Israeli startups lead the world in revolutionary, lifesaving technology. From facilitating medical miracles to re-envisioning natural disaster response, the start-up nation is making major changes. Now, Israeli startups are tackling the different safety concerns a self-driving car might bring up from a different perspective, providing the consumer with comfort and assurance when they stop getting behind the wheel. The future of car safety is here. At CES 2019, check out the Israeli companies that will ensure a safe, smooth, autonomous ride.
It’s January in Las Vegas, which means top innovators are showcasing their technologies at CES 2019. Not all consumers may grasp how the innovations presented at CES will, in the near future, impact their day-to-day. From grocery store trips, to customer support ordeals, to natural disaster response, startups are already making an impact in your daily life – and we’ll see a lot more of that impact in 2019.
Are you at CES? Meet these companies in person at OurCrowd’s Startup Pavilion at Booth 301 in Westgate Paradise Center. Contact us to request a meeting.
A look at Israeli innovation throughout the decades – and beyond
In just 70 years, the world’s only Jewish state has managed to cement its reputation as a global high-tech powerhouse in the face of considerable odds. Despite a precarious geopolitical environment with little natural resources, Israel has become home to major players in the high-tech industry and boasts one of the world’s most technologically literate populations.
Seven decades ago it would have been hard to imagine that Israel would not only have pioneered agriculture and water tech but is forging ahead in today’s hottest sectors – artificial intelligence ($1.1B in 2017 capital raised), cybersecurity ($791M in 2017 capital raised), automotive ($810M in 2017 capital raised).
In 2017, $5.2B of venture capital poured into Israel – since 2013 that totals $20.2B (according to IVC ZAG High Tech Survey 2017). Last year alone, Israel saw $23B in exits. Israeli high tech is on fire – and the world knows it.
This extends to the Far East. Last year, Israel saw the highest number of visitors from China ever – up 75% YoY according to the Wall Street Journal. At OurCrowd, we host delegations and visitors throughout the year, and in 2017, the country represented the most was China.
Israel and India are enjoying closer relations than ever, with Israel hosting the first visit of an Indian Prime Minister – Narendra Modi – in 2017, with PM Benjamin Netanyahu returning the visit with a trip to India early this year. We had the privilege of sending an OurCrowd representative with the Prime Minister to strengthen business relations and found an eager audience for collaboration beyond defense into almost every aspect of Israeli tech. The trips resulted in nine agreements, including cybersecurity, space, and AgTech exploration.
For OurCrowd, we take great pride in being at the nexus of it all; being part of world-shifting tech startups and helping them grow, and bringing the world’s attention to this vibrant startup ecosystem. In honor of Israel’s 70 years, we have put together a snapshot of where we’ve come in 70 years – how tech innovation throughout the decades has led Israel to the forefront of so many sectors today.
1950s: Water Tech
Faced with dry conditions and difficulty accessing reserves, Israel was pressed to find solutions for water. In the 1950’s, Israeli inventor Alexander Zarchin began developing the first desalination technology, kicking off the path for Israel to become a world leader in innovative water saving solutions.
Today, Israeli companies are improving water saving abilities for farmers around the world like CropX, and are even creating water from air, as AirGen is doing.
Israel’s creative agriculture solutions allowed the country’s desert and swamplands to bloom. From the development of a drip irrigation system, Taftefet, in 1965, to famously creating the world’s first cherry tomatoes, Israel has led in genetic and high yield solutions used worldwide, especially in large agricultural countries like India and China.
Today, Israel’s AgTech sector is bringing fortune to the Israeli economy, notably with Netafim’s 2017 exit for $4B. Startups are continuing this legacy by producing ever better yields and less crop damage through pesticide alternatives like Eden Shield, and applying advanced computer mapping to fields, like Taranis.
In 1972, Professor Isaac Kaplan developed the Sharplan CO2 laser at Jerusalem’s Hebrew University, to be used for highly precise surgeries. Since then, Israel has led the way in medical breakthroughs, including the famous pill-cam.
Today, Israel’s academic and startup prowess is creating miracles in cancer-fighting therapies. Israel, the first fully digital healthcare system in the world, is also leading the way in digital health and AI applications; Zebra Medical Vision is challenging traditional diagnostics through offering radiology scan readings for just $1.
1980s: Air and Space Tech
With the celebrated launch of Israel’s first satellite Ofeq in 1988, Israel strengthened its foray into air and space technology. It later developed innovative military gear, like hi-tech air force helmets and began utilizing drone technology for military and industrial use.
Today, Israeli startup NSLComm is developing nanosatellites for better communications and Airobotics is using unmanned drones to protect and monitor industrial sites.
1990s: IT and Cybersecurity
In the 1990’s Israel began exploring the wonders of the internet and computers, most famously developing the original instant messaging service ICQ and inventing the disc on key, or USB stick. 1993 would also see the founding of CheckPoint, which was an early indicator of the next decade’s cybersecurity boom
Today, Israel is considered a global leader in cybersecurity innovation, second only to the U.S. with companies all over the world coming to find solutions to cyber attacks like wannacry, and 2017’s notorious NSA leak, as well as thinking ahead to cybersecurity for Autonomous Vehicles, like Argus Cyber Security, acquired by Continental AG in 2017.
2000s: Personalization and Computing
In 2004, Intel released its Centrino microprocessor, establishing Israel at the forefront of R&D. In 2006 Wix made it easy for anyone to create their own website. Community-sourced navigation app Waze was founded in 2008 with real-time individual traffic updates, acquired by Google five years later for over $1B.
Today, Israeli startups are providing more access and personalization to consumers, with retail apps visualizing purchases in 3D like Snap acquired Cimagine, and mobile, on-demand services, even in traditional sectors like beauty.
2010s: Defense Tech and Autonomous Vehicles
With the Iron Dome, Israel started intercepting short-range missiles over civilian areas, altering civil defense. Today, Iron Dome software developer mPrest is now securing power grids from New York to New Zealand.
Israelis startups are altering defense tech like drones for other purposes. Edgybees is expanding drone tech into public safety and companies are adapting computer vision and vehicle autonomy for safer roads.
Tech in the Next 70 years…
It’s been a quite a distant journey in such a relatively short time, and the road extends far beyond this point. There’s no time to lean back and assume that Israel can continue to lead the world in innovation without effort, especially with global high tech competition heating up. Yet, living in a land which is made up of more than half desert, surrounded by hostile neighbors, and choosing to constantly look forward makes Israelis optimists to a fault. And optimists can make the impossible possible.
Cheers to the next 70 years!
OurCrowd is a co-organizer of MIXiii BioMed 2017, the leading event in Israel’s life science industry, which brings together thousands of healthcare industry professionals from around the world to scope out Israeli and global biomed technologies. BioMed provides insight into the latest research and the thinkers who will create the medtech solutions of tomorrow.
Taking place in Tel Aviv from May 23-25, the event will feature a number of OurCrowd senior professionals as well as portfolio companies, including:
- Intendu’s Active Brain Trainer: Transforming Brain Health in Aging and Following Injury and Disease (May 23) with Son Preminger, Founder & CEO of Intendu. Watch her speak about the company here.
- Technology and the Elderly (May 24) with Allen Kamer, managing partner of OurCrowd Qure, Israel’s first digital health fund. Watch the Digital Health panel led by Allen at the OurCrowd Summit.
- Robotics Role in Aging (May 24) with Dor Skuler, CEO of Intuition Robotics will speak on how the company’s social companion technology can positively impact the lives of older adults. Watch Dor speak on the Machine Intelligence panel at the OurCrowd Summit.
- Early detection of Osteoporosis (May 25) with Elad Benjamin, CEO of Zebra Medical Vision. Elad spoke on the Machine Intelligence panel at the OurCrowd Summit.
Ready to sign up? The registration deadline for the Early Bird price is May 8. Plus, as a co-organizer we can offer you a 10% discount as a member of the OurCrowd network – just enter the promo code 10%discount on the registration page.
Guest post by Phillip Fine, Jerusalem-based writer/editor.
There’s commercialization of military know-how and then there’s Israel’s commercialization of military know-how.
Take mPrest Systems Inc., a software maker headquartered in Petah Tikva, a city of 231,000 roughly 11 kilometres east of Tel Aviv.
That company is selling the software that Israel used in Iron Dome – its system for shooting down Hamas rockets — to electric power utilities to help them prevent blackouts.
Specifically, by polling sensors, the software allows an electric utility to monitor its equipment. The utility can then better predict when a transformer might pop, thus allowing for repairs before the electricity goes off.
One customer, the New York Power Authority, has already used the software to pinpoint transformers that it didn’t even know were problematic, says Natan Barak, mPrest’s CEO, who spoke to Media Line at the OurCrowd global investor summit in Jerusalem Feb. 16.
mPrest hopes to sell the software to other electric utilities in the U.S., as well as to power companies in Asia.
In fact, the company is customizing its product so utilities in that part of the world can better match power generation with power consumption, thereby reducing the possibility of outages and blackouts.
All told, mPrest’s software helps electric utilities tie together their many moving parts, such as sensors, closed circuit TV cameras, alarms, fences and patrol vehicles.
Indeed, the product can connect more than 300 sites, five levels of hierarchy, as well as tens of thousands of sensors.
But what about Israel’s security? Isn’t it endangered by the sale of Iron Dome software?
After all, from 2011 to 2014, Iron Dome reportedly intercepted more than 1,200 rockets that Hamas fired from Gaza. And many of those rockets would have hit populated areas. Moreover, Israel hopes to make Iron Dome even more useful, extending its range to 250 from 70 kilometres, as well as tweaking it so that it can simultaneously intercept rockets coming from two directions.
But Israelis needn’t worry that their enemies might gain the upper hand. Because mPrest’s software uses only Iron Dome’s infrastructure, and not its operational capabilities, there’s no security risk, says Mr. Barak.
In the meantime, mPrest sees its software helping power the so-called smart city: those systems that use sensors to knit together the many layers of communication in a complex urban area.
Take a tree that falls on a homeowner’s driveway or front lawn during a blizzard or an ice storm. Thanks to mPrest’s software, the homeowner need only push a button on his android, rather than phone city hall, to report the problem, Mr. Barak says.
mPrest has already sold this type of software to Bezeq, the Israeli phone company, which in turn will license the product to cities throughout Israel. mPrest also hopes to sell the software to telcos in other parts of the world.
Yet another customer for mPrest’s product will be Netafim, the Israeli maker of drip and micro-irrigation products for both the agriculture and greenhouse sectors.
Through the use of ground-based sensors, an irrigation company will be able to use the software to measure out the right amount of water at the right time and at the right place.
Mr. Barak, now 58, is perhaps the perfect person to bridge the gap between software used in defence and software used in business.
Not only does he hold a B.Sc in electrical engineering from the Technion, Israel’s version of the Massachusetts Institute of Technology, but he also holds an MBA from Bar-Ilan University in Ramat Gan near Tel Aviv. In addition, he has a master’s degree in political science from the University of Haifa.
More important, he spent 23 years in the Israeli navy, during which he helped develop command and control systems for the country’s submarines, missile boats and helicopters. He also helped develop a simulator for subs.
Founded in December 2003, mPrest now boasts 180 full-time employees, of which 160 are either engineers or specialists in mathematical algorithms.
Although private, the company is likely to go public in a few years, Mr. Barak says.
mPrest Systems is an OurCrowd portfolio company; to learn more about the investment, visit ourcrowd.com.
Building the ecosystem. Leveraging the network. Helping our portfolio companies succeed.
Every startup wants to work with investors that will help solve problems and spring their business forward. Every venture capital firm boasts their “entrepreneur friendly” initiatives that sets them a part from the others. “We do X better than other VCs.” “We match our founders with experts to advise them with Y.” “We offer to our companies Z to help them raise follow-on funding.”
In a growing industry of more than 798 venture capital firms in the U.S. alone, as important as receiving capital is who you get it from. A few brand name venture capital firms embody legendary value-add that offer the edge to outperform others. Andreessen Horowitz, the forefather of value-add venture investing, has built an operating model around giving founders the ability run their companies as if they are serial entrepreneurs who have previously built successful startups. Kleiner Perkins opened a fellowship program to find talented individuals to work with their portfolio companies. First Round Capital has a team that helps their founders fast forward through the tough nitty-gritty of building an early stage company by using their “Pitch Assist Team” to help with their decks and pitches, or their “Talent Team” to connect their startups with top-tier candidates.
— Josh Kopelman (@joshk) May 31, 2016
Powered by OurNetwork
At OurCrowd, we’re working towards disrupting the value-add model by leveraging our diverse global investment network – OurNetwork – to help portfolio companies succeed. Beyond portfolio companies, this vast network includes strategic multinational partners & corporations, seasoned founders & executives, and most importantly, investors from across the globe.
From the moment the term sheet is signed, our portfolio companies will be able to plug into a supercharged network that gives founders — especially first-time founders — the tools and global rolodex of a seasoned CEO. While until now this has been a case-by-case manual process, we’re beginning to leverage OurNetwork in a more systematic and data-driven manner, building tools to optimize our efforts at every step of the way.
For any startup, especially an Israeli startup, a major challenge is reaching relevant contacts in the target market.
Sight Diagnostics, a company pioneering an innovative computer vision platform for cheaper, faster, and fully-automated blood diagnostics, was seeking connections to make the next push into the global market. In Q3 2016, the Sight team worked to gain introductions to doctors and managers at relevant medical facilities with the intention of conducting short phone interviews. Through key connected investors, Sight was introduced to Walgreens Healthcare Clinics, executives at Mayo Clinic and John Hopkins, and dozens of relevant doctors and managers of medical facilities.
Marketing & PR
It’s no secret that early stage companies are in a fierce competition to increase their brand awareness. On top of that, it’s nearly impossible for early stage companies to control free virality and exponential organic growth.
Surgical Theater, a virtual reality solution that combines the science of flight simulation with advanced CT/MRI imaging technology, was seeking a push into the global spotlight, but was having difficulty securing meaningful PR. Within 24 hours of receiving the request, an OurCrowd executive arranged a strategic interview with Surgical Theater and CNN’s Erin Burnett, that showcased the company in front of millions of viewers worldwide.
As an investor, having a global network of thousands of fellow investors is a powerful tool. Aside from leveraging the network for strategic business and portfolio development, an essential piece of the puzzle is sourcing dealflow through the network.
In mid-2016, an OurCrowd investor from the United States approached our Investment Team with an interesting company. As an early angel in the company, he brought us the deal as the company was raising their next round. After performing thorough due diligence, including a site visit to their HQ in India, OurCrowd made an investment in the company’s Series A & B rounds. Through OurCrowd, 177 investors from 22 countries invested over $5.5M alongside Ford Motor Company, Sequoia Capital, and Nokia Growth Partners.
It’s all about scale
In today’s landscape, top-tier VCs prevail because of their ability to build networks that provide quality dealflow and strategic value to their portfolio companies. While every venture capital firm’s marketing reflects their value-add, we’re working towards leveraging network effects on a global scale. Whether you’re a portfolio company in Tel Aviv, New York, Sydney, or Singapore, you will have the ability to tap into a global rolodex without going through the obstacles that often drain enormous time, effort and resources.
While the anecdotes above provide a glimpse into our unique model, there’s a pipeline of value-add tools and a vault of OurNetwork success stories that have gone untold and unnoticed. In the coming weeks and months, we’ll be launching game-changing tools that redefine collaborative participation from the greater ecosystem. Regardless of who you are, we’re betting that you have a role to play. If you want a sneak peak into our global innovation network and are interested in getting involved, introduce yourself here.
Thanks to Stav Erez, Liz Cohen, and Laly David for contributing to this article.
In early 2016, many pundits predicted a more tepid investment environment, characterized by a slowing venture capital market, a more rational valuation environment, and potential correction in the public markets. There was a feeling that we were due for a bit of a “hangover” from the 2014-15 startup investing frenzy – which had been driven largely by walls of new capital from the likes of sovereign wealth funds, increased corporate venture money, and family offices. (For more on that, see our thoughts from early 2016 here.)
And, indeed, the end-of-year data for 2016 has exposed what everyone pretty much knew: In 2016, venture capital funding in the US was down year-over-year, following five years of consistent growth in funding. According to data provided by Pitchbook, VC funding dropped roughly 14% – from the impressive $79.2 billion funneled into US-based startups in 2015, to a more modest sum of $68.3 billion in 2016. Perhaps even more telling is the decrease in the number of deals done in 2016 vs. 2015: 10,486 in 2015, compared to 7,966 in 2016. And exit activity was also lower, with 935 exits compared to just 719 in 2016 – representing a 25% drop.
The reasons for the slowdown in the US are varied, ranging from a sense that valuations had potentially run ahead of themselves in 2014-2015, hindering later stage rounds in 2016, to uncertainty around public markets and the presidential elections. While the US stock market ended the year on a high note, the fact is that for the 20 months leading up to November 2016, the US markets were basically flat, trading in a wide range. (Remember the periods of high volatility around such events as Brexit, the first Fed interest rate hike in many years, and the US election.)
Yet – while this somewhat sobering description may accurately portray 2016’s investment story in the US – in Israel, the investing environment was different, demonstrating continued momentum, and a more positive atmosphere. Indeed, the growth trend in both dollars invested and number of deals done continued apace in Israel in 2016.
The Israeli experience was different
In 2016, Israeli VC investing showed growth in almost all key metrics – a continuation of what has been a very strong growth trend (some might ask if it is too strong?) over the past five years. According to the recently released report, Summary of Israeli High-Tech Company Capital Raising (IVC and ZAG Report), 2016 actually saw a record high of $4.8 billion of capital raised, which is 11% above 2015 levels, and up from $1.8 billion in 2012. In addition, while the number of deals fell a modest 7% from 2015 levels, the average deal size rose to a record $7.2 million, up 19% from 2015 levels.
The reasons for this? I believe there were four distinct drivers:
- The relatively less inflated valuations of Israeli companies compared to their Silicon Valley peers;
- Israel’s focus on and frontier technologies – those areas where global dollars are flowing;
- the growth in Israel of late stage funding rounds;
- and a new influx of Asian capital.
Below, I take a closer look at each.
No bloated valuations
During 2014-2015, startups in Silicon Valley saw record amounts of investment. Much of this came from new sources of capital, such as sovereign wealth funds, hedge funds, a new trend towards corporate venture capital and strategic corporate investment, and large family offices. And as pointed out in PitchBook’s analysis, this sudden increase in available capital drove up valuations across the industry. It generated a plethora of new unicorns (private companies valued at over $1 billion). This led to somewhat of a “hangover” in 2016, when companies found it harder to complete next funding rounds as founders’ valuation expectations were often different than what the market was willing to pay.
In the 2016 climate, some US-focused VCs were worried about where the follow-on investment would come from for later stage companies – and in many cases, they opted to reinvest in their own companies as opposed to launching new investments. As a result, overall deal activity slowed. Indeed, according to Crunchbase, in 2016 there 14 new unicorns created, down from 48 in 2015.
In contrast, this dynamic did not play out in the same way within the Israeli ecosystem. While valuations have been rising at a healthy rate in Israel – and in some cases, and some sectors, I would argue have gone too far — in general, valuations in Israel did not go up nearly as much during 2015, compared to Silicon Valley. Instead, most valuations stayed pretty much in-line with business fundamentals.
As a result, when it came to the ‘next round’, Israeli companies found there were eager and interested funders available. In fact, later stage rounds – the area where valuations became more extended in the US – saw the greatest growth in Israel (more on this below).
Where global dollars flow: Frontier technology generating interest
“Skate to where the puck is going, not where it has been,” said Wayne Gretzky, but that’s only part of the story.
When it comes to growth in investment dollars, it is often very important not to look at venture capital as one uniform sector (though it is of course an asset class), but rather to look at the areas of technology that are attracting the most interest from global investors.
Even when investing slows down, as it did in the US this year, the slowdown is not uniform across different sectors. Specific areas of technology development and innovation will continue to attract interest and funding.
According to a recent year-end 2016 report by Crunchbase, key frontier technology sectors, such as transportation (autonomous vehicles, drones, logistics), artificial intelligence, and AR and VR, all saw significant growth in investment across the globe, with investment in each of these sectors up between 70% and 150% in 2016. This reality played in Israel’s favor in 2016, as the Israeli high-tech sector is well positioned in key areas of technology that have continued to attract interest. These include AI (artificial intelligence), machine learning, drones, autonomous automotive technologies, Big Data analytics, robotics, digital health, and cutting edge areas of cybersecurity.
These are spheres of excellence where Israeli has historically been strong, and where the country’s best companies have been – and continue to be – created. As a result, Israeli entrepreneurs have been incredibly active in these technology areas and global capital continues to flow.
Cybersecurity is a prime example of an Israeli field that has historically been very strong, producing some of Israel’s largest companies (CheckPoint, CyberArk), and global investing interest remain strong. According to data gathered from CB Insights and CrunchBase, there was a 23% increase in funding for cybersecurity companies across all stages in Israel —from $560 million in 2015 to $689 million in 2016 (even as funding in this sector dropped roughly 20% in the US.
Newer areas of innovation such as AI, VR/AR and mobility (drones and autonomous vehicles), play right into Israel’s core strengths and are becoming key areas of growth, attracting large amounts of new investment. Israeli -founded Mobileye – now traded for over $9 billion – was at the forefront of many of the technologies that now enable autonomous driving. Israeli entrepreneurs and engineers are attracting rapidly growing amounts of capital in this area.
Interestingly, we are seeing Israeli companies excel at the convergence points of key technology trends. For example, a number of Israeli startups are emerging as leaders in cybersecurity for automobiles, while others are using expertise in big data analytics to move the autonomous driving industry forward.
According to a recent report by automotive industry consultants Roland Berger (Israel’s Automotive and Smart Mobility Industry):
Israel has recently become active in the automotive and smart mobility industry. Technology companies like Mobileye and Valens or mobility service providers like Waze and Gett have their roots in Israel and foster growth of this sector in the region… the digitization of mobility has required new competences – such as object recognition and tracking for advanced driver assistant systems, or mobility behavior projections for shared ride services. These are precisely the fields where Israel has developed competences in the past, often targeting military defense applications or Big Data applications for intelligence services. A growing awareness for the availability of these competences is reflected by the increasing investments and activities of automotive players like GM, VW, Daimler, Ford, Renault-Nissan, Bosch, Samsung (Harman), and many others.
Larger and late-stage rounds
Large funding rounds providing later stage “growth” capital for startups ready for expansion have been a part of the VC/startup scene in Silicon Valley and New York City for many years. However, in Israel, startups have generally built more capital-efficient businesses, and have often exited earlier — through either an IPO or M&A. Therefore, larger, later stage funding rounds have historically been less prevalent in Israel.
In 2016, that started to change as founders and investors realized that in order to scale their businesses faster, and better compete on a global basis, larger amounts of capital were necessary. Larger rounds at later stages of growth have also become more important in a capital markets environment, in which it has become more challenging, and less desirable to IPO.
While it is true that companies are staying private longer all around the world, in Israel there’s a new phenomenon in which larger, later funding rounds are becoming more normative. Five years ago, when a company reached a certain stage and needed to raise $30-50 million for a round D, they would either sell or go public. Generally, such amounts of growth capital were not available in Israel. Now, there’s late stage capital available and investors who are searching for those bigger, late stage growth companies. This is combined with serial entrepreneurs looking to build large companies with global scale.
In 2016, there was a clear acceleration in later stage growth rounds in Israel. According to IVC, there were 76 large deals (defined as above $20 million), up over 25% from 2015.
Moreover, the amount of money invested in growth rounds (above $20 million) in Israel in 2016 was as high as $2.7 billion, up from around $2 billion in 2015. Notable large, later stage growth rounds in the Israeli ecosystem over the past year include:
- VIA ($70mm series C)
- Payoneer ($180mm)
- Claroty ($32mm, Series B)
- Airobotics ($28mm, Series B)
- Sisense ($50mm, Series )
- Formlabs ($35mmm, Series B)
- Celeno ($38mm, Series F)
- Lemonade ($33mm, Series B)
- Enverid ($21mm, Series C)
It is a testament to the strength and breadth of the Israeli startup ecosystem that these companies represent a wide range of sectors, including cybersecurity, fintech, clean tech, digital printing, mobility and semiconductors.
Funding from the East
Until relatively recently, the vast majority of foreign capital investing in startups in Israel came from the West – North America and Europe. Over the past five years, we have seen a major shift, with increasing interest from Asian investors, primarily from China, Hong Kong and Singapore.
In 2016, this trend accelerated dramatically, and while accurate data is hard to pinpoint, Asian investment activity – especially from China—has grown dramatically. According to one estimate (IVC), Chinese investment in Israel has grown roughly 50% year over year since 2011. I believe that growth rate may have been higher in 2016. Anecdotally, I can say that in well over 50% of the investments we look at seriously (those in which we would consider investing), we note that there are Asian investors either looking at the deal or who have put forward a term sheet. One data point worth noting is that the amount of capital deployed by Israeli VCs in 2016 was roughly flat with 2015. Thus, the $400 million of growth in capital deployed in 2016 was almost all driven by foreign VC and strategic investors. I believe that a very high percentage of that came from the East.
The surge in capital coming from Asia is a response to the fact that Israeli high-tech has generally matured and offers highly innovative and proprietary technologies to the Asian markets. Chinese investors in particular have woken up to the significance of Israeli technology and the opportunities inherent in developing Chinese-Israeli business partnerships. Bringing great products and solutions to the huge markets of Asia can be a win-win proposition for all.
Working more closely with Israeli companies also means getting Israeli attention in terms of the direction of product development, i.e., Asian money is pulling Israel’s tech attention toward Asian markets, in contrast to more US-centric companies.
And the Asian interest in Israeli companies is not just about passive investment: According to PwC’s 2016 Israel M&A Report, investors from the Far East were involved in nine acquisitions of Israeli companies in 2016, totaling no less than $6.38 billion, representing a 3.5-fold increase from the previous year. Six of those deals specifically involved investors from China.
At a recent event in Tel Aviv, the China-Israel Forum hosted by the Chinese media group Caixin, the growing role of China in Israel and cooperation between the two countries was explored. The forum highlighted the fact that China is one of Israel’s largest trading partners (I believe it is #2 after the US), and both sides are highly motivated to build on the growing relationship. At the event, dozens of entrepreneurs from China and Israel gathered to discuss tech links between the countries, and Caixin Editor-in-Chief Hu Shuli was quoted as saying that China is especially interested in Israel’s tech innovation and talent in the areas of cybersecurity, agriculture, AI, and the Internet of Things.
Well-positioned for continued momentum (then again, it’s a small world)
I remain very enthusiastic about the trends I am seeing as we’ve entered 2017. Israel is well positioned in some of the most important emerging areas of technology. The core competencies of Israel’s technology ecosystem are well suited to benefit from “where the puck is going” – and global investment dollars are flowing.
Nonetheless, while Israel sidestepped the modest slowdown experienced by the US VC industry in 2016, we need to be cognizant of the global nature of the technology industry. Both business and investment trends are international, and the cycles in one geography are highly intertwined with the rest of the globe.
The Israeli startup and investment scene continued to thrive in 2016 and overall trends feel solid going into 2017. However, we’d be wise to remember that we’re just a small—if important — part of a highly interconnected, global community. The future development of the Israeli high-tech sector will be driven by many of the same unique attributes on which the ecosystem has been built, but is also likely to reflect, in one way or another, what’s happening elsewhere in other parts of world.
Thanks to David Stark and Liz Cohen for contributing to this thought piece.
You can view our currently funding investment opportunities here.
After decades of being at the forefront of life sciences, specifically in medical technology innovation, Israel is now leading the way in another area of health care and advancement: brain science.
Already well known for research and developments in the areas of robotics, optics, immunology, pharma, early disease detection, and surgery, Israeli start-ups are now making significant strides in neurology. 2015, in fact, saw the launch of Israel’s first braintech accelerator, Brainnovations, operating out of Tel Aviv.
Disruptions in the detection and treatment of brain-related disease and functionality are sorely needed, and companies around the world are emerging with solutions related to Alzheimer’s, Stem Cell Therapy, central nervous system diseases, psychiatric disorders and more. We’re excited about what we’re seeing in Israeli brain innovation, in particular. Here are a few companies developing solutions that address significant neurological issues:
- ElMindA was founded in 2006 with the vision of revolutionizing the management of brain disorders and injuries. They’ve developed the world’s first FDA-cleared neuronal functional assessment tool. EIMindA’s solution uniquely measures how different parts of the brain communicate by uploading measured neural activity into the cloud. Proprietary algorithms then map out neural association. This approach captures objective, physical evidence that may elude physicians, offering insight to or explanation of a patient’s symptoms, behaviors, and brain functions.
- Surgical Theater is a company that has developed software combining the science of flight simulation with advanced CT/MRI imaging technology. Using Surgical Theater, surgeons may perform a 3D “flight simulation” of surgery before an actual operation. The company’s Surgery Rehearsal Platform (SRP) is the only commercial, patented, and FDA-cleared platform for cerebral and spine pre-surgery rehearsal on the market. Research indicates that surgeons who use virtual reality and simulators operate with decreased risk and ultimately see better outcomes.
- BrainQ offers a non-invasive technology to treat a swath of neurological issues. Their device, LearQ, uses proprietary algorithms to create tailored electromagnetic fields, which target patients’ impaired neural networks; thus, recovering their connectivity and enhancing natural rehabilitation. The company’s first area of focus – the treatment of upper limb disability following stroke – affects 900,000 people in the U.S. and E.U. every year. At this time, there are limited treatments are available for the recovery of patients with stroke. BrainQ is hoping to address this need.
- Intendu aims to improve cognitive rehabilitation of people with brain dysfunction. Their platform — already in use in U.S. hospitals – is centered on adaptive, body-controlled video games that mimic real-life interactive scenarios. The games are personalized in real-time to fit the player’s capabilities and rehabilitation goals. Intendu’s solution is particularly useful for patients with cognitive impairments due to traumatic brain injury, stroke, age-related cognitive decline, mental illness, or neurological disease.
Interested to see and learn more about this space? Israel’s best and brightest will be on display for the international medical technology community this May 23-25 in Tel Aviv at the 16th MIXiii-BIOMED 2017 Conference and Exhibition. Aging is the central theme of this year’s conference, and certainly braintech will be a big part of the ongoing conversation at BioMed, since neurological diseases do affect a significant portion of the elderly population.