Australia/Israel & Jewish Affairs Council

Growing Aussie and Asian investment in the Israeli start-up scene

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Israeli start-ups are courting significant Aussie and Asian investment and this trend looks set to continue.

Israel is widely considered an international leader in entrepreneurship, technology and innovation, and it is said to have the highest density of start-ups per capita. Israeli hi-tech companies are estimated to have raised US$4.43 billion in investment capital in 2015, an increase of 30 percent compared with 2014, according to Israel's IVC Research Center, the Australian reported. Moreover, "69 Israeli startups were sold in 2015 for total payment of US$5.41 billion. For every US$1 invested, investors saw US$1.50 in returns. That's a 50 percent gain," according to Techinasia website.

In many ways, the Australian Government's December innovation statement was inspired by the Israeli experience, with many government officials having travelled to Israel in recent months to learn from the ‘Startup Nation'.  The Government also announced that Australia will establish its first innovation hub in Tel Aviv as part of its innovation agenda (see here for more details).

Now Aussie and Asian businesses and investors increasingly want to be part of the Israeli start up action, as seen by the many recent announcements of new business partnerships with Israeli companies.

For example, Australia's James Packer's private company Consolidated Press Holdings is working on a number of investments in the technology sector in Israel, according to the Australian. Packer who has a residence in Tel Aviv, has commented:

"The IT sector in Israel has emerged as a hub for innovation and start-ups in technology-related services... Israel now has the highest start-ups per capita in the world and this will provide major opportunities in the future.''

Other Australian investments in Israeli companies, include the following:

Fiverr

In November, the Australian reported that Australian venture capital firm Square Peg Capital announced its leading a $US60 million funding round for an Israeli company Fiverr, which is a "microtask marketplace for people to buy and sell any type of digital service." Fiverr enables users of its platform to market their digital skills including web design, writing, or marketing to buyers on the web.

According to the Australian, Australia represents 10 per cent of Fiverr's revenues. Commenting on the Australian connection, Fiverr CEO Micha Kaufman said:

"When you look at the percentage of Australian users, it is rather big when you compare that with other countries. We are seeing a lot [of] talent from Australia and demand coming from Australia."

Square Peg's Arad Naveh told the Australian, "For Australian investors involved in Square Peg we now have a way to be involved in Israeli tech."

Square Peg Capital is focused on the Israeli start-up scene with an office in Tel Aviv and has made other investments in early-stage storage and database software technology businesses in Israel, including in Feed­visor and JethroData. Moreover, last June, Square Peg Capital organised a delegation of 40 leading Australian technology entrepreneurs to learn about the Israeli hi-tech industry.

OurCrowd

On Feb. 4, the Australian reported that, "Australians are flocking to Israeli equity crowdsourcing funding platform OurCrowd, with local investors now accounting for about $60 million of the $260m that has been raised by the ­company for investment in hi-tech start-ups across the world."

Explaining OurCrowd, its website states, "OurCrowd is a world-leading equity-based crowdfunding platform, built for accredited investors to provide venture capital funding for Israeli (and later global) venture capital start-ups." OurCrowd has also invested directly in two Australian firms: Global Kinetics Corporation and Tapit.

OurCrowd recently held a Global Annual Summit in Jerusalem, which was attended by around 2000 people from over 50 countries, including an Australian delegation of 25 local investors. At the conference six major corporations - Honda, Coca-Cola Company, Samsung Ventures, Philips, Intuit, GE - provided a preview of their future plans for innovation together with many startups.

OurCrowd CEO Jon Medved said in a statement:

"While most eyes are on stock market retreats on Wall Street and global markets, we are proud that we are hosting in Jerusalem a glimpse of a much brighter investor future. Israel's technology sector is setting new records and continues to boom. We are delighted that we have so many investors joining us to build the next generation of Israeli tech giants."

The Junction

The Australian reported on Feb.2, that Australian telco Telstra's start-up incubator muru-D announced that it is entering into a partnership with Israel-based accelerator program, The Junction. The idea of the partnership is to connect Australian and Singaporean start-ups under muru-D with mentors and advisors from the "Israeli start-up ecosystem."

President of Telstra Software Group and muru-D co-founder Charlotte Yarkoni told the Australian, "We see Israel as a very interesting ecosystem and it's an environment that we can absolutely learn from," Adding, "At muru-D we have a chance to pick up from the best and then apply the (lessons) to start-ups that are part of our program and then mining them for broader benefits to Australia."

The Junction has an impressive record of success, as the website Informationage noted:

"Set up in 2011, The Junction has hosted 116 companies, with ‘three companies completing successful exits (KitLocate, acquired by Yandex; ClarityRay, acquired by Yahoo; and Moment.me, acquired by Wix)'. In addition, 57 companies under The Junction's watch had raised US$145 million from investors, further strengthening its credentials in the accelerator space."

iAngels

The Australian also reported on Feb. 4, that last year Alex Waislitz's Thorney Investment Group announced plans to invest up to $15m with Israeli early-stage technology investment platform iAngels, which "sources investment ­ opportunities focused on elite ­ Israeli start-ups and early-stage companies." According to the Australian, 20 percent of the $20m iAngels has raised since its launch 18 months ago has been from Australians.

Anyvision

Australia's Top End Minerals has entered into an agreement to acquire Tel Aviv's facial recognition company, Anyvision Group, for a reported US$6 million. Anyvision describes itself as being "the most advanced facial recognition technology engine in the world that works on millions of different identities without loss of performance." Top End Minerals says its acquisition will help it transition away from the resources sector, Israel 21C reported.

Asian interest in Israeli tech scene

Meanwhile, Asian nations are also joining in on the action, forging deeper ties with Israel's flourishing tech industry.

Asian nations including China, India and Singapore have been investing in the Israeli market for some time. China and Israel have an estimated US$10 billion in trade since the beginning of 2015, and technology investment from China into Israel is growing by 50 percent annually, according to TechCrunch. China has also invested in Israeli venture capital funds including Pitango, Jerusalem Venture Partners (JVP) and Vertex Ventures.

Sephi Shapira, chief executive officer of Massive Impact International Ltd, a mobile advertising company with offices in Tel Aviv and Taiwan reportedly commented:

"The Chinese are looking for unique technology that goes beyond their traditional copycat style to stay competitive... I believe that they are looking for technology to help with user experience, big data, anything to take the product they built for the Chinese market and make it work externally."

Now other Asian countries, particularly Japan, are waking up to the potential partnership opportunities with Israeli tech companies. For example, for the first time Japan opened a booth at Cybertech 2016, held in Tel Aviv on January 26-27.  Cybertech describes itself as "the most significant conference and exhibition of cyber technologies outside of the United States." According to the Japan Times, "Japanese companies are aiming to cooperate with Israeli firms with cutting-edge cybersecurity technologies ahead of the 2020 Tokyo Olympics and Paralympics." Six Japanese companies, including Dai Nippon Printing Co. and Murata Manufacturing Co., also took part in the Cybertech.

The Japan Times also noted that, "an exchange event was held in Tel Aviv for cybersecurity-related companies of the two countries, with some 300 people taking part. Japanese Ambassador to Israel Koji Tomita said at the event he believes that Japan, which has strength in manufacturing, and Israel, an innovation leader, can work productively together."

Moreover, Japanese companies have recently launched a series of partnerships with the Israeli tech scene. In 2014, Japan's largest e-commerce platform Rakuten acquired Israel-based messaging app Viber Media for US$900 million, and on January 26, Sony announced its intention to acquire Israel-based Altair Semiconductor for US$212 million.

As mentioned above, Japan's car giant Honda also attended the OurCrowd summit in Jerusalem, as Honda is interested in Israel's vehicle intelligence technologies, apps and software. Nick Sugimoto, Senior Program Director at Honda's Silicon Valley Lab commented, "We believe that partnering together with entrepreneurs, startups, developers and academic institutions will help us develop truly transformational new products."

Asian and Australian focus on Israeli start-ups, particularly in technology, appears set to grow, providing opportunities for investment and collaboration with new partners. Initiatives such as those led by OurCrowd, have made it appear even easier for Australians to get a piece of the Israeli startup pie. Meanwhile, Asia's commercial interest in Israeli innovation could open the door to closer diplomatic relations with Israel over time - including with countries such as Indonesia which has no formal diplomatic relations with Israel, but whose business leaders appear keen to reap the benefits of the vibrant Israeli tech scene.

Sharyn Mittelman

 

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