Israeli Economic Shift: Less Start-Ups, Bigger Investments (Globes™ top 10)
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| New Motorola building in the Airport City industrial complex. The new shopping complex which opened a year ago is bringing new life to this large office and warehouse complex. / © 2010 |
Israel's economy is going through a tectonic shift. Small start-ups and small venture capital firms are disappearing. Big start-ups (US$ 10 million) and big venture firms are holding on. Darwinian survival of the fittest is hitting hard the Israeli start-up world, the lucky few survive, but many are dead or dying. In a recent article picking the top ten start-ups The Globes™ newspaper picked the year's most promising candidates. This is their sixth year of picking the top 10 start-ups and their past record is pretty good. The shift from many small start-ups to few big ones is driven by outside factors. Mostly the collapse of the American venture capital industry which brought a sharp drop in technology investments. As the old saying goes: "when the American venture capital industry catches a cold, Israeli start-ups catches pneumonia". Most of Israel's smaller venture capital firms have closed in the last four years. Investments in small start-ups has dropped to a trickle.
The Globes™ 2010 ten most promising start-ups*:
| Rank | Company | CEO | Funding [US$] |
| 1 | Provigent | Dan Charash | 55 |
| 2 | Prime Sense | Inon Beracha | 29.4 |
| 3 | WIX | Avishai Abrahami | 20 |
| 4 | Waze | Noam Baradin | 12 |
| 5 | Panaya | Yosi Cohen | 22 |
| 6 | Solar Edge | Guy Sela | 60 |
| 7 | Broad Light | Raanan Gewirtzman | 30 |
| 8 | Work Light | Shahar Kaminitz | 17 |
| 9 | Life Bond | Ishay Attar | 9.5 |
| 10 | Aero Scout | Yuval Bar-Gil | 70 |
As an Israeli with start-up experience the large investment level is music to my ears. Experience has shown how crucial a strong investor base and larger investments help to keeping a start-up going. Start-up companies succeed not just because of innovation or technology, sometimes just time and money is needed to get a company running on it's own or sold off. In Israel, with limited internal funding resources, we see too many companies fizzle out after the initial big investment runs out.
But as a start-up worker what is worrisome is the small number of start-up investments. As the venture capital firms invest more in less companies, less entrepreneurs are willing to start. Because the race to get funding is harder, less people even try. From experience, especially in Israel, we know that start-up success is also dependent on the number of tries. More start-ups try to get going, more will succeed. So the sharp fall in the number of start-ups the last two years is a big concern. There have been attempts by the government to help seed start-up projects. Programs to help entrepreneurs build prototype products and write a well formed business plan. But these programs have not taken into account the fundamental change in investor preference from many small start-ups to a few big ones.
It is hard to predict where the world of investment and entrepreneurship will take us. In Israel, where we nurtured an industry of building technology companies and selling them to others, the changes recently are hard to digest. Technology workers are not fully utilized, professional services are idle and the financial world supporting them is still waiting for a "comeback to the good old days". Like previous changes, something will happen, maybe not what we expect. If you ask most entrepreneurs what they expected before they started, you always get an answer like: "what happened is not what I expected". This does not seem to be something related to Israel or the personality of it's people, it is indicative of the continuous changing world we live in. Keep your eyes open and look for new development. Here in Israel we will run and dodge with the times.
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