Israeli Start-Ups: Foreign Investors
Israeli Start-Ups: Foreign Investors
פורסם בתאריך 20/06/16 16:25, מאת Ariella Dreyfuss, partner at Barnea & Co.

For over twenty years Israel has maintained the coveted position as a world-wide hot spot of innovation and technology. The country is heaving with founders eager to carve out their success story, striving to be the unicorn among their peers and to emulate the feats of the Israeli entrepreneurs behind Viber, Fundtech, Waze, Mobileye, Wix and ironSource. The technology now coming out of Israel is, as always, trail blazing and varied: fintech, GPS, IoT, augmented reality, cyber security, life sciences, medtech and much more.

 

Traditionally, hi-tech investments were insular, Israeli money supporting Israeli entrepreneurs, the only international nexus being the foreign investors in Israeli VC funds.  This trend was reinforced by the availability of various forms of favorable financial support from the Office of the Chief Scientist of Israel (recently renamed the National Technological Innovation Authority) (the OCS).

 

However our founders have outgrown the pond; the domestic market (investment and consumer) is simply too small and the limitations imposed by OCS grants (restricting transfer of IP or manufacturing outside of Israel) too inhibiting. This desire to reach beyond Israel’s boarders has been recognized by among others Coca Cola, who responded with its “bridge” program to connect Israeli startups with major global markets. Israeli entrepreneurs are no longer simply soliciting financing, but added value on a global scale: international contacts, manufacturing abilities, distribution, marketing and promotion channels, regulatory approvals, mentoring and no less importantly – credibility. Our founders are hungry for international prominence and this makes foreign investment particularly interesting for everyone.

 

For Israelis, America has always been the embodiment of success (colloquially the term “America” is used to describe something great), and so Israeli founders have often cast their eyes over the Atlantic in pursuit of their dreams. They are willing and excited to relocate from the “land of milk and honey” to the “land of opportunity”.

 

However, in the last few years the Far East has woken up to the potential here and interest from China, Hong Kong and Japan has spiked. Israeli executives, aware of East Asia’s fast economic and technological growth are eager to play ball and profit from the added value these new investors can bring to the table; the consequence - a surge in investments from the Orient (Huawei, Alibaba).

 

While VC money previously dominated the Israeli Start-Up space, recently international corporations determined to maintain their competitive edge are by-passing the VC stage and going straight for the kill, buying up Israeli ideas and assets (think Johnson & Johnson, Sears, Roebuck and Co, IBM, Microsoft and Amazon to name a few) or setting up their own accelerators to tap into Israeli innovation (consider eBay, Havas, Kimberly-Clark, Citibank and Barclays).

 

Startups are typically not self-sustaining, they require investment to scale up and conquer the global market. Simultaneously, Israeli entrepreneurs do not seem to aspire to grow a corporation, and few pursue the IPO route (Checkpoint, Mobileye, Novocure and SolarEdge being notable exceptions – all of which floated on NASDAQ). The dream of most Israeli founders is to have an attractive exit, to sell and move on to the next idea; after all technology and trends are evolving so rapidly.

 

Israeli entrepreneurs are eager to procure financing from a wide range of vehicles (VCs, private equity, high net worth individuals and corporations) and from a wide geographical net. With approximately one and half thousand startups in Israel at the moment seeking to enhance their international footprint, or move on to their next project, there is a wealth of opportunity for foreign investors in Israel.

 

Ariella advises international and Israeli entrepreneurs and companies engaged in a wide range of high tech activities, including, communications, life sciences, medical devices, internet, financial services and advertising.