‘Israeli tech successes in the EU? I can’t think of any’

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‘Israeli tech successes in the EU? I can’t think of any’

January 25th, 2021

Awake Goy

“Let’s do a little thought experiment. If I ask you for a great Israel success story on the US market, what comes to mind?” asked Ido Alon, Director of Strategy & Change at KPMG in Israel. “Maybe one of the huge company acquisitions that have been made, or a big IPO. There are many examples.”

“Now what if I ask you to think of an Israeli success story in the European Union? Most people can’t think of any. That’s what we are here to address.”

Alon was one of the leaders of a project funded by the European Commission exploring ways to strengthen the business connection between the Startup Nation and the EU’s single market, presented Monday at a large online workshop attended by diplomats and business leaders.

The EU, with some 500 million people, is already a significant trading partner with Israel, importing about 40 billion euro from Israel and exporting 20 billion euro a year. However, its role in Israel’s hi-tech ecosystem is little felt.

Part of that has to do with investors and valuations. “The EU doesn’t have a strong venture capital market. In fact, it is very weak,” Alon said. “Investment at a high company valuation is one of the main things a startup is looking for, and US VCs offer much better opportunities than European investors or markets in that regard.”

Europe, with 27 member states, also poses certain market entry challenges. “There is a perception among people we interviewed for this project that the EU is not a single market, but one that is rather fragmented by different languages, cultures and laws,” Alon said. “Perhaps if I have an automotive startup, I will focus on Germany, but for most technologies, there is a fear of not knowing where to enter first, and having to deal with different sets of regulations and tax requirements.”

For these reasons and others, Alon said, Israeli startups are focused almost exclusively on the US market. “But the opportunity is tremendous, the markets are close in proximity, and there are already trade frameworks in place,” he said. So how do we make things change?

Alon’s report studied investment opportunities for startups, with a focus on clean-tech and food-tech – about which, he said, Europe is already established as a leader. The findings, culled from interviews with CEOs and industry leaders, pointed to three steps: investment, information and boots on the ground.

Investment requires, among other things, becoming a stronger part of Israel’s economy. While 230 American companies have R&D centers in Israel, only about 50 European corporations do so, Alon said. “Hundreds of European multinational companies could benefit from partnering with Israeli firms.”

In order to provide easier access to information, the report suggests creating a single online platform where EU businesses can access all information about Israeli companies for purposes of investment and trade, as well as access to open tenders, requests for proposals and grants. In addition, the report proposes to invest in increasing awareness of Israeli startup success stories in Europe – and there are such successes, Alon assured.

If Europeans want to do business with Israel’s small- and medium-sized enterprises, with revenues of less than a half-billion dollars in revenues, they’ll need an inexpensive way to get boots on the ground to find and engage them, Alon said. The program suggests offering local “scouts” that can work for multiple firms to make connections and find worthwhile collaborations.

Will this plan change things between Europe and Israel? “As with any strategic plan, there is the possibility of failure, and there are a lot of people that we have to get on board with the program,” Alon said. “That’s why we are focused on getting some quick wins that will create momentum quickly. We’ll see from there.”

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