An astounding 2021 for Israeli tech could bring pivot
Israel’s prowess in cyber, biotech, adtech and more makes it a genuine global colossus and offers value to the region
My Romanian Jewish parents yearned for me to be a doctor, and if that could not be organized, then at least an engineer (in Romania that too is a title proudly placed before one’s name: Ing.). To please them and compel college funding, I studied computer science all the way to the graduate level in the United States.
But I abandoned it in favor of inky trades. When I applied to The Jerusalem Post in the late 1980s, co-editor Erwin Frenkel hired me on the condition that I complete my PhD, which I attempted to do, without success, while being the paper’s political correspondent. All this caused my parents considerable distress. Romanian journalists back then enjoyed the respect level of black market moneychangers, on a good day.
My choice afforded me some very interesting decades. But I find myself contemplating the wisdom of it all as I survey the Israel tech scene at the end of 2021 from a perch in Tel Aviv.
The sector’s performance is nothing short of astounding. Over $100 billion entered Israel through start-ups this year, with 33 new companies joining the unicorn club of private firms valued at more than $1b and Israeli IPOs growing by 520% from 2020. Some of it relates to global trends including the COVID-19 digital disruption and a dearth of attractive investment options. But then again, the $25b Israeli firms raised from venture capital is roughly the same scale as tech-savvy India, with a population more than 100 times bigger, as well as the UK, the leading innovator in Europe, and half that of the European Union, with more than 400 million people.
This has had an effect that for many Israelis is annoying: Shekel demand has driven up the currency’s value relative to the US dollar and most currencies (the dollar has in fact had an otherwise good year) – making imports expensive and driving inflation. This compelled the Economist to declare Tel Aviv the world’s most expensive city.
But it also gives the country something concrete to offer the Arab world – an anchor for a regional tech hub which married with the Gulf financial centers, regional markets and the largely untapped regional potential for Arab innovation could bring real symbiosis.
So extraordinary is the landscape – including a slew of Israeli firms trying to find a Covid treatment – that I am compelled to offer a survey of specifics, from my own vantage point.
ADTECH & MEDIA: Outbrain And Taboola are a global duopoly, and Engageya is sniping at their feet with a product that brings social media content to the open web. If sites are using video chances are the tech is IronSource. Outbrain went public on the NASDAQ last summer raising $160m at a $1.1b valuation (less than expected) while Taboola, after the failure of a planned merger with its rival, just went public via a SPAC at $2.8b; IronSource went public at over $11b, also this year.
CLEANTECH: UBQ has a hell of a world-beating (and planet-saving) elevator pitch: Any trash can be recombined at a molecular level yielding infinitely reusable plastic substitute for industry. This eliminates the need for sorting for recycling (which does not work well) and at scale could minimize the need for landfills, reducing methane emissions, mitigating global warming. After a pilot operation in Israel, the company recently announced a large-scale facility in the Netherlands for Europe and in December approached unicorn-level valuation by raising $170m. Among users of its material are Mercedes-Benz, global retail solutions provider Mainetti and Arcos Dorados, the McDonald’s franchisee in Latin America.
BIOTECH: Jerusalem Venture Partners, an Israeli VC with global ambitions, this year inaugurated a new food tech innovation center in northern Israel. But perhaps the most interesting development of 2021 comes from BioHarvest, which has found a way to replicate plant cells in bioreactors, is already selling a product based on red grapes which have health value, and in December announced it was producing large quantities of pure cannabis from trichome cells without growing the plant. This resolves the problem of cleanliness and consistency, a pain point of the booming global cannabis industry, and if applied more widely could upend agriculture and conserve land all across the planet. Similarly, Future Crops, an innovator in vertical farming, has established a fully automated vertical farm in Holland (what is it about this country?) that aims to be a model for the industry.
THE GIG ECONOMY: Its stock has fallen in recent months as COVID seemed to be receding, but Fiverr remains one of the most of-the-moment companies, providing a marketplace for freelancers. Want your deck improved, text edited or video produced? You could be in Israel, and a pro from hostile Pakistan will do it on Fiverr, which listed on the NASDAQ two years ago at a $650m valuation. A more recent Israeli entry into this space, roughly, is Wisio, which provides a platform for influencers – or “creators” – to monetize their audience and get paid for interactions; for many, it is a more honest living than product placement on Instagram.
CYBER, SECURITY, & AI: NSO Group, which has faced a blizzard of criticism over allegations it helps governments target dissidents, claims to be actually fighting crime and terrorism. Its Pegasus spyware can take over control of a phone and download data or activate the camera and microphone. The skullduggery concerns didn’t stop US-based Berkeley Research Group from acquiring effective control of NSO in a transaction with a reported valuation of $1b. On the defensive side of cyber, MyPrivacy aims at giving phone users a way to protect their content, and Check Point remains a global champion, despite being nudged out of the NASDAQ 100 index. Last year co-founder Marius Nacht invested in BeyondMinds, which makes systems aimed at enabling corporations to deploy deeply customized AI – for computer vision, claims validation, and more – without building from scratch. This tackles a surprising problem: most AI projects are dropped halfway through.
The list goes on. Israeli-founded firms Real Brokerage (publicly traded) and HoneyComb are bringing a positive form of tech disruption to the US real estate and multi-family insurance sectors, respectively. In e-commerce you’ll find the next-level reviews platform YotPo, which raised $230m this year, making it a unicorn, and plans to float on the NASDAQ at a valuation of over $2b. Then there is MyHeritage, the genealogy company which is the closest competitor to Ancestry.com and was sold in 2021 to San Francisco Partners for $600m.
This technological tempest makes you wonder what would have been the value of Waze today, if it had held out instead of being sold to Google for $1b in 2013. Some believe that injection of money created a flywheel effect in Israel, explaining much of the above (in addition to military research, Soviet immigration, Israeli chutzpah and the Jewish tradition of learning). But others think the company might have been more impactful on its own, and that a tide is turning in this regard.
Indeed, Guy Pross, head of investor relations at Viola, one of the leading Israeli VCs which invested in a number of the companies mentioned, says 2022 may bring a shift. He expects more and more Israeli start-ups to hold out through the growth stage, resist early exists, and become global leaders on their own.
And here’s a disclaimer that is a revealing data point as well: Despite my dereliction toward computer science, my recent years’ pivots in the business world (combined with just living in Tel Aviv) have yielded a personal connection to every company just mentioned. Some I advise or help manage (Engageya, Wisio); some are past, present or prospective clients of the communications consultancy Thunder11 where I am managing partner (UBQ, BeyondMinds, Bioharvest, Real, Honeycomb, MyPrivacy), and the others I know through business dealings or close friends or family who are senior there. Imagine how mind-bending would be a comprehensive list, not a random one reflecting one person’s experience.
If my parents are reading this from their perch atop the heavens, a Romanian-accented “I told you so” is probably inevitable, and quite forgivable as well.
(A version of this article appeared first in The Jerusalem Post)