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DisruptSports.com was recently invited to Tel Aviv, Israel as part of an Australian trade delegation in order to participate at ‘DLD’ Israel’s leading innovation summit as well as meet with the key players in the eco-system. There’s a lot that Australian start-ups and the ecosystem as a whole can learn from Israel.
Below are my top takeaways:
1. Full stack start-ups
The overarching reason for the success of Israeli start-up’s in that they build and fosters ‘full stack start-ups’. The whole of Israel’s eco-system is crammed into a very small geographic area and every part is well connected having both formal and informal links to each other. The universities are set up with strong commeralisation arms where professors retain equity in their inventions, where corporates and VCs actively feed their challengers to universities and universities pitch innovations to corporates. The VC’s are connected, listen to both sides and fund the gap, the whole thing has success/distribution build in from the start.
2. Military & Culture
You cant talk about Israel and not touch on culture, it’s unique, fascinating & intriguing. There are a few key cultural influences that help fuel the success of the Israeli start-up eco-system.
Necessity breeds innovation.
Israel has very little natural resource (no mining, sorry Australia) meaning they have HAD to invest in exporting brain power for the past 50 years = compound interest.
Israel has put a great to deal of R&D investment into becoming self-sustainable, meaning they have some of the best solar technology as well as the worlds best cybertech divisions, all of which eventually get commercialised as startups.
Israeli’s are opinionated, slightly dissident and ‘continually declassified’ according to their president. This all leads to a culture of seeking a better way and identifying inefficiencies in the status quo
3. Deep Tech
Once obvious difference between Israeli and Australian start-ups is the focus on Deep Tech and B2B/Enterprise based start-ups. For example Australia has lots of surface level start-ups, services, marketplaces. Israel on the other hand has lots of biotech, cyber security, data-storage compression companies. It’s openly known that the majority of this is due to the military and their training of 000’s of new each year through military service. In addition the close bond between universities, research institutions and private sector mean technology getsto market and is productized quicker.
4. Funding & government
The funding environment in Israel provides them with a different trajectory. Australian start-ups tend to follow the same process: MVP --> sales traction --> Small round --> more traction --> Larger incremental rounds etc. It’s no-doubt a hard slog but I often think the focus is on the wrong metrics often focusing on just topline revenue as opposed to Proof-of-Concept trials with more security that funding will be there. I believe that’s why we have a lot of service based start-ups and maketplaces where the sales cycles are lower, less short-term investor risk and a fast route to profitability. In Israel the government fun angles rounds with $500k grants for start-ups that pass a certain test. This means the start-up has some runway and can afford to take some bigger swings
5. Corporate engagement
By far this is the biggest learning I took from Israel, the least expensive and most effective for increasing Australia’s opportunity for success.
Scouting and Proof of concept
The number one thing start-ups are looking for is distribution, ‘who has the customer before us’, how can we get to them and/or who can sell our service. For DisruptSports.com this is our sports ecommerce partners, our artists network and retailers. Corporate are forever talking about how they need innovation however there are very few in Australia that have a formal process for engaging with start-ups, for traialing new products and running proof of concepts. This is not just a positive for the start-ups but the corporates really need this if they want to stay ahead and if they really truly are committed to innovation. In Israel 350 of the worlds biggest companies have scouts whose sole role it is to meet and engage in the start-up community, liaise with their internal teams all around the world and regularly introduce start-ups to various business units.
There are key challenges in every industry that all established corporates face. For streaming services is might be compression, for banking it might be security and fraud and for manufacturing it might be how to move to agile customization using ERP systems. In Israel there are consortiums of businesses who are competitors but that collaborate in order to solve mutual challenges, mentoring and co-investing in start-ups that are solving those challenges - this abig-market mentality – eyes on the bigger prize not the short term gains, and is certainly something Australian Corporates can learn from.
Build for purpose
Corporates, their scouts and their accelerators openly shared challenges they would face in the future, specific business problems that are looking for solutions for. In turn start-ups were building for purpose with a known channel partner and investor should they succeed. Whilst this is not the sexy story we sometimes looks for in start-ups. What is does do is multiply the chances of success for the start up.
6. Standing on the shoulder of giants Israel has a mature start-up ecosystem with many successes to date. This means start-up success and R&D success is not only visible but most people know someone personally with an exit. This means they aim high, they have a network they can call on and there is a well-trodden path. It also means most people are founders for life with a noticeably older average age of founder. Finally – did I mention corporate engagement ;-)