The Start-Up scene
The Start-Up scene
Many Japanese companies visiting Israel for ‘innovation search’ wish to meet start-ups. Maybe one can make a difference to their business? Here’s an objective look at the Israeli start-up scene.
Let’s start with some numbers. You’ll find claims that there are 6000 Israel start-ups. That’s probably true. However if the definition is ‘stable start-ups’ i.e. those with some track history and ones that won’t be disappearing tomorrow, then the figure of 2,400 (-60%) is more reasonable.
Mainly in the center
Israeli start-ups are located along the whole coastal plain, as well as in the North and in the Beer Sheva area (shown in red on the map below). While you find many of them in the greater Tel Aviv area, location is no indication of a start-up’s value. Some very bright minds choose to work in outer and quieter areas.
Map courtesy of https://mappedinisrael.com
The start-up accelerators (brown), investor companies (purple) and R&D centers (green) all have a similar location pattern. The overall view is of a small country that commits itself massively to being a thought-leader.
Wide-scale financial support
Organizations of every size exist in Israel to look for the ‘next big idea’ offered by start-ups. These include Technological Incubators, International R&D Funds and Venture Capital Funds. The Israel government subsidizes all these. There are also Research Foundations in Universities that support the technologies developed within their institutions.
Israel start-ups also use the services of MAOF, a government-subsidized business development agency with 40 branches nationwide. From MAOF they get expert business advice and assistance, preparation of business plans and assistance in obtaining financing.
The social advantages
Everybody talks about the reasons for Israel’s start-up success. So we summarize four main reasons:
- Closeness – People are close in Israeli society. They’re together at school, in the army and afterwards. There’s one degree of separation, so everyone can be reached quickly.
- Courage – The spirit is “Let’s take a chance and see if an idea works.” Even if it fails, that’s OK. That’s just a stepping stone to future success and encourages them to try again.
- Ambition – Young innovative adults may spend about four years being somebody else’s employee before creating a start-up. It’s the freedom to set their own pace and direction that drives them forward.
- Survival – Israel is isolated with a small home market. The excitement and challenge are in international markets. This stimulates the drive towards creating new ideas that can work on the world stage.
Can start-ups also scale up?
There’s no question that Israel is very strong on innovation – getting from point 0 to point 1 (new idea to tested prototype) on the marketing scale, dreaming up the new idea or application. But how can Israel also take those ideas from point 1 to point 100 (tested prototype to full production and sales)?
A recent article in Forbes magazine says that the leaders of Israeli start-ups need greater experience in two areas: Process and Personnel. Regarding process, it says that business executives must have more maturity to plan properly. They must allow sufficient time for each development stage. Regarding personnel, these leaders need to build development teams that are both bold and practical.
For these reasons, the connection between an Israeli start-up and a more mature overseas company (such as in Japan) can be successful for both. Israel can start up. Japan can scale up – in a market category that it defines carefully.
Following the Swiss example
It isn’t just Japanese companies that are looking for innovation. So are the Swiss. Swiss Post is one of the most advanced logistics companies in the world. In 2018 they delivered 1898 billion letters and 138 million packages. They have linked up with Israel Post, which for years has provided appalling service. Many letters in Israel’s system take 10 days to arrive – or don’t arrive at all. So where’s the appeal?
Last year Israel Post decided to completely transform the business of delivering posted items by applying artificial intelligence, digital services and automation. They have set up an ‘Innovation Center’ and have invited Israeli start-ups to offer solutions for many different tasks. These include streamlining the return of packages, improving service management and regulating queues and peak deliveries. They also deal with setting up unmanned stores, dealing with logistics and robotics and speeding customs clearance.
Swiss Post has connected with Israel Post because they want to be involved in this. They will select a project and Israeli start-ups involved will be invited to a workshop in Switzerland. Those selected will carry out the project while getting funding from Swiss Post. Israeli venture capital companies and the Israeli government will fund other projects. A 40% stake in the postal service will be sold to private investors.
In 2018, Israel Post delivered 65 million packages and letters in Israel and the numbers are increasing. Hopefully, with the help of Israeli start-ups and Swiss Post, it may become a successful public service instead of the failure that it is today.
These are a few special insights into the nature of Israel’s start-up companies. KEYZUNA is in constant contact with them, finding the ones with unique ideas and stability that can be suitable for international cooperation. Let us help you, our Japanese visitors, to identify the most suitable Israeli innovators for your specific needs.