Like the epidemics of yore, the modern situation in Israel’s high-tech industry faces its own set of challenges, each posing a unique test of resilience. This Passover, its story of transformation and renewal, reflects the challenges and triumphs within the ecosystem.
The Jerusalem Post asked tech industry experts and stakeholders to share their insights on 10 of these modern-day “epidemics” to uncover the underlying problems and explore potential solutions. .
The epidemic of cost-oriented R&D decisions
Companies are increasingly setting up operations and expanding their workforce in destinations known for their cost-effectiveness, such as Bulgaria and India. This change is primarily driven by the attractiveness of access to labor at lower costs compared to established technology hubs like Israel. Nevertheless, the equation remains strong in Israel: high costs come with very high values.
“Here in Israel, no matter what, we have a unique blend of a strong development spirit, an unparalleled spirit of innovation, flawless execution, and fast delivery that positions Israeli high-tech companies as leaders on the world map. ” said director Eliel Schulman. He holds a bachelor’s degree in engineering from the SAP Development Center in Israel. “It is imperative that companies do not overlook the invaluable Israeli workforce and its unique contributions, which are essential to propelling both their companies and their products to new heights. Embracing the qualities is essential to maintaining the innovative edge and success that is synonymous with Israel’s high-tech culture. ”
The epidemic of stagnation in entrepreneurial activity
From 2007 to 2015, Israel experienced a surge in startup creation, but since then, new ventures have plummeted by more than 50% each year. This trend shows that entrepreneurs are reluctant to launch startups despite ample opportunities in areas such as cyber and AI. This stagnation threatens the vitality of the technology sector and the local economy. Support programs are critical, but so is fostering a culture of entrepreneurship.
Ziv Elul, co-founder and CEO of digital health company Pery, said: “Increasing demand in areas such as mental health presents opportunities for innovative solutions such as AI-based ADHD interventions. However, the number of startup incubators is decreasing, and partnerships with foreign companies are increasing.” Revitalizing Israel’s innovation capacity requires a concerted effort to reignite the entrepreneurial spirit and foster collaborative efforts to maintain our position as a global innovation leader. can do. ”
Valuation – The Bubble Plague
In recent years, there has been a proliferation of Israeli high-tech companies that are primarily focused on valuation and fundraising, rather than the core business of generating revenue and cultivating sustainable products. Many of these ventures boast high valuations on paper, but lack a concrete product or customer base, creating a speculative bubble that threatens their long-term survival.
Avri Itach, CCO of Flyfish, a technology financial services company, says, “Rather than pursuing an exit, a startup’s primary objective should be to establish a robust business model that generates revenue and drives profitability.” This approach does more than just provide stability. Focusing on profitability also reduces the pressure to deliver on intangible promises to investors, allowing them to organically attract investment and ensure market survival. ”
The plague of raising capital in times of crisis
Israel’s vibrant high-tech industry faces challenges in raising capital, especially during the crisis. Economic, political, and social instability can significantly reduce investor confidence. Recent examples include Israel’s judicial reforms, which have raised concerns among foreign investors, and the destabilizing war in Gaza.advertisement
Gal Ringel, CEO and founder of data privacy company Mine, advises: “Despite these challenges, high-tech companies can succeed in raising capital by focusing on strong and experienced teams, unique products with innovative solutions and market value, and solid businesses. Develop a plan that includes market analysis and growth strategies, and build strong relationships with investors. ”
Proof of Concept (PoC) Pest
In the dynamic landscape of technological innovation, traditional “proof of concept” (PoC) approaches often become a bottleneck that delays startups from realizing their full potential. Although this methodology is widespread in corporate environments, it can inhibit progress by focusing on small-scale validation rather than embracing a broader vision of scale-up and gradual deployment. “Solutions are specifically designed for fast global adoption for startups,” said Michael Markus, director of UST Spark, UST’s innovation arm that seeks to build growth partnerships with Israeli startups. “In the Israeli ecosystem, this can be a big hurdle.” “The key to success lies in avoiding the PoC stage and demonstrating readiness for immediate integration and scalability. Essentially, a PoC-centric mindset is essential for startups looking to effectively navigate the corporate maze and secure a foothold on the global stage. In this illustration taken on June 23, 2023, the words AI (artificial intelligence) appear on a computer motherboard. (Credit: REUTERS/DADO RUVIC/ILLUSTRATION/FILE PHOTO)
GEN AI Pivot Plague
The rapid rise of generative AI is both a challenge and an opportunity for startups, and those that cling to traditional methods risk falling behind. “Generative AI can be a game-changer for companies that were confident in their product’s market fit, as it opens the door to entirely new customers and competitors.” says Nogah Hendler, vice president of product for the company Commit. Consulting services to various companies in the process of implementing generative AI technology. “Imagine a marketing startup struggling to create engaging content as competitors leverage AI to churn out targeted ads and personalized customer journeys. Will it survive? It’s all about adaptation. Startups should explore how generative AI can enhance their existing services or redirect their core technologies. ” This includes using AI to streamline internal processes, develop more user-friendly interfaces, and generate innovative product ideas. Ignoring generative AI may not be a death sentence, but it certainly strains a startup’s ability to compete in a rapidly evolving environment.
“Embracing this technology is no longer a luxury, but a necessity for survival and future success. Remember, past success is no guarantee for the future.”
down round pesto
Over the past year or so, there has been a resurgence of so-called “down rounds,” in which companies raise funds at lower valuations.
“For many founders and investors, down-round financing is seen as a last resort and something they try to avoid,” adv says. Simon Marks is a partner and head of his high-tech and venture capital practice at the Epstein Rosenblum Maoz (ERM) law firm. “This is due to the ‘double whammy’ of the dilutive effect of the down round itself and further dilution due to the anti-dilution protection given to previous investors. While we encourage you to consider your options, a down round doesn’t necessarily have to spell the end for your company, as long as you’re raising money through a down round (e.g. by reducing your burn rate or raising money through alternatives like SAFE). Done wisely, down rounds are possible: Use them as an opportunity to clean up the cap table, strengthen relationships with investors, and create new incentives for core management and employees, thereby positioning your company for the future. position for success.”
The plague of junior and entry-level positions
Israel’s high-tech industry is thriving, but the looming shadow of the junior position dilemma threatens its future. Academia has fallen short in its inability to adapt its learning programs to the evolving needs of industry.
“Overemphasis on theory and outdated curriculum means many graduates lack the skills needed in the job market,” says Chaim Geron, co-CEO of Infinity Labs R&D . “Thus, a vicious cycle ensues: young people have a hard time finding jobs without experience, and companies are reluctant to hire them without experience. , we must transform our organization to become one that produces talent that can be added quickly.” Syllabus is working with high-tech companies and recruiting industry experts into teaching roles to improve hands-on, Relevant skills should be prioritized. ” Workplace Diversity (Examples) (Credit: INGIMAGE)
The plague of lack of diversity
Despite ample evidence showing the benefits of diversity within companies and organizations, there is still room for improvement in Israel’s high-tech industry in this regard, especially after the decline in minority representation in the sector over the past year. There are quite a few left.
“Research consistently proves that diverse teams improve overall company performance, leading to increased revenue and profits,” explained Ynon Dolev, CEO of Sompo Digital Lab Tel Aviv. Masu. “Embracing human diversity creates better talent that moves companies forward, facilitates faster problem solving, and is a vital factor in how employees choose their workplaces.For managers, Israel It is important to actively integrate individuals from all walks of society into your company. This is a strategic move that not only strengthens workplace dynamics, but also contributes to improving the broader economic situation.”
Epidemic of geographical concentration
Staying in the realm of diversity, Shai Meinrad, deputy director of the Center for Innovation in Jobs, Desert Technology and Climate, points out another glaring problem within Israel’s high-tech industry: the lack of diversity and Point out geographic concentration.
“This concentration not only limits opportunities for talent from diverse backgrounds, but also poses a risk to the resilience of the industry itself,” she explains. “The importance of diversifying and decentralizing the high-tech sector cannot be overstated as Israel navigates turbulent times, but within these challenges lie opportunities for change. The Negev region stands as a potential game changer, offering fertile ground for social development.” Embracing the Negev’s potential will not only reduce the vulnerability of the industry, but also help the nation. It can also make a significant contribution to the broader social and economic well-being of people. ”
