“Technological excellence also in the horizontal fields, and not only in the technology infrastructures” (Photo: Dreamstime)
In the last year we have seen in high-tech a transition from talking about a “new normal” to “correction”, then to “uncertainty”, and slowly the industry started to talk in terms of “crisis”. This situation does not spare the technology giants, who are implementing plans to lay off tens of thousands of employees, but are the small startups the ones who can benefit from the situation?
We spoke with several senior executives in the industry, who will also serve as judges at the GeekAwards ceremony, to hear their insights about the direction the industry is going, and although it is difficult to estimate when we will see stabilization, we can agree that this is a temporary situation, and there is much to be done in the meantime. Despite all the difficulties, Israeli high-tech shows signs of vitality in the important places – the result of a long maturation process.
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The Israeli Edge
There are many bright spots in the Israeli high-tech market, andEric Cole, who heads the Inception program at Nvidia, There are three of them. “The Israeli entrepreneurs, who are used to a reality where uncertainty is not a dirty word, are able to deal with instability in a better way, in general, compared to other cultures,” he begins and adds that in recent years Israeli startups have included their ability to implement significant and deep Go To Market plans More. “If in the past they were very focused on the technological side and were sold at relatively early stages, today we see more and more companies that also reach the stage of business growth. I estimate that this is a trend that will continue and expand in the coming years,” he says.
The third bright spot eight voice is the entry of artificial intelligence into almost all areas of our lives. According to him, this is a move that has led to a paradigm shift, in which more and more startups are trying to develop and produce horizontal technological solutions. “This is in contrast to the attempt to lead in the field of technology infrastructures, which the Israeli high-tech industry has been known for in recent decades,” he explains. “The comparative advantage and deep knowledge of the Israeli startups in the fields of ML and AI will allow them to continue to lead to technological excellence in the horizontal fields as well, and not only in the technology infrastructures.”
“In recent years, Israeli startups have included their ability to implement significant and deeper Go To Market plans”
also ענבל אורפז, Strategic Innovation Consultant, Founder of Woman In Tech initiativeagrees that the technological maturity of AI, which includes the launch of consumer applications that do not require technical knowledge to operate them, is a double opportunity – “first for the Israeli startups that develop solutions in the field and raise investments”, she explains, “but precisely in the current period, when companies are looking for how to reduce “
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“The market was at Disneyland, irresponsible and inflated,” she states Einat Nemesh, Director, Strategic Partners ecosystem at Google. “The situation now returns the market to a healthier level of trust between founders and funds, between recruiters and candidates and so on.” According to her, a crisis is a good opportunity for renewed strategic thinking – what to focus on and what to give up, what are the opportunities and what is the path that will lead us there with the existing resources.
Sarit Assaf, General Manager NewTech BU at Amdocs, puts things into proportion. “I won’t pretend to give exact predictions, but from my personal experience and as part of Amdocs, which has been operating for four decades in an influential and affected industry that has gone through several waves and upheavals – it seems that what the ecosystem has experienced in recent times is not a crisis that we have not faced before.”
Indeed, in an overall view, the current crisis is almost insignificant. Elon Reshef, Co-Founder and CPO at Gong, I agree that crises come and go, and I want to stand for the biggest change that has happened to us in the local industry. “In recent years, the Israeli high-tech industry has learned to build ‘real’ companies in a systematic way, that is – not just one-off successes like Check Point or Wix, but the ability to establish a collection of companies that know how to provide significant value to customers, grow in terms of access to the market, generate significant revenues, create competitive differentiation and reach the top of the global high-tech industry,” he says.
Check Point was also once a small company (Photo: Dr. Avishi Teicher)
“Venture capital funds have a lot of money that they need to invest. Since companies in advanced recruitment stages will avoid raising money as much as possible in order not to do Down-Rounds, this creates an opportunity for startups at the beginning”
According to her Adi Sofer Thani, CEO of Meta in Israel, There are quite a few trends that are currently affecting Israeli high-tech and seem very negative – such as the level of interest that affects the companies’ fluctuations, and the inflation that may affect the consumption volumes of customers – but this is where good news is also hidden. “Venture capital funds around the world have a lot of money that they need to invest,” she diagnoses. “Since companies in advanced recruitment stages will avoid raising money as much as possible in order not to do Down-Rounds, this creates an opportunity for startups at the beginning, and I believe that the Israeli market will know how to take advantage of them. Even if we enter a period of economic slowdown, the demand for products and technological solutions will not decrease.”
“A good entrepreneur will make an extension to the previous recruitment in order to get through 2023 with his head above water, and will start recruiting when the market recovers,” continues Einat Nemesh from Google, and explains: “The thread that connects the private and business markets, plus macro trends that affect interest rates and inflation – from the highest that were – weaken the entrepreneurs’ appetite for low-value fundraisings. On the other hand, the funds that are sitting on the money are in no hurry to invest, thinking that there will soon be realities in the market. In practice, the market is frozen and there are no transactions.”
The crisis highlights the power of Israeli tech
“2021 was a confusing year,” she says Aya Petersburg, founder and partner in the venture capital fund S Capital. “Instead of building companies on the basis of creating value for customers, sales cycles and profits, companies concentrated on trying to improve the company’s valuation. The crisis is an event that allows companies to build more correctly and pushes them to build a correct business. This is actually a lesson that helps Israeli high-tech to be built more correctly and better with long-term thinking The very long one.”
Petersburg explains that the crisis actually emphasizes the strength of Israeli high-tech companies, and adds the investors’ point of view. According to her, in 2000 the system around the companies was not strong enough to support them, there was no strong support from investors and the entrepreneurs were not experienced enough. “But the current crisis period emphasizes the strength of the entire Israeli high-tech – the supportive environment that has developed, the ability of investors to help and the determination and experience of the entrepreneurs. In difficult times, the most successful high-tech companies are born,” she states.
“The current crisis period emphasizes the strength of the entire Israeli hi-tech – the supportive environment that has developed, the ability of the investors to help and the determination and experience of the entrepreneurs”
“In recent years, Israeli high-tech has become more diverse, development and innovation centers of global companies continue to open in Israel, testifying that it is a technological leader in many fields”, reinforces Pavel Berengholtz, founding partner and VP of development and research at the fintech giant Fireblocks. “More companies are looking to reach an IPO and are not in a race to be sold to another company. Public companies have been created with a business center in Israel, and even if the value falls in the crisis, they will be here for a long time. This is a maturing process of our industry, and I believe it will make Israel not only the center of innovation the world, but also to a leading global business center.”
Ader Margalit, Site Manager at ServiceNow Israel, explains that Israelis are perceived in the world as those who know how to bring results in a short time, already from the idea stage. “In Israeli high-tech there is a very strong ecosystem that allows the next generation of new startups to grow, and this is reflected, among other things, in the large number of meetups, accelerators, dedicated conferences, and the like.”
Israeli high-tech has matured
According to Margalit, compared to the crises of 2008 and certainly to that of 2000, Israeli high-tech is much more mature and prepared to deal with the crisis. “In previous crises, startups collapsed very quickly at the onset of the crisis, whereas today the more experienced managers rushed to take immediate actions: cut expenses, updated a business plan if necessary and were prepared to take a long breath in order to make it through this period,” he explains. At the same time, he says, there are more large companies, international and local, that contribute to the stability of the local high-tech industry in this period. “This crisis also has positive sides: investment and purchase opportunities have been created where during the unicorn era there was an inflation that deterred investors. The difficulty in hiring employees has moderated, which somewhat curbs the trend in which we export work to other countries.”
Investment and purchase opportunities have been created where during the unicorn era there was a valuation that discouraged investors (Photo: Dreamstime)
Gur Shatz, Co-founder, President and COO at Cato Networks, claims that the crisis is actually a period of transition between a world with one set of laws, to a world with a new set of laws. “The change has been expected for a long time. It’s good that we can face the emerging future now, instead of waiting nervously for a crisis to break out,” he says. “Such times are good for those who know how to adapt to new situations, and Israeli high-tech, and in particular startups, have proven in recent years that they know how to respond quickly and wisely to a changing environment.”
“I am excited every time by the amount of ideas and entrepreneurs who believe and are determined to succeed with their dreams and ideas,” says Guy Berkovic, COO at Waze. “We have super high-quality people in Israel who know how to think big and be committed to the process, and this generates a lot of investments and a lot of excellent teams.” Berkovich says that he receives requests for consultation and always tries to help. “I know that other managers also do this, and it makes me happy to see how many managers in Israel try to help entrepreneurs.”
“I think we are on the verge of creating huge companies from Israel,” he predicts Chen Amit, co-founder and CEO of Tipalti. “There are several companies in Israel that may define and dominate new business categories and become companies with revenues of many billions. One of the reasons for this is the maturation process of entrepreneurs and managers in Israel who can lead such companies.”
“Companies are no longer satisfied with a good idea and rush to the exit – there is a trend of building large companies with value and bringing them to an IPO or to a situation where they are large, profitable and global”
Tami Mazal Shahar, CEO of Incredibuild, agrees that some positive trends are taking place here in the shadow of the crisis. “The first is that companies are no longer satisfied with a good idea and rush to exit – there is a trend of building large companies with value and bringing them to an IPO or to a situation where they are large, profitable and global. This proves the capabilities of an idea and development innovation, but also impressive business and marketing capabilities. The second trend is exit From the realms of cyber to other fields such as gaming, fintech, DevOps, etc. And the issue close to my heart – there is some improvement in the representation of women in the industry, although there is still a long way to go.”
And there is also good news overseas. “Data we collected and analyzed on the Israeli cyber industry in 2022 show that, despite the global crisis, out of 75 fundraising rounds of Israeli cyber companies in which venture capital funds invested this year, foreign funds participated in 47 of them,” reports Sharon Ziman, Partner (Marketing) at YL Ventures. “This is an interesting figure that teaches about the great trust that global industry has in the Israeli ecosystem, which continues to grow successful companies on an international level. This trust is not expected to erode due to market fluctuations, but will continue to increase in light of the products, solutions and impressive growth of Israeli industry.”
“The bright spot for me is undoubtedly the crazy success of the Israeli B2C tech companies,” concludes Adi Sofer Thani. “Until a decade ago, there were almost no such companies in Israel, and there was great skepticism surrounding the question of whether they would be able to start a company from a garage in Israel that would have hundreds of thousands and millions of users all over the world. Today, B2C Tech companies in Israel already make up a quarter of Israeli startups, and many of them even leading their categories in the world.”
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