Europe looks East to “Startup Nation” Israel for brand, tech growth

Published on June 9, 2019

In years past I would visit Israel once, sometimes even twice a year.

With the pressures of building an agency and New York City life in general, my travel schedule to the Startup Nation became more infrequent. Recently, I had an opportunity to visit Israel at the end of last month for some client work. It was a chance to work with the locals and see the business environment as well as catch up with friends and family. I am always surprised anew when I visit; below are five observations from my recent (too short) trip to Israel and why despite all the noise surrounding this little country I’m still optimistic about the Startup Nation.

NYC-style skyline

Old Tel Aviv is not a beautiful city, at least not yet. While it was a center of Bauhaus architecture in the 1930’s when Jews fleeing Germany designed much of the city, the utilitarian buildings built in the 1950’s to accommodate previous mass migrations still dominate. However, Tel Aviv’s appearance is changing as the price of real estate has skyrocketed in recent years. We’ll see more buildings renovated because of government incentives to make them earthquake ready but what is most impressive is the ever-expanding skyline.

The tallest building in Tel Aviv is Azrieli Sarona Tower at 781 feet, with 5 projects slated to be completed in the coming years that will be taller. Since the 1990’s the White City’s skyline has continued to grow with both commercial and residential projects; the last time I visited many new projects were added and there seems to be no letup regarding the pace of building as foreign capital alongside local investors capitalize on real estate in Tel Aviv, which is starting to resemble New York’s Hudson Yards.

Newly minted millionaires

Tech has been the primary driver of wealth generation in Israel. It used to be the case it was Israel seeking outside capital from places like the United States. Now there is a significant amount of wealth in Israel, and with every acquisition new millionaires are being created. The question is how long the foreign capital that is being poured into the country and the international appetite for acquiring Israeli tech companies will continue.

It’s a sign of the times, and for the country a net positive, but the “exclusive” air of New York, i.e. pay-to-play is starting to become more prevalent in Tel Aviv. It is also reflected in the disparity between those in tech and those not in the industry; this is already a problem in places like the Bay Area and has become blatant in Israel with the wage gaps.

Israel as a market

Common wisdom is that when building a high-growth tech company, Israel is not your target market; it’s all about selling to points across the globe. Circa 2019, some of that thinking has changed, particularly with the number of Israelis with a disposable income and millennial lifestyles. From a transportation perspective, the scooter companies have looked to Israel as a market as indicated by the number of Bird and Lime scooters on the streets, sidewalks, and roads of Tel Aviv. While Uber never really got off the ground in Israel due to internal politics, startups like ride hailing service Yango are present alongside Israeli founded Gett.

Yaniv Rivlin, General Manager of Bird in Israel, believes that Tel Aviv is a perfect city for Bird’s global city launch. He gave his thoughts over the phone, stating that, “Israelis are early adopters, 40% of Tel Aviv is under 30 years old, and as the most congested OECD state, scooters are solving a real problem.” Public transportation is well developed in Israel but as Rivlin states, “1/3 of Bird customers use the scooters for the first and last mile of their commute.”

Of course, the dagger hanging over Israeli retail is Amazon which is poised to begin delivering Prime in Israel. Amazon failed in China and India, but the risk involved in a country like Israel could prove to be less. While Israel has served as an R&D hub for global tech companies, this is the first time it is being considered a real market.

Between Google and Alibaba

Between the two tech juggernauts America and China, the rest of the world, and Europe are desperately searching for innovation in order to narrow that widening gap. Not known for its tech and entrepreneur ecosystems, Europe understands who the winners in tech circa 2019 are. It is with this urgency that there has been a surge of interest from Western European organizations looking for innovation in Israel. With the range of innovation centers, accelerators, scouts, corporate VCs, and everything in between Israel has developed a robust industry selling “innovation” and tech how-to.

As Yoni Argaman, SVP of Marketing and Corporate Strategy at Fyber, whose company was acquired by German media company RNTS Media wrote via email “a number of unique circumstances have helped Israelis create this dynamic tech ecosystem… we are not just proud of what we’ve built, but understand this knowledge and can-do mindset is exactly what the world needs at the moment.”

Campus TLV

Something that you can’t take away from Tel Aviv, for better or worse, is the campus-like feeling you get walking down streets like Dizengoff. It is true that in some neighborhoods in New York one gets a small-town feel walking down the street, but Tel Aviv is serendipity city. I personally saw people from all phases of my life, be they Israelis or Americans every time I stepped out. Tel Aviv has become much more American, and that is reflected in the business culture. From a bird’s eye view Israel, and Tel Aviv resemble other major tech hubs; openness to other cultures, early adopters, and newly acquired wealth.

Jonathan "Yoni" Frenkel is a Columnist at Grit Daily. Based in New York, Yoni shares news, impactful ideas and event opportunities in the New York, San Francisco, Los Angeles, and Tel Aviv tech ecosystems.

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