How Israeli startups can scale into international markets.
Over the past few years we’ve seen a change in message when it comes to Israeli startups. A shift from Start Up Nation to Scale Up Nation.
However what does this mean in practice?
It means that instead of Israeli entrepreneurs seeking quick exit opportunities to global leaders, Israeli companies are now looking to be around for a lot longer and to scale into global — not just local — companies.
Think WIX, Lemonade Insurance, HomeTalk, Zebra Medical Vision, Windward, Vayyar Imaging and OrCam.
As recently noted in The Jerusalem Post, by Matthew Krieger, the founder and managing director of Tel Aviv-based GKPR, an international public-relations and communications firm:
‘The overwhelming majority of technology entrepreneurs fail to grasp that to build a successful, thriving company, they must either possess both the vision and business acumen to guide the ship, or surround themselves with those who do.’
This piece won’t focus on what your company should be doing internally to scale but rather the second set of people mentioned above: the external players you need to surround your company with, who possess both the knowledge and connections to help you to tap into your target markets and communities.
The Israeli Economic and Trade Mission
My interest in the Israeli Tech World developed after I joined The Israeli Economic and Trade Mission in London. Here, I was responsible for introducing world class Israeli tech start-ups to the UK’s business and investment community.
My roles included:
- Advising and assisting Israeli companies and start-ups in developing their business strategy, raising capital, and securing clients and partners internationally.
- Consulting with leading FTSE 100 companies and investors on opportunities in Israel and managing their delegations to the UK and vice versa.
Oftentimes, people don’t know that these bodies exist (for free!), but it’s well worth having a call or meeting with them when you travel to that country and seeing how they can help, which service providers they would recommend, and who they can connect you to.
International Corporates within Israel
It was recently reported that there are over 270 multinational corporations (MNCs) which have established more than 320 advanced R&D facilities throughout Israel. These include Google, Apple, Facebook, Microsoft, Intel, GM, IBM, Cisco and many more. These MNCs are a great first stop. Even if the office here is small, the people who work there can often introduce you to their colleagues in the specific country you are trying to expand into and any good entrepreneur knows that a direct intro is better than a cold call.
The person who is Head of Growth / Value Creation in a VC fund
Not all funds in Israel have this, and sometimes the role is fufilled by partners in the fund who use their own international network to help you scale.
However if you are lucky, your fund may have a head of growth or value creation (essentially in-house business development) whose job is to engage with the fund’s portfolio companies, advising them on their future strategies, and connecting them with the international corporate world.
Choosing an investor from your target country, in your chosen space
There are four types of investors:
- Those who have the money but don’t have the knowledge about your sector.
- Those who have the knowledge about your sector but not the funds required for your investment round.
- Those who have the money and the knowledge about your sector.
- Those who have the money, knowledge about your sector, and are situated in the country you are trying to target — or have hands-on LP’s based in your target markets.
Getting investment from any of the first three types of investors is unquestionably a great thing and you don’t always need your investor to bring more than one attribute to the table, i.e quality over quantity.
However if you can access an investor like that which is outlined in point four, your journey to expanding into a certain country would become a lot easier.
These types of investors are likely to know the right people in your sector, in that country. This may sound obvious but I’ve seen so many startups overlook this sort of investor and it really is a game changer if you can secure investment from a VC like this.
Some UK examples of this are Oxx VC who invest in ambitious companies originating in the Nordics, the UK, and Israel and building out in the US.
Then there is Hetz ventures which launched earlier this year (2018): A $50 million fund for investment in Israeli startups in the early stages — the first all-UK fund investing exclusively in Israeli ventures.
If your target is the US, there are many options to choose from. One fund which just raised it’s third round is UpWest Labs, a seed stage Silicon Valley fund investing in Israel’s most promising entrepreneurs.
Although not a fund, it is also worth highlighting Eyal Bino a co-founder and Partner of ICONYC labs, a customized acceleration program for top early-stage Israeli tech startups looking to accelerate growth in the US market via NYC.
On this point I would just add that if you are early stage and are interested in an accelerator programme, choosing one outside of Israel, in a future possible market you are looking to enter, is worth thinking about. (Although there are pro’s and con’s to this, too many to cover here and probably a separate article in itself!)
Choosing an investor who has an office in both Israel and your chosen target country.
It’s also important to note here that a lot of Israeli funds have another office in another country. This means that you’re bringing on a VC who has an understanding of the local market and your target market, which can be extremely helpful.
For the UK, one such fund which does this is 83North (formerly Greylock IL). (Disclaimer: I also worked here back in 2016) They are a global venture capital firm with offices in London & Tel Aviv, investing in European and Israeli entrepreneurs with more than $1 billon dollars under management.
There are also a multitude of funds with offices in Israel the US. Battery Ventures, Bessemer Ventures, 500 Startups and the list goes on.
Then there is China. China’s investors and markets are becoming increasingly important to Israel’s economy, and in particular to its booming high-tech industry. ‘Israeli high-tech VC (venture capital) companies raised $500 million from Chinese investors in 2014 and $700 million in 2015 and the amount keeps growing, according to Tidhar.’
If China is your desired market to enter, Moshe Hogeg’s Singulariteam — which can claim founders of the Chinese Tencent Holding Group as LPs — is one group to make contact with. Founded in 2012 and headquartered in Tel Aviv with four offices around the globe, Singulariteam acts as a super angel investor.
There’s also MizMaa Ventures, which launched its $100m fund in mid-2017. MizMaa — a combination of the Hebrew words for east and west — invests in early stage Israeli startups and helps them access markets in the US and China.
As with all topics as large as this, theres a lot more to mention but hopefully this will supply a good base for those looking to start or continue the scale up journey.
If you are looking for more help, feel free to reach out to the team at HiPitched, the strategy company I recently founded. * A CREATIVE STRATEGY AGENCY MAKING YOU HEARD * ALL about: Branding | Strategy | Consulting | Scaling
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