, launched an accelerator program powered by Techstars, a startup accelerator which partners with major corporations to host industry-specific programs. It is the first foreign bank to open a lab under the auspices of an Israel Finance Ministry program to encourage financial institutions to invest in fintech. Called Barclays RISE, the accelerator is focused more on cyber security, blockchain – the technology underlying digital currency Bitcoin – and compliance solutions, selecting just 10 startups.
Another notable financial institution with a lab in Israel is Citibank. Citi’s Tel Aviv lab, which works with tech teams in London and New York, focuses on mobile and big data R&D, said Neil Corney, Citi Israel’s chief country officer. Since its launch in 2013, Citi’s Tel Aviv lab has developed a mobile app for “Citi Velocity”, one of the largest trading and research platforms for institutional investors, with an average daily volume exceeding $3 billion; one of the highest trade flows worldwide for a platform of this kind. Citi Velocity has facilitated the trading activities of hedge funds, institutional investors and professional traders by providing the relevant news, research, prices and maximum securitised trading activity.
Its unique point?
Condensing six big screens, that include all the relevant information required to make a good decision in almost no time, into displays that work on tablets, mobile devices and smart watches. The app is the only one providing market research and trading capabilities under one roof for foreign exchange, Citi said, adding other businesses such as equities, interest rates and commodities are looking to incorporate the app.
We’ve curated a few notable Fintech startups here:
- Social trading that allows members to analyse and mimic the trades of fellow users
- Offering sophisticated data feeds and analytics, traders can make decisions based off insights and experience crowdsourced from the Tradeo community.
- Raised $6m in 2015 for their Series B funding round
- End-to-end fraud prevention solution for online merchants that reviews, approves and guarantees transactions.
- Flexible business model enables merchants to select which transactions they want to send to Riskified for review and merchants are only charged when Riskified approves and guarantees a transaction.
- $25m Series B funding raised in 2016
- Converts leftover foreign currency (US dollar, Euro, British pound, Phillipines peso, Russian ruble, Turkish lira, and Georgian lari) to add to an individual’s PayPal account, redeem gift cards or for donation
- Notes language preferences and recommends relevant products. E.g. Choice of Russian suggest Yandex Money, the Russian online wallet
- Raised $10m in 2016 Series A round
#3: Growing Trend in Accelerators and Co-working Spaces
2015 saw a 50% increase in mentorship programs and accelerators, of which there are now over 80, with the corporate accelerators backed by multi-national companies becoming key players. Operating since 2012, Microsoft Ventures has already managed to grow and exit some successful companies in Israel. These initiatives join the ranks of established accelerators such as 8200 EISP, created by prestigious army intelligence unit graduates that also accepts all kinds of entrepreneurs and Upwest Labs, a Silicon Valley-Israeli collaboration.
Co-working spaces have grown in popularity within Israel. Tel Aviv for example has doubled its co-working spaces from 21 to over 50 in just 4 short years! Companies such as Mindspace even have whole buildings in prime locations around Tel Aviv. With rising competition, co-working spaces have developed new ways to distinguish themselves. South of Salame (SOSA), for example, is one of the co-working spaces with a prominent incubation element as companies only stay for a dedicated period of time. They also have regular lectures from a diverse base of industry experts to engage their members with interesting content. Most importantly, SOSA has visiting hours with investors, which is incredibly valuable for startups, Rami Beracha from Pitango Venture Capital, one of Israel’s leading venture capital funds, is just one of their in-house advisors.
#4: Enhancing Cybersecurity
At a speech to CyberTech 2016 participants, Israeli Prime Minister, Benjamin Netanyahu, stated that Israel has already become one of the five leading cyber powers in the world. With some US$3.5 billion in cyber-related exports last year and a target for some 20 percent of worldwide investment, he noted that the Israeli market is larger than all other nations combined apart from the United States.
Israel’s use of military technology to civilian use in the field of cybersecurity has led to notable acquisitions by foreign companies. For example, payments provider PayPal bought innovative online fraud detection startup Fraud Sciences for $169 million in 2008 and predictive security startup CyActive for $60 million in 2015.
The latest development: cybersecurity for connected cars. Notable Israeli automotive cybersecurity startup Argus has pioneered a solution that analyses communication packets (the segments of data) that come into and go out of the vehicle and determines if the packets are associated with the kind of behavior expected (e.g., signals from specific IP addresses, commands that make sense given the current activity of the vehicle, etc.). It can then block or trace suspect connections, preventing hackers from remotely grabbing control of a vehicle’s steering or braking system. This would have been especially useful for Fiat Chrysler which had to recall 1.4 million vehicles in 2015 to install new software after cybersecurity researchers showed a WIRED journalist that they could turn off a Jeep Cherokee’s engine as it drove.
With estimations suggesting that by 2020, there will be as many as 400 million connected vehicles on the road – hacking will be a huge problem. Harman International Industries, a maker of connected car systems, just bought Israeli-founded cyber defense start-up TowerSec to protect its products with market-ready platforms in an acquisition valued at $75 million.
The prominence of these developments are also reflected in the move of global technology firms, such as IBM, to the desert city of Beersheba. Part of Netanyahu’s initiative, the Israeli military decided to move operations such as elite intelligence and cyber warfare units there. With many of these graduates being the key drivers behind many of Israel’s private successes, under the Beersheba cybersecurity initiative, large tech companies are attracted to continue utilising military expertise in an innovative environment.
Do join us for our learning tour in September!
Further information on our learning tour to Israël, the “startup nation” can be found here!