1 00:00:00,000 --> 00:00:05,560 Hi, today we will talk about Israel, one of my favorite countries in terms of international 2 00:00:05,560 --> 00:00:11,120 business that I use as an example in my international expansion strategy courses. 3 00:00:11,120 --> 00:00:17,720 However, being a strong exporter, this country has a relatively small market which is highly 4 00:00:17,720 --> 00:00:24,200 competitive being served by local and international companies, and in addition to this, its internal 5 00:00:24,200 --> 00:00:27,560 regulations are extremely demanding. 6 00:00:27,560 --> 00:00:32,880 Taking this into account, the question appears if it's worth spending efforts and resources 7 00:00:32,880 --> 00:00:35,640 for entering Israel at all. 8 00:00:35,640 --> 00:00:42,000 But at the same time, Israel is strategically located at the crossroads of Europe, Asia, 9 00:00:42,000 --> 00:00:46,880 and Africa, making it a getaway to these markets. 10 00:00:46,880 --> 00:00:51,720 It has a diverse population with a mix of immigrants from various countries, including 11 00:00:51,720 --> 00:00:57,800 Europe and the United States and the Middle East, and the country has a relatively high 12 00:00:57,800 --> 00:01:02,120 per capita income, and its population has strong purchasing power. 13 00:01:02,120 --> 00:01:09,600 Israelis are willing to spend on quality products and services, both domestically and internationally, 14 00:01:09,600 --> 00:01:13,040 and it has a thriving and technologically advanced economy. 15 00:01:13,040 --> 00:01:18,840 So it is known for its innovation in high-tech industries, particularly in sectors such as 16 00:01:18,840 --> 00:01:24,720 cyber security, software development by technology, and pharmaceuticals. 17 00:01:24,720 --> 00:01:29,240 So perhaps it is still a very interesting market to enter. 18 00:01:29,240 --> 00:01:35,600 In one of the previous episodes in my conversation with Johan Gustafsson about Sweden, Johan 19 00:01:35,600 --> 00:01:40,560 said that his secret for international expansion is Tel Aviv. 20 00:01:40,560 --> 00:01:45,700 If you need to find connections to the whole world, you need to go to this city. 21 00:01:45,700 --> 00:01:50,560 He said that Israel is like a getaway to all the other countries, and it might be a great 22 00:01:50,560 --> 00:01:53,640 idea to start your journey there. 23 00:01:53,640 --> 00:01:59,320 Taking this advice into account, and the fact that Israel is known as a startup nation due 24 00:01:59,320 --> 00:02:06,400 to its thriving startup ecosystem, I have invited to a short but very saturated talk 25 00:02:06,400 --> 00:02:10,000 an expert from the field of startups and innovation in Israel. 26 00:02:10,000 --> 00:02:19,120 I am Dmytro Shvets, your host at The Start Global Insights, where I interview experts 27 00:02:19,120 --> 00:02:24,920 in different countries about local business secrets and international expansion experience. 28 00:02:24,920 --> 00:02:32,280 So let me introduce my guest Or Haviv, a partner and head of innovation at Arielli Capital. 29 00:02:32,280 --> 00:02:38,440 Or has more than 17 years experience in working with Israeli innovation ecosystem and innovation 30 00:02:38,440 --> 00:02:44,320 centers, and I hope that today he will share all insights about this side of the country 31 00:02:44,320 --> 00:02:48,240 and how to use it to enter the world's market. 32 00:02:48,240 --> 00:02:50,240 Hi Or, and welcome to the show. 33 00:02:50,240 --> 00:02:52,520 Hi, thank you for the opportunity. 34 00:02:52,520 --> 00:02:55,560 And my first question is about greetings in Israel. 35 00:02:55,560 --> 00:02:57,240 What is more appropriate? 36 00:02:57,240 --> 00:03:01,440 Should I call you Mr. Haviv or just Or? 37 00:03:01,440 --> 00:03:09,360 You know, if you want to be official, you can always use Mr. in Israel, but Israel is 38 00:03:09,360 --> 00:03:17,040 a very, the culture, the business culture in Israel is very non-formal. 39 00:03:17,040 --> 00:03:25,280 It's not very common to call people Mr. unless you're talking about official circles such 40 00:03:25,280 --> 00:03:28,640 as, you know, government and things like that. 41 00:03:28,640 --> 00:03:31,600 So feel free to call me Or. 42 00:03:31,600 --> 00:03:33,280 Okay, deal. 43 00:03:33,280 --> 00:03:37,880 Could you tell our listeners, what do you do in Israel and what is the scope of your 44 00:03:37,880 --> 00:03:41,520 activities and some words about the industry perhaps? 45 00:03:41,520 --> 00:03:50,160 As you know, we're talking about the innovation ecosystem, talking about the technology industry, 46 00:03:50,160 --> 00:03:52,080 which is very, very exciting. 47 00:03:52,080 --> 00:03:59,640 I mean, obviously in Israel, we're going to talk about it in a second, but globally, world 48 00:03:59,640 --> 00:04:10,840 one, the tech ecosystem is super exciting for one very simple and obvious reason. 49 00:04:10,840 --> 00:04:19,800 The tech ecosystem or the innovation ecosystem is basically touching upon one of the most 50 00:04:19,800 --> 00:04:23,320 important points in humanity. 51 00:04:23,320 --> 00:04:35,160 What is differentiating humans from other animals is our ability to not just innovate, 52 00:04:35,160 --> 00:04:37,640 but execute on our innovation. 53 00:04:37,640 --> 00:04:42,400 Okay, so not just dream about something, but make it happen. 54 00:04:42,400 --> 00:04:50,400 Human beings have discovered a way to act upon our innovation capabilities and that 55 00:04:50,400 --> 00:04:54,880 way is the startup way. 56 00:04:54,880 --> 00:05:02,440 So you know, Israel is positioned second after the Silicon Valley in the entire world as 57 00:05:02,440 --> 00:05:08,160 far as the amount of unicorn, which are companies, rich foundations crossing the billion dollars. 58 00:05:08,160 --> 00:05:09,160 Right. 59 00:05:09,160 --> 00:05:17,480 So it's only second to the Silicon Valley, which is again, by size, a very, very amazing 60 00:05:17,480 --> 00:05:20,280 comparison because Israel is very, very small. 61 00:05:20,280 --> 00:05:21,760 It reached that place. 62 00:05:21,760 --> 00:05:23,280 So that's all we do in Israel. 63 00:05:23,280 --> 00:05:28,160 To your question, we deal with innovation, we invest in technology companies, but we 64 00:05:28,160 --> 00:05:37,160 also grow innovation platforms, innovation centers, innovation programs, not just in 65 00:05:37,160 --> 00:05:39,080 Israel, all around the world. 66 00:05:39,080 --> 00:05:45,440 We have a financial side that sits in the UK and we have a capital side that sits in 67 00:05:45,440 --> 00:05:46,440 New York. 68 00:05:46,440 --> 00:05:51,080 I'm always showing Israel as an example of an amazing expert experience. 69 00:05:51,080 --> 00:05:57,760 A small country with extremely harsh conditions and constant missile attacks managed to turn 70 00:05:57,760 --> 00:06:03,160 the desert into the forest and became one of the biggest exporters of fruits and vegetables 71 00:06:03,160 --> 00:06:04,400 in the world. 72 00:06:04,400 --> 00:06:09,040 So I believe that innovations that you are talking about are not only for the software, 73 00:06:09,040 --> 00:06:12,920 but also for brick and mortar, as you said. 74 00:06:12,920 --> 00:06:19,380 So you could use it to do all of those amazing things that then succeed in the world trade. 75 00:06:19,380 --> 00:06:26,480 Human beings usually will not innovate or change anything, right, if everything is okay. 76 00:06:26,480 --> 00:06:29,280 But if you have challenges, you've got to innovate. 77 00:06:29,280 --> 00:06:38,920 So you have one more natural resource that is un-united, which are human brains. 78 00:06:38,920 --> 00:06:45,920 And if you tap into that, if you start mining human brains, then you get to innovation, 79 00:06:45,920 --> 00:06:53,400 then you get to high tech and export the knowledge, export innovation, export unicorns, export 80 00:06:53,400 --> 00:06:54,760 IP and patents. 81 00:06:54,760 --> 00:07:00,160 And you know what, at the end of the day, more than half of the economy in Israel is 82 00:07:00,160 --> 00:07:01,160 tech. 83 00:07:01,160 --> 00:07:11,960 Over 25% of the income generated by the government comes from the tech sector. 84 00:07:11,960 --> 00:07:17,720 So the thing is, if you ask us, why do we do what we do in our real capital? 85 00:07:17,720 --> 00:07:21,000 Our real capital is based by a family office. 86 00:07:21,000 --> 00:07:24,320 We're not a fund, conventional fund or a VC. 87 00:07:24,320 --> 00:07:29,280 We're invested in many B-C, for example, you know, or innovation center. 88 00:07:29,280 --> 00:07:30,280 So NGT. 89 00:07:30,280 --> 00:07:36,200 NGT is an innovation center positioned in Israel, in Nazareth, which is in the north 90 00:07:36,200 --> 00:07:37,200 of Israel. 91 00:07:37,200 --> 00:07:41,040 It's a mixed city with Jews and Arabs. 92 00:07:41,040 --> 00:07:47,920 That's the reason the innovation center was positioned there is exactly that, to create 93 00:07:47,920 --> 00:07:54,880 more opportunities for people, for the community to work, new type of jobs, and everything. 94 00:07:54,880 --> 00:07:57,640 There's an amazing thing that's been working. 95 00:07:57,640 --> 00:08:05,360 They already completed the first fund, investment fund, investing in 25 startups. 96 00:08:05,360 --> 00:08:11,480 And now they completed the second fund, the second VC investment fund, which is 93 or 97 00:08:11,480 --> 00:08:13,440 94 million dollars. 98 00:08:13,440 --> 00:08:18,280 Our real capital is GP in this fund. 99 00:08:18,280 --> 00:08:25,280 And it's a great example of a fund that is not just money, but it's also an incubator. 100 00:08:25,280 --> 00:08:27,600 It has actual facilities. 101 00:08:27,600 --> 00:08:34,720 When you visit there, you see companies that benefit from the team's knowledge, the actual 102 00:08:34,720 --> 00:08:41,660 facilities, not just offices, but, you know, laboratory, you know, clean rooms to produce 103 00:08:41,660 --> 00:08:44,560 the drugs or whatever they need to move forward. 104 00:08:44,560 --> 00:08:51,600 It's a lot of amazing thing that the industry realizes that are required in order to bring 105 00:08:51,600 --> 00:08:55,720 a company to success, which is much more than money. 106 00:08:55,720 --> 00:09:01,480 And if we move forward to business, you've said that Israel is a multicultural country 107 00:09:01,480 --> 00:09:04,340 with different nations living there. 108 00:09:04,340 --> 00:09:09,720 And taking this into account, how well do you characterize the business culture in Israel 109 00:09:09,720 --> 00:09:15,040 in general and in comparison to the European, for example? 110 00:09:15,040 --> 00:09:16,040 Israel is very opportunistic. 111 00:09:16,040 --> 00:09:18,960 The mindset, the business mindset is very opportunistic. 112 00:09:18,960 --> 00:09:20,640 They're always looking for good deals. 113 00:09:20,640 --> 00:09:26,880 Any place or any person or any organization that will come to, you know, an Israeli person 114 00:09:26,880 --> 00:09:30,040 or institution say, oh, there's a business opportunity. 115 00:09:30,040 --> 00:09:31,040 They'll jump. 116 00:09:31,040 --> 00:09:32,040 They'll be all over it. 117 00:09:32,040 --> 00:09:36,800 They'll try to see if they can realize. 118 00:09:36,800 --> 00:09:42,320 Not everything is wrong, not all things are equal, not everybody is within this industry. 119 00:09:42,320 --> 00:09:49,840 Still you have to remember directly as far as the technical system, it's only 10% of 120 00:09:49,840 --> 00:09:53,000 the entire Israel population works in tech. 121 00:09:53,000 --> 00:09:54,000 The impact is huge. 122 00:09:54,000 --> 00:10:00,080 The part of the economy is huge, but directly it's up to 10% of the population that works 123 00:10:00,080 --> 00:10:01,080 in high tech. 124 00:10:01,080 --> 00:10:06,920 And not all 10% are entrepreneurs or business people. 125 00:10:06,920 --> 00:10:14,920 A lot of them are amazing people, programmers, like that, but they're not necessarily the 126 00:10:14,920 --> 00:10:15,920 business side. 127 00:10:15,920 --> 00:10:22,120 When you talk about the business side, I can tell there is a business difference in mindset. 128 00:10:22,120 --> 00:10:28,480 Really, one of the biggest sections in our company is working with governments. 129 00:10:28,480 --> 00:10:33,720 We build and lead innovation programs with governments to help them grow their ecosystems 130 00:10:33,720 --> 00:10:39,560 and to help their startups to break through the glass ceiling of scaling up. 131 00:10:39,560 --> 00:10:45,480 So we work with amazing countries like, you know, Italy. 132 00:10:45,480 --> 00:10:55,160 So they have governments, being in government, going to Germany, certain states in America. 133 00:10:55,160 --> 00:10:57,320 So we work a lot in Europe. 134 00:10:57,320 --> 00:11:02,520 And I can tell you that after many years of working with European entrepreneurs, there's 135 00:11:02,520 --> 00:11:07,960 a lot of amazing things that they do, such as, for example, Europeans are very conservative 136 00:11:07,960 --> 00:11:09,760 as far as business people. 137 00:11:09,760 --> 00:11:14,200 They're not big risk takers, which means they'll go for validation early. 138 00:11:14,200 --> 00:11:18,520 You will see early stage startups that are already making money, which you will not see 139 00:11:18,520 --> 00:11:20,840 in Israel in any case. 140 00:11:20,840 --> 00:11:24,760 Israelis are risk takers, so they will run with their big dream. 141 00:11:24,760 --> 00:11:28,920 Like you said, they're really good sales in the early stages, so they will sell their 142 00:11:28,920 --> 00:11:29,920 dream. 143 00:11:29,920 --> 00:11:31,320 They will raise a lot of money. 144 00:11:31,320 --> 00:11:36,840 The Europeans will not raise a lot of money in the beginning, but they will go for validation. 145 00:11:36,840 --> 00:11:38,320 They will get flash. 146 00:11:38,320 --> 00:11:42,880 So you think Israel might be a great place for startup to begin? 147 00:11:42,880 --> 00:11:52,000 Israel turned out to be one of the most attractive places for startups that want to scale out, 148 00:11:52,000 --> 00:11:57,560 not because they target Israeli market, but because of two things. 149 00:11:57,560 --> 00:12:05,280 Number one, because of the high validity of the Israel tech ecosystem, your chances of 150 00:12:05,280 --> 00:12:14,960 growing, scaling into big markets like America, et cetera, are bigger than to go from a small, 151 00:12:14,960 --> 00:12:21,360 medium, sometimes even large hospital in Europe that is not well known. 152 00:12:21,360 --> 00:12:22,640 So that's number one. 153 00:12:22,640 --> 00:12:31,680 And number two, there is a huge, huge concentration in Israel of multinational companies. 154 00:12:31,680 --> 00:12:42,760 So there are literally hundreds of multinational corporates with their business offices, R&D 155 00:12:42,760 --> 00:12:47,920 offices, invasion offices, scouting offices. 156 00:12:47,920 --> 00:12:54,360 It's like fishing in a barrel for a scaling up startup to come to Israel in a very short 157 00:12:54,360 --> 00:12:55,360 amount of time. 158 00:12:55,360 --> 00:13:04,320 They'll be able to physically meet and potentially work with the world's largest global brand. 159 00:13:04,320 --> 00:13:06,080 Israel is an amazing entry point. 160 00:13:06,080 --> 00:13:09,200 Well, it looks like a portal to the whole world. 161 00:13:09,200 --> 00:13:10,200 Exactly. 162 00:13:10,200 --> 00:13:11,200 You said it. 163 00:13:11,200 --> 00:13:15,840 And how easy it is to sell to this innovation people and corporations? 164 00:13:15,840 --> 00:13:18,160 How long does it take to do it? 165 00:13:18,160 --> 00:13:25,200 And why actually it is better to reach them in Israel and not to go to them in their home 166 00:13:25,200 --> 00:13:26,200 headquarters? 167 00:13:26,200 --> 00:13:32,480 In short, startups from all around the world, that's a question they'll tell you in one 168 00:13:32,480 --> 00:13:34,480 word, painful. 169 00:13:34,480 --> 00:13:36,520 The process is painful. 170 00:13:36,520 --> 00:13:41,280 And even if you get to the relevant person, there is the whole value of death between 171 00:13:41,280 --> 00:13:45,000 when the corporate says, oh, we like you, we want to start working with you. 172 00:13:45,000 --> 00:13:52,360 And until they start working with you, an average startup can die 10 times in that period. 173 00:13:52,360 --> 00:13:55,280 It's super, super painful for startups. 174 00:13:55,280 --> 00:14:01,960 But in Israel, it's still a corporate process because at the end of the day, she's talking 175 00:14:01,960 --> 00:14:06,400 to Microsoft, Google, Samsung, I don't care what, it's still a huge corporate and they 176 00:14:06,400 --> 00:14:08,880 still have to run it through their system. 177 00:14:08,880 --> 00:14:16,360 What they're missing is that in Israel, after many years of working, they started to find 178 00:14:16,360 --> 00:14:19,360 a cracks in the system. 179 00:14:19,360 --> 00:14:25,680 The people, at the end of the day, these big companies, they hire local people from Israel. 180 00:14:25,680 --> 00:14:27,860 They hire Israel from this sector. 181 00:14:27,860 --> 00:14:31,520 And then Israel is not to stick the land with the business plan. 182 00:14:31,520 --> 00:14:34,980 They know how to bridge the gap with startup. 183 00:14:34,980 --> 00:14:40,480 And they help the big corporates to understand how do we shorten the time to work with these 184 00:14:40,480 --> 00:14:41,480 companies? 185 00:14:41,480 --> 00:14:43,480 How do we speak the startup language? 186 00:14:43,480 --> 00:14:47,440 Don't necessarily go after the very, very big fish. 187 00:14:47,440 --> 00:14:52,880 Go after the small to medium fish. 188 00:14:52,880 --> 00:14:53,960 Validate your model. 189 00:14:53,960 --> 00:14:56,680 Make sure you create value. 190 00:14:56,680 --> 00:14:58,160 The big fish are looking. 191 00:14:58,160 --> 00:15:00,000 They're always interested. 192 00:15:00,000 --> 00:15:03,640 Make sure you have value so they can chase after you. 193 00:15:03,640 --> 00:15:07,560 So when you can come to them, you don't say, oh, I'm going to do it. 194 00:15:07,560 --> 00:15:09,200 You tell them, look what I've done. 195 00:15:09,200 --> 00:15:14,400 And they actually prefer to pay bigger money for something that has bigger value and less 196 00:15:14,400 --> 00:15:19,120 risk than to pay less money for something that has more risk and less value that they 197 00:15:19,120 --> 00:15:20,120 have to build. 198 00:15:20,120 --> 00:15:26,480 So do I understand it right that the strategy may be to target smaller companies first, 199 00:15:26,480 --> 00:15:32,440 validate your business model and understand if your products are sellable in Israel, that 200 00:15:32,440 --> 00:15:38,520 you have clients and that your value added goods are accepted by the market. 201 00:15:38,520 --> 00:15:41,360 And only then you can scale up to the bigger market. 202 00:15:41,360 --> 00:15:47,600 And another question is, is it a good idea to utilize a local startup ecosystem for that? 203 00:15:47,600 --> 00:15:50,960 I would say first look for programs. 204 00:15:50,960 --> 00:15:54,560 For example, we have a program open for agriculture. 205 00:15:54,560 --> 00:16:01,880 We're calling global coal, insurance agriculture, market ready, C2 round A type of company. 206 00:16:01,880 --> 00:16:03,720 You know, you can apply today. 207 00:16:03,720 --> 00:16:06,800 You know, that will be great. 208 00:16:06,800 --> 00:16:13,720 Going through programs, innovation programs like that will increase your chances of connecting. 209 00:16:13,720 --> 00:16:17,000 It's a road show on steroids, right? 210 00:16:17,000 --> 00:16:20,560 So you will meet a lot more people than you can meet alone. 211 00:16:20,560 --> 00:16:24,120 You will work with a lot of people and you earn legitimacy. 212 00:16:24,120 --> 00:16:27,880 Well, I see that networking is highly important in Israel. 213 00:16:27,880 --> 00:16:32,480 Networking, trying to go through certain programs, make sure the program is quality, make sure 214 00:16:32,480 --> 00:16:34,600 it suits you and your stage. 215 00:16:34,600 --> 00:16:39,480 But if you can find a high quality relevant program, it will really help you. 216 00:16:39,480 --> 00:16:42,320 Or I understand that you don't have much time. 217 00:16:42,320 --> 00:16:47,120 So I will try to summarize a bit what we have discussed. 218 00:16:47,120 --> 00:16:53,960 So Israel is a multinational country with a highly developed tech startup and innovation 219 00:16:53,960 --> 00:16:58,160 ecosystem that can be used to enter the market. 220 00:16:58,160 --> 00:17:03,120 The business culture is risk tolerant and opportunistic. 221 00:17:03,120 --> 00:17:09,500 Many international corporations have representatives in Israel and they are hunting for innovations 222 00:17:09,500 --> 00:17:12,760 and new solutions. 223 00:17:12,760 --> 00:17:18,380 One of the most appropriate ways to enter the market is via some incubation innovation 224 00:17:18,380 --> 00:17:20,760 program in Israel. 225 00:17:20,760 --> 00:17:26,480 And well, actually all of that, despite the small internal market, makes Israel a perfect 226 00:17:26,480 --> 00:17:28,360 portal to the whole world. 227 00:17:28,360 --> 00:17:29,360 Exactly. 228 00:17:29,360 --> 00:17:30,360 Great, great. 229 00:17:30,360 --> 00:17:34,800 So thanks a lot and thanks for your time and for your experience. 230 00:17:34,800 --> 00:17:36,720 It's a pleasure and thank you. 231 00:17:36,720 --> 00:17:49,680 And anybody who's listening, keep listening to this podcast.