Roman Gold, managing partner of JSCapital

Roman Gold: Ukrainian innovation ecosystem should not be limited by copying the ways of other countries

Digital Future

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Israeli technology in the context of similarity of the Ukrainian situation in the IT landscape is emerging increasingly on our media scene. We have decided to find out how such analogies are justified, and how things work in the investment and startup ecosystems of Israel, from a person immersed in the realities thence. In addition, this person is well aware of the situation in Ukraine and the CIS countries since a long time he lived here. Therefore, he can speak rightfully and with the real arguments on this subject.

We asked Roman Gold, managing partner of JSCapital, well-known investment platform from Israel, to share his opinion with us.

- Since the firefight started, Ukraine became a subject for comparison to Israel on a number of occasions. In your opinion, is this comparison correct?

- The reasons for such a comparison is clear, but Ukraine and Israel face completely different challenges. These countries are from very different historic, social and mental contexts. The confrontation between the two countries, one of which is much larger, cannot be automatically recorded as the battle of David and Goliath, no matter how imaginative and brilliant this comparison may seem. In the end, if we talk about the worst-case scenario: for Ukraine, it is the loss of independence and a return to totalitarianism, for Israel — the physical destruction of each resident. Therefore, for me, this comparison seems a bit dragged in.

However, there are many tactical moments where Israel and Ukraine are in sufficiently similar conditions. Moreover, some of the cases, successfully proven by the Israeli experience, could find use in Ukraine. We are talking about a whole range of issues, starting with the organization of the home front to cybersecurity.

- What does Ukraine and Israel have in common? In the investment ecosystem, in particular?

First of all, there are few hundred thousand of Israelis, who are originally from Ukraine. In my opinion, this is the most valuable resource that needs development. If we are talking about the innovation industry, I can say that both Ukraine and Israel have strong technical school, or even a technical culture. Other than that, there is, at least, one area where the synergy of Ukraine and Israel seems natural — agro-technologies. It is obvious even now, that Ukrainian investment ecosystem cannot and should not limit itself to copying the ways of other countries like Russia, Poland or Israel. Ukraine is creating its own puzzle and Israel should limit its participation in this process by some factors. Personally, I would be happy if these factors were transparent legal framework, adaptive education, and community building.

- You have mentioned once, that the words “incubators” and “accelerators” are almost obscene in Israel. Can you tell us a bit more about that? The relationship between start-uppers and incubators in Ukraine have not yet reached such point of strain. Can these words become almost obscene here as well?

- The thing is Israeli startup market is saturated with high-quality projects to the point, that if a startup is located at a “plain” incubator, it is regarded as a problematic one by the investors. At the same time, a great number of specialized incubators exist in Israel. We can divide them into two groups: corporate (for example Cockpit — a startup program of El Al airline), niche (with the focus on certain sphere like Fintech, EdTech, cybersecurity etc.) and regional (the one that prepare the startup to enter the markets of the USA, Europe or China). Participation of the startup in such incubators is highly encouraged. Speaking about Ukraine, skepticism about incubators and accelerators, in my opinion, can only be for one reason — lack of expertise of the founders of such kind of projects.

Somehow, for a long time, it was thought that the start-up space should unite people with money and people with ideas. People with the experience did not fit there. Firstly because they “spoiled the mood” for the first two categories with the inconvenient questions, and secondly it is not so easy to find the people with live hands-on experience in the market. Now, it seems to me, the situation is changing for the better: the market is clearing itself of dummy projects. At the same time, there are new initiatives, which look very promising.

- Who is likely to invest in Israeli startups? How much does the China invest (we have much information about this)?

- Chinese investors are very active on the Israeli startup market — for the third consecutive year, the volume of Chinese investment in Israel is growing exponentially.

First place, though, with the huge lead belong to American investors, who hold more than the half of the total investment in Israeli start-ups.

If we are to talk about Israeli venture funds, their share of the market will not top 15%. To be very precise, for the first three quarters of 2015, the Israeli funds invested in the startup companies $ 443 million, representing about 14% of the total investment (in 2014 the share of Israeli investors was slightly higher — 16%).

Trends for the next five years are simple — we are talking about increasing the share of “Russian” investments, as well as investments from India. By the way, just a few weeks ago we found out that the richest man in India — Mukesh Ambani — sent his scouts to Israel to search for promising startups.

- What kind of investors does your company specialize on?

- JSCapital provides access of international investors to the Israeli start-up market. We work with venture funds and direct investment funds, business angels and family offices. Geographically speaking it is Russia, Ukraine, Kazakhstan, UK and Switzerland. At the beginning of 2016, Singapore and China will join this group. Our specialization is the search for the startups that are still “under the radar.” Later we gain access to them by utilizing our own methodology, which utilizes academic, army and other connections.

- What does it take to be successful on Israeli market for Ukrainian team? A few key things, if possible.

- First and foremost — you need to understand, why Ukrainian team needs Israel. To consider Israel itself as an attractive market would be imprudent: domestic Israeli market is very small and undeveloped.

An approach, where you consider Israel as a springboard towards global expansion may work. Other than that, Israeli startup can attract the funding significantly easier than Ukrainian one, and this is no secret. The point here is not in the jurisdiction so much, but in the fact that “the Israeli startup” is a strong brand that has a self-sufficient value in the eyes of investors.

Once again, we are talking about foreign investors, so I would not move to Israel with the hope of capturing the attention of Israeli VC, their pipeline is loaded with the local startups, and their relationship were built over the years.

Turning to the practical part of the answer, I would give the first place to the communication skills — both language (knowledge of English) and business (networking skills). Nine out of ten important questions can (and should) be resolved in an informal atmosphere over a cup of coffee or a plate of hummus. Next, I should highlight the respect for the law — not only to the laws of the State but also to the principles of the functioning of the Israeli startup community. There are dozens of other details, however, this two — communication and laws, are the most important I think.

- Whose help should Ukrainian teems seek? Is it possible to start the “expansion” without emigrating?

- Frankly speaking, this is almost impossible. On one hand, Israel is the epitome of western business models, but on the other hand, it is an Eastern country with eastern specifics. For Israeli people is extremely important to “feel” the person, so without dozens (or even hundreds) cups of coffee, it is almost impossible to join the local startup crowd. Of course, the first time (six months to a year), you can visit the country for short periods of time, but sooner or later you will have to find someone who will be able to stay permanently in Israel, and will be the face of the team at the Israeli startup stage.

The first acquaintance can be acquired either at the specialized events (DLD Tel Aviv, Ernst & Young Journey, Go4Israel, TAU Innovation Day, Cybertech, etc.) or through the numerous representatives of the Israeli start-up crown, speaking Russian and Ukrainian languages. Other than that, in the framework of the JSCapital, we regularly hold the specialized tours for investors and startup-entrepreneurs who wish to take a closer look at Israeli innovation industry.

- What prospects do you see for Ukraine? What prevents us from achieving success?

- The potential of Ukrainian innovation industry is perhaps the highest among all post-Soviet countries. It is noteworthy that this is not the merit of any government agencies or industry heavy industry or the education system. Almost everything that is built — the result of private initiative, a high concentration of talent and serious engineering expertise. Add to that the clear rules of the game for investors and entrepreneurs — the industry will skyrocket. If you do not do that, the industry will not skyrocket, but it will not halt either.

Israel went through this phase in the early 90s — today the country ranks 8th in the world in protecting the rights of minority investors (the US — 35, Ukraine — 88). The flywheel is already running, and there is no turning back for Ukraine. Therefore, everything will be fine.

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Digital Future
Digital Future

Written by Digital Future

Digital Future is a global, multi-stage investment company focusing on digital marketing, AdTech, e-commerce, mobile and AI. http://digital-future.org/en/

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