Cash flow for Israeli startups is plentiful at present, and the local innovation scene is basking in the limelight, according to the recently released Startup Snapshot report based on data from over 200 local startups. COVID-19 has served up challenges, but homegrown companies continue to prove their aptitude in pivoting and innovating and raised a record USD 5.37 billion in capital in the first three months of 2021.
“So much new money has flown into the Israeli ecosystem in the past two years, there are so many new investment funds and new investors who have money to spend,” Tzahi Weisfeld, vice president and general manager of Intel Ignite, one of the authors of the report, told NoCamels.
Startup Snapshot, a data sharing platform for the Israeli startup ecosystem, was compiled by Y. Benjamin Strategic Marketing in partnership with LeumiTech, Intel Ignite, and Fiverr.
“Funds are flowing,” Nimrod Vromen, a partner at Yigal Arnon & Co and CEO of Consiglieri, said in a press release. “In 2021, investors are seeking more active involvement in overseeing expenses and ongoing business activities, trying to protect themselves in today’s uncertain market environment.”
“Everything is on steroids. Governments are going to invest a lot of money as they understand that they haven’t moved fast enough in the past few years. So there’s lots of money that’s going to be funneled into technology,” said Weisfeld.
Tech unicorns, record funding rounds, and high valuations are being reported almost daily in the Israeli tech ecosystem.
Just this week, Salt Security announced a USD 70 million round, Wiz added USD 120 million to its coffers, and Valens is set to go public on the New York Stock Exchange at a valuation of USD 1.16 billion.
“The speed of closing a round has almost been cut in half compared to pre-COVID, with 29% of the companies closing a round in under two months,” said Weisfeld.
“It is interesting to witness the impact of COVID-19 on early stage startups. If, at the beginning of the pandemic, these startups were at a disadvantage in terms of fundraising, the excess of capital in the market has led to a high level of investments in early rounds. At the same time, in light of the uncertain market environment, we see investors seeking more protection and thus requesting more restrictions when it comes to closing deals. For this reason, I believe startups will be seeking to diversify their funding types, with credit products resuming to appear more significantly in their portfolios,” said Nurit Pirani, head of LeumiTech’s business center.
Moreover, an OECD analysis of the global impact of COVID-19 on SMEs and entrepreneurs mentions Israel as one country now enjoying a booming startup funding arena.
“We’re super quick when it comes to solving a problem,” said Weisfeld about the local innovator community.
The Startup Snapshot report shows how Israeli startups are growing with today’s market amid COVID-19, how they are strengthening their teams, increasing their funds, and expanding to new locations abroad.
The report cites that the competitiveness of the local hiring market in filling thousands of vacant positions is forcing some 13% of startups to look abroad to hire employees.
The impact of COVID-19 is also changing the way business is done. The report shows that in order to succeed in the tech sector, companies must now navigate a new hybrid model of remote work, working from home, and working at an office.
There are pluses and minuses in this new mixed situation. With work-from-home and remote work now part of the business lexicon, founders are less limited in terms of where their employees are based. The report shows that 21% of companies reported that the location of their employees abroad is no longer important.
And while face-to-face sales pitches are preferable, being able to listen to a recorded video call has its benefits, said Weisfeld.
“The early part of sales is critical for founders to understand what the customers expect and what they want. We work with startups and founders to go back and listen more than they would ever be able to do in real sales during face-to-face engagement. There is now an ability to go back to the recording and say, ‘Let’s listen closely to what they just said.’ So, there can be a lot of learning in these recorded calls, which didn’t happen before, which is a plus,” he said.
On the other hand, remote communication is negatively affecting business relationships and sales.
“The ability to get people together and brainstorm ideas is important, and right now, we’re challenged [to do this]. A hybrid future will have to supply some solutions for this need because it is critical,” Weisfeld told NoCamels. “The inability to spontaneously set up meetings is hurting entrepreneurs.”
“41% of startups that raised funding in the past nine months did so without meeting their investors face-to-face. With digital meetings replacing in-person interactions, early-stage startups are struggling to create credibility with investors they’ve never met in person. Startups that manage to do this successfully will be able to tap into vast international funding and business opportunities,” Yael Benjamin, founder of Y. Benjamin Strategic Marketing, said in a statement.
And while things around the world seemed to be heading in the right direction in terms of COVID-19, the risk of companies growing too fast seems certain.
“Some big failures are bound to happen,” said Weisfeld, a seasoned executive and serial entrepreneur with three decades of experience in tech consumer and enterprise markets. “The SPAC phenomenon and super large funding rounds—some of them are going to end painfully. But I think generally, the bigger flow of funding is going to create more opportunities … to fund more tech experiments and more startups. The biggest challenge is that we don’t have enough talent.”
Rising from failure is an oft-repeated factor of innovation in general, and specifically local tech. “It’s an amazing time to be in this industry,” Weisfeld said.
The article was originally published by NoCamels, a leading news website covering breakthrough innovation from Israel for a global audience.