FT SPECIAL REPORT Technology & Innovation

Tuesday March 22 2016 www.ft.com/reports | @ftreports

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Mapping apps plot Scaling up is the next challenge world domination Companies are challenging Google in Israel’s booming tech the transport sector sector is facing labour Page 2 shortages, report John Cyber security Reed and Murad Ahmed Military service produces talent for a roducts being pioneered in thriving business Israel’s high-tech sector Page 2 include a medical device that uses electromagnetic waves P to treat depression; a data Start-up funding platform that tracks ships at sea for Money flows in despite hedge funds and governments; and an eyeglass-mounted camera for the blind the global slowdown in thatcanreadtextsandrecognisefaces. venture capital investing Brainsway, Windward, and OrCam Page 3 are just three of thousands of new tech- nology companies in the country nick- named “Start Up Nation”, which has Medical technology since the 1980s has created one of the Hundreds world’s most vibrant technology com- of fledgling munitiesoutsideSiliconValley. Israeli tech firms raised a record healthcare $4.4bn of venture capital investment businesses last year, a 30 per cent rise on the previ- with ous record set in 2014. That total, calcu- ambitions lated by Israel’s IVC Research Centre, does not include the billions of dollars for global invested by Google, Facebook, Oracle Shipping now: marine data start-up Windward, founded by Matan Peled (left) and Ami Daniel (right) is finding global customers — Eyal Warshavsky growth and other foreign groups in their Israeli Page 3 R&D centres which account for half of Palestinian lands. announced a computing divisions, particularly Unit prime minister. New companies in big morelikeIsrael,”saysJonMedved,chief thecountry’s280,000hightechjobs. $6bn investment in a new chip plant in 8200, release thousands of veterans data analysis, artificial intelligence and executive of OurCrowd, which helps The sector is growing without appar- Israel in September 2014, less than a every year equipped with world-class machinelearningarethrivingtoo. raisefundsfornewventures. Tech companies are ent regard for the cooling of investor monthaftertheendofIsrael’slastwarin hacking skills. These are feeding into a Agriculture companies — experts in Despite an international campaign to slow to hire Arabs sentiment toward tech companies else- theGazaStripagainsttheIslamistgroup cyber security industry that grabbed 20 squeezing maximum yields out of boycott Israeli goods, the tech sector is Minorities make up where, the political violence in Israel Hamas. per cent the world’s new investment in unpromising soil — now provide infor- attracting new customers from places just 3 per cent of the andtheWestBank,orthegrowinginter- Israeli tech owes much to the coun- the sector in 2015, according to the mation technology tools for crop man- with which Israel did not traditionally national boycott movement targeting try’s military establishment. The Israel National Cyber Bureau, a body that agement to help feed a hungry planet. do business, including China, India, industry’s workforce the Jewish state for its occupation of Defense Forces’ elite intelligence and reports to Benjamin Netanyahu, Israel’s “Unfortunately, the world is becoming Continuedonpage2 Page 4 2 ★ FINANCIALTIMES Tuesday 22 March 2016 Israel Technology & Innovation

Gross domestic spending on R&D as % of GDP Difference with OECD average, Mapping apps plot world domination percentage points -2 -1 0 1 2 automotive sector as it moves towards a South Korea Transport After the futureofdriverlesscars. Israel $1.1bn sale of Wazeto “Mankind needs cars to be autono- Japan mous, it would save an enormous Germany Google in 2013, Israel’s amount of time for everyone,” he says. France start-ups have even “But there is a lack of cyber knowledge EU28 of this industry. Cyber was not an issue UK grander plans, [automakers] thought about when Italy writes Murad Ahmed designingcars.” Spain Some plans are even grander. In Tel Russia Aviv, a company called SkyTran is Mexico hen Israel’s tech start- building what could be the future of Chile ups tackle transporta- publictransportation. tion, they think less Itiscreatingamonorail-likesystemof about the local com- capsules, large enough to hold two peo- Science degree recipients W mute and more about ple, which run along magnetic levita- % from all degrees worlddomination. tion, known as maglev, rails which are 13 In 2013, Waze, an Israeli company elevatedhighabovetheground. that offers real-time traffic information Itisafuturisticconceptthatenvisages Israel 12 on its popular navigation app, was passengers travelling in bubbles over acquired by Google for $1.1bn. Being cities at speeds of 150 miles per hour. A snapped up by the Silicon Valley com- test track is being built at the campus of 11 pany was seen as a great result, as it was Israel Aerospace Industries and could then the country’s biggest high-tech becompletedbytheendofthisyear. 10 dealbyvalue. The system, which requires heavy Now, an even bigger Israeli transpor- investment in a technology that has yet OECD* 9 tation technology company has to be proven, has its sceptics. But Saul emerged. Mobileye, the world’s leading Singer, co-author of Start-Up Nation, an 8 supplier of driver-assisted technology is account of Israel’s high-tech sector, 2000 05 10 13 listed in New York and has a market believes SkyTran could be revolution- capitalisation of about $6.5bn. It wants aryincitiessuchasBeijing. * Core countries average. Excludes Estonia, Iceland, Slovenia, Greece, Czech Republic and Luxembourg to go one better than Waze — by aiming “The subway is full, they’re already Sources: OECD; Israel Ministry of Finance to beat Google in the race to building limiting cars on the road and building driverlesscars. High fliers: ThesuccessofWazeandMobileyehas country’s current cyber security exper- freewaysontopofeachother,”hesays. Over January and February, the Nas- SkyTran spurred on a spate of technology start tisestems. The focus on transport may have daq-listed company announced deals envisages upsinthecountryfocusedontransport. Mr Ben Noon says he and his col- come from local challenges in getting Scaling up is with carmakers Renault Nissan, passengers What stands out is their long-term and leagues wondered how to carve out a around,saysNirErez,chiefexecutiveof Volkswagen and General Motors to travelling in globalambition. niche in Israel’s crowded cyber security Moovit. His app culls data from tens of the next build the digital maps autonomous capsules above Take Argus, a -based start-up sector and were inspired by stories of Mobileye, thousands of people to deliver public vehiclesneedtonavigate. cities foundedin2013,whichisbuildingcyber successinthetransportsector. transportinformationandroutesin850 The partnerships mean that Jerusa- security products for the automotive “Thefactthattherearesomanycyber the digital citiesaroundtheworld. challenge lem-based Mobileye is working with a industry.Thecompanybelievesthatthe companiesinIsraelallowedustoseethe mapping “It is really problematic in Israel, third of the international motor industry rise of connected cars — vehicles with entire landscape,”he said. “We saw our we are trying to fix it here,” says Mr atatimewhenGoogleisstrugglingtoper- internet connections and the ability to friends trying things, some succeeding company, Erez. “Israel is one of the few countries Continuedfrompage1 suadesuspiciousmanufacturerstouseits communicate with other devices — will and some not, so we had the chance to has a where ground transportation are very Latin America, and Africa. Mr Netan- technologytocreatedriverlesscars. also lead to hackers attempting to learnfromthem. limited. yahu has said repeatedly that the world “It’s one thing to come and say: remotelyhijackacar’sfunctions. “Not that many people in Israel were market “We’re surrounded by countries that is beating a path to Israel’s door, and ‘I developed a technology,’” says Amon Ofer Ben Noon, chief executive and into the automotive sector before, but value of don’t necessarily allow us to drive vehi- “they all want three things: Israeli tech- Shashua, Mobileye’s chairman and co-founder of Argus, started the com- Mobileyehasmadeitcleartous.” clesoutsidethecountry.Theonlywayto nology, Israeli technology, and Israeli co-founder. “It’s another thing to say, pany with three other founders in a Mr Ben Noon says that the company’s about get out is by aeroplane. We’re all dream- technology.” ‘Ihavealreadypartneredwithone-third garage after leaving Israel’s8200 intelli- ultimate goal is to become a leading $6.5bn ing of ways to make transportation High tech is a hedging policy of sorts, oftheglobalindustry’.” gence unit, from where much of the provider of cyber security to the smoother.” as Israel comes under growing criticism from its traditional trading partners in Europe for its role in the deadlocked Israeli-Palestinianconflict. Tech companies in this report LEBANON SYRIA Israelis say there is something special Turning Golan about their corporate culture, where Spy tactics can spot overheads are typically low and open- ness to risk is high. Israel’s close-knit military talent • SkyTran • Mindo Life • Galil Software culture and small size make it feel more • Neura • Google • Nazareth like a city-state than a country — with • 83 North Business consumer trends 8mpeopleitisthesizeofNewYorkCity. into civilian • Apple • UpNRide Incubator Center “To win in other places, you need • Carmel • • Optima Design much more money and more pride,” fortunes Ventures Caesarea Automation areas, including financial technology says Oren Tamari, chief executive of • Pitango • Itamar Ra’anana Big data and web analytics. SimilarWeb, a fast- UpNRide, which makes a standing • Genesis Medical West • Microsoft growing software company, uses these wheelchair for quadriplegics. “Maybe Partners Bank Hod Hasharon Companies track everything techniques to analyse what people do it’s spirit, maybe it’s drive, maybe edu- • Taranis whentheyvisitwebsites. cation — maybe it’s coming from the Cyber security • ThetaRay from ships to shopping, Tel Aviv The company, which garners data army.” Products of compulsory writes John Reed from internet service providers and The large number of companies in • Argus national service have proved • DouxMatok mediawebsites,comparesitsmethodof Israel’s tech sector speaks for itself: 708 • Moovit • EarlySense • IBM Israel’s military spies are skilled at sift- aggregating information to Waze, the Israelicompaniesinthiscategoryraised • Team8 Gaza ideal recruits for start-ups, ing through large amounts of informa- Israeli-founded app that was sold to capital in 2015, according to IVC. How- • Cropx tion — emails, phone calls, location data Google in 2013. Waze uses information ever, Israel faces growing competition reports Hannah Kuchler • Mobileye • Windward — to find the proverbial needle in a hay- gleaned from drivers’ mobile phones to for venture capital as countries from • SimilarWeb • The Kitchen • Jerusalem Venture stack: a suspicious event or anomalous buildreal-timemaps. Australia to Chile set their own innova- Years ago, veterans were not allowed to • Netafim • Yofix pattern that could be the warning of a ThetaRay, another new company in tion agendas. In 2015, for the first time, • Google • Bactusense Partners talkaboutthefactthattheyhadworked • Brainsway securitythreat. the field, uses big data to spot the first South Korea spent a higher proportion atunit8200,Israelimilitary’slegendary • PayPal • Deep Learning So it is no surprise that many compa- signs of cyber attacks, allowing banks ofitsGDPonR&D—at4.3percent— • Facebook Robotics • OurCrowd high-techspyagency. • OrCam nies ask Israeli start-ups for help in data and critical infrastructure companies thanIsraelwhichspent4.2percent. But now, for founders of Israel’scyber • Superfly Insights analysis. The start-ups, often founded such as power plants to protect them- “We are now on the medals podium, Beer Sheva security ventures, being a former mem- • Magma Venture by former military intelligence officers, selvesbeforeattacksprogresstoofar. but we want to stay there” says Avi Has- beroftheunithasbecomesomethingto Partners • Cyber Spark areusingthemethodsofcrunchingdata “There is a convergence between son, whose office — part of the economy openly brag about. In January Cyber • Aleph ISRAEL • Jerusalem deployedinspycrafttohelpcommercial cyber security and fraud,” says Mark ministry — has played a guiding role in Tech 2016, Israel’s largest digital secu- • BioCatch Venture clients. These might range from busi- Gazit, ThetaRay’s chief executive. the tech sector by providing risk-free rity conference, was full of founders Partners nesses tracking customer behaviour to “Cyber security in banks is not just loansandpromotingR&D. brandishing their connections to unit Ketura financial institutions trying to root out about stealing credit card numbers — While the number of tech jobs in 8200. • Alga onlinefraud. it’s about breaking into the system and Israel is rising, their share of total “In my day we weren’t allowed to say Technologies Superfly Insights, one such company, stealingrealmoney.” employment is stagnating, standing at wewerecomingfromtheunit.Noweve- EGYPT analyses anonymous data from email ThetaRay counts several leading 12 per cent in 2014. Tech companies say ryone does, every article is about it, it is receipts sent by companies — including banks among its customers. In Decem- they have more jobs for engineers than so weird for me,” says Natia Golan, JORDAN retailers, game developers and trans- ber it signed a deal with PwC to help the peopletofillthem.Restrictivevisaregu- director of product at BioCatch, a secu- 100 km port companies such as Uber — to gain consultancyanditsclientsdetectanom- lations make it hard to import skilled rity start-up. An 8200 veteran herself, insightsintoconsumertrends. alies in their business data that might foreign workers, so wages in tech — she finds it peculiar that the unit has “We are growing by getting anony- signalthreats. while still lower than in Silicon Valley — evolvedintoabrand. SpeakinglikeaSiliconValleyinvestor, incubatorforcybersecuritystart-upsin mous slices of data,” says Jonathan The company’s investors include arerising. Almost 70 security start-ups are Mr Matania says he is comfortable with the park. Yoav Tzruya, a partner at the Meiri, chief executive, who did his mili- General Electric, the US engineering Therearefivejobsforeveryapplicant founded each year,according to the IVC such risky bets. When a Japanese dele- firm, says it prides itself on being an tary service in Mamram, the Israel conglomerate. ThetaRay says that its in the software sector,says Michal Tzuk Research Centre. Many of them are cre- gation recently asked him what hap- active shareholder and moulding new DefenseForces’elitecomputingunit. services include “predictive mainte- of Israel’s economy ministry. She and ated by young entrepreneurs trained by pens if companies do not succeed, he ideas into globally successful compa- The company sells insights from the nance” — which is the ability, for exam- other Israeli officials express disquiet theIsraelimilitary. replied: “Most don’t and it is OK, they nies. aggregate data to companies such as ple, to predict the future failure of an over shortfalls in education, including Israel has tackled a severe shortage of justdisappear.” “We insist that in the early stage, the hedge funds. For example Superfly engine at a power plant just by studying the falling number of Israeli schoolchil- experienced and qualified cyber secu- The centrepiece of the government’s companies are co-located in this facility Insights saysithaddataonApple’ssales thedataitproduces. dren who take matriculation exams in rity engineers in a unique way — by digital security push lies 70 miles south here. So at the moment we are sharing of iPhones and iPads, based on these “The reason the system works very mathematics. channellingbrightkidsintosecurityata of Tel Aviv, in the desert town of Beer the office with five other portfolio com- receipts, weeks before the company wellisthatitdoesnotrequireanyprevi- The shortage of skilled staff means young age as part of their compulsory Sheva. panies,”hesays. publishedanythingaboutit. ous knowledge or understanding of the that Israel could be missing a golden militaryservice. For now the Cyber Spark business Once they have “graduated”, some “Email is such a rich set of data that data,” says Mr Gazit. “We let the math opportunity in a sector that can just as When they leave, many of them are park consists of a couple of generic may simply move across the street to you can build an alternate credit score dothejob,purely.” easily add jobs in the US or rival “off- keentoremaininafieldthatisbooming blocks in the middle of scrub land the new WeWork shared office space based on someone’s messages,”says Mr Neura, another Israeli company shoring”destinationssuchasUkraine. thanks to a wave of funding from ven- including the offices of EMC and Deut- thathasopenedinthetown. Meiri. foundedin2013,helpsuserspersonalise To bridge the manpower gap, Israel’s ture capitalists seeking to profit from scheTelekom,alongwithaloneoutletof Another organisation which seeks to devices such as fitness trackers and the need to protect computer systems actasafinishingschoolforturningmili- internet-connected appliances. Often worldwide. tary-trained cyber security engineers ‘We let the math do these machines are “smart” at their $4.4bn 4.2% Thishumantalentisluringlargemul- into entrepreneurs is Team 8, based in the job, purely,’ individualtasksbutoperateinisolation. The government has says Mark Gazit, Venture capital Proportion of tinationals such as IBM and PayPal to Tel Aviv and run by a former com- chief executive of Neura aggregates data from all a funding raised by Israeli GDP spent thecountry. prioritised cyber security as manderofthe8200. ThetaRay user’s devices. For instance, a lightbulb Israeli tech on R&D Both the public and the private sector Its founder Nadav Zafrir says poten- might “know” from a homeowner’s companies in 2015 arenowlookingtocapitaliseonthissuc- ‘an enabler of the economy’ tialfoundersareofteninspiredbywork- location that he or she was arriving cess.Theyarekeentocreateenterprises ing closely to other people who have left Windward, another big data analytics homeandturnitselfon,onthebasisofa government and some tech companies to defend against increasingly sophisti- Domino’s Pizza. But in the next few the army and entered the security start-up, gathers maritime data on the pre-assigned preference. A car could are increasing efforts to recruit from cated attacks which have ranged from years, the Israeli Defense Forces plan to industry. movement of ships and cargo across the “learn” what a driver’s musical prefer- Israel’sArab and ultra-Orthodox Jewish data breaches in the US to recent strikes build a vast site which will include its “They come out into the industry world,thenanalysesitforgovernments, ences were when driving alone. The minorities,whicharebothunder-repre- againstUkrainianenergysuppliers. militaryintelligenceandcyberunits. aged 23, 24, and the guys who are two, hedgefunds,andotherclients.“Ifweget company says it puts the customer in sented in the sector. Mr Netanyahu has TheIsraeligovernmentdecidedtopri- By placing the military’s cyber talent three,fouryearsolderhavestartedtheir it right, people will use this for years,” control of data, allowing them to chose reportedly given his backing to a plan to oritise cyber security four years ago as next door to businesses and the owncompanies,“hesays.Somealready says Ami Daniel, who along with his co- howmuchissharedwithcompanies. give more work visas to foreign engi- “an enabler of the economy”,says Evia- researchers at Ben Gurion university, havemadefortunes. founder Matan Peled, served as an “We will enable companies to sell neers and other tech workers — a politi- tar Matania, head of the National Cyber the government hopes to bring together “ThisisnotastoryintheFT,itisinthe Israeli navy officer. Windward’s early smarter products in a fair way,”says Ori callysensitivemoveforacountrywhose Bureau at the prime minister’s office. some of the country’s best minds in next room. This guy just exited for investors include Hong Kong tycoon Li Shaashua,co-founderofNeura. immigrationpolicyisfocusedstrictlyon The government has invested 100m security. $300m, his company was bought by Ka-shing’s Horizons Ventures, US Gen- Lenovo, the Chinese computing com- Jewishheritage. shekels, or about $26m, in early stage Jerusalem Venture Partners, Israel’s Microsoft, and you know what, he’sstu- eral David Petraeus, and Dan Senor, a pany, is an early investor and Mr “If I could find double the number of start-ups and offers loans which do not oldest and largest venture capital pid, I can do better than him — I know co-authorofthebookStart-UpNation. Shaashua says the two companies are engineers in Israel, they would be easily havetoberepaidifthecompanyfails. firm, has already established its own theguy,Isatinthesameroomashim.” Data mining tools are used in other “lookingatwaysofworkingtogether”. employed,”MrHassonsays. Tuesday 22 March 2016 ★ FINANCIALTIMES 3 Israel Technology & Innovation Medical pioneers push into global markets With more pictures taken on a smartphone to help Despite the number of companies on Healthcare diagnosepatients. thescene,however,Israelhasyettopro- than 700 medical start- “That is conducive for science duce a large global leader in medical because you challenge the status quo in devices equivalent to Teva, the Israeli ups, Israel has yet to science, or how business is done, we pharmaceuticalsgroup. produce a global leader alwayschallengeit.” “How do you take a great idea and Leading Israeli companies in the field make it a great company?” says Mr in medical devices, include Given Imaging, the makers of Segal. writes Murad Ahmed PillCam, a small disposable capsule that “We have one Teva in pharma, but is an alternative to endoscopy as it you don’t have one in medical devices. n a quiet office on an industrial allows doctors to visualise the small We have the potential of being park in Jerusalem, an Israeli intestine,oesophagusandcolon. there . . . but Brainsway will have to woman in a white coat slowly binds Another much discussed group is Ita- grow to be a global company, not an a black coil to the surface of a metal mar Medical, which has developed fin- Israeli company . . . [we must learn] dome. She is creating the insides of gertipmonitorstohelptreatsleepdisor- that the way you sell a depression treat- Ia helmet that may help treat millions of ders and cardiac problems. Yet another ment in Japan is different from how you peoplewithclinicaldepression. is UpNRide, a standing wheelchair for sellintheUS.” The machine is made by Brainsway, a quadriplegics (pictured below), a Part of the problem is down to heavy Tel Aviv-listed medical devices com- project that is an offshoot of ReWalk, a global regulation of medical treatments pany,which has a market capitalisation similardeviceforparaplegics. andthelengthoftimeittakestodevelop of around $260m. It has pioneered a medicaltechnology. treatment known as “deep transcranial Long lead-times do not work well for magneticstimulation”,usingahelmetto Israel’s fast moving digital groups, aim magnetic fields at a patient’s brain which tend to keep costs down and look tissues. This can target the reward sys- to generate revenues quickly,often sell- tem in the brain, helping to counter and ing out to a corporate giant in order to relievesymptomsofdepression. makeaswiftandprofitable“exit”. Unlike other treatments, such as One of those hoping to become a last- drugs or electroconvulsive therapy, the ing success is Avner Halperin, chief patient suffers no major side effects or executiveofEarlySense,makersofsen- significant pain. The device feels like sorsthatcanbeplacedundera wearing a bicycle helmet with a wood- mattress to allow doctors and peckerknockingontheframe. nurses to monitor a patient’s vital “It’s the first time in neuroscience we signsremotely. have a technology that non-invasively The company claims the information influence the deep structures of the from its sensors has so far helped physi- brain,”saysRonenSegal,vice-president cians save the lives of 300 people and of R&D at Brainsway. “Patients come in has reduced hospitalisation days by for daily sessions of 20 minutes a day, 20,000. fivetimesaweekoveramonth.” But Mr Halperin says the 11-year-old Brainsway is not an isolated medical company is likely to require an addi- pioneer. Israel is home to 700 medical tional funding round — on top of about device companies, according to media $75m already raised from investors — reports, and has the most medical beforeitcanconsidergoingpublic. device patents per capita in the world. “We know it’s a marathon,” says Mr According to Espicom Business Halperin.“Inthemedicalworld,ittakes Intelligence,theIsraelimedical something in the order of 10 to 20 years device market is expected to tomakerealchange.” reach $1.6bn in 2018, up MrSegalfromBrainswaysays:“Israel $0.5bnfrom2013. has been a hub of innovation, but in “What is unique about the medical area we have been lag- Israel is that it is full of dis- ging behind, mainly, I think, satisfied people,” says becauseoftheregulation. Jonathan Adiri, a serial “Israeliswanttoseeimmedi- entrepreneur who was ate results, but as the industry Israel’s chief technology becomes mature, we are will- officer under former presi- ing to be more patient and to dent Shimon Peres. He follow the steps needed to get then founded Healthy.io, a medicaltechnologydevicestothe system that can analyse market.” Investors’ enthusiasm for start-ups bucks global trend

Venture capital Israeli high-tech capital raising Israeli start-ups Crowdfunding and Chinese $bn Number backers are bringing in new Foreign & 4 Successful 1000 other investors Running sources of funding, writes Israeli VCs Failed 800 Murad Ahmed 3

Investors around the world are growing 600 wary of backing the tech sector, but 2 there is little sign of any slow down in 400 Israel. According to Israel Venture Capital 1 Research, which tracks the country’s 200 high-tech scene, Israeli tech start-ups raised a record $1.2bn in the fourth quarterof2015—atenpercentincrease 0 0 year-on-year. In all, Israeli tech start- 2006 08 10 12 15 2000 05 10 14 upsraised$4.43bnin2015. Source: IVC-KPMG Capital Raising Survey 2015; IVC-Online.com In the rest of the world, meanwhile, venture capital investments fell 30 per Others, such as Silicon Valley-based of OurCrowd. “[Investing in tech com- centinthefourthquarterof2015,falling Bessemer Venture Partners and Massa- panies]hasreallybeenanold-boysclub. to $27.3bn globally, according to CB chusetts-based Battery Ventures, have Ifyou’reinSiliconValleyandyou’recon- Insights,aresearchgroup. set up Israeli offices, where local part- nected to Peter Thiel [co-founder of Arnon Dinur, a partner at 83 North, ners make investments on behalf of the PayPal] or Marc Benioff [founder and one of Israel’s most prominent venture globalfund. chief executive of Salesforce.com], then groups, says that the global slowdown “Potentially the amount of money maybeyougetaccesstoadeal. will reach Israel eventually, but it may that can be available in the country is “Even in most cases, you don’t . . . it’s prove to be less painful as the country’s very large,” says Mr Dinur. “There are really this completely rarefied, limited tech scene has not had the same level of multimillion dollar [global] funds who thing.” hypeasCalifornia’sBayArea. can write a cheque, but it’s not a com- New investment is also coming from “[Investing] has been less extreme, mitted capital, it doesn’t have to be China. The country’s largest tech com- bothontheupanddownside,”hesays. spentinIsrael. panies — including Baidu, Tencent, and The venture capital industry in Israel “I think that’s very healthy for the Alibaba — have all invested in Israeli began to take off in the early 1990s, country because it forces Israeli entre- startupsinrecentyears. thanks to a government scheme known preneurs to compete on the same play- One of China’s top investors, Li Ka- as Yozma, or “initiative” in Hebrew, ingfieldasSiliconValleyentrepreneurs. shing,hasbackedaround30Israelistart which offered, among other things, tax You see a much higher level of Israeli ups. He was one of the early investors in breaks for investors. Today, an esti- entrepreneursasaresult.” Waze, the transport navigation app mated 50 venture capital groups are New avenues for investment are acquiredbyGooglefor$1.15bnin2013. activeinthecountry. becomingavailable.Oneisfrom“equity Yet Israeli investors maintain that the Israel’s VC firms come in two guises. crowdfunding” groups, which allow strength of the country’s tech scene is There are local venture funds, of which start-ups to raise investment from a due to the support of local venture capi- the most prominent include Jerusalem large number of people, each contribut- talgroups. Venture Partners, Carmel Ventures, ingrelativelysmallsumsofmoney. “At least at the early stage, it’s still Pitango, 83 North, Genesis, Magma and OurCrowd, the world’s largest plat- important to be on the ground and be Aleph. form for equity crowdfunding, is based connected,”saidMrDinur. Large international groups, particu- inIsrael.Ithasraised$200mfor91com- “At the end of the day, venture is a larly US companies, invest in the coun- panies — most of them Israeli — from local business. Having a local office and try. Some, such as Sequoia Capital, the about11,000privateinvestors. heritage counts a lot. It’snot just getting California-based group known for its “We’re . . . openingupventurecapital a cheque, it’s getting the support and investments in Apple and Google, oper- to a much broader audience of partici- attention. Smart entrepreneurs know atebysettingupaspecialIsraelifund. pants,”saysJonMedved,chiefexecutive that.” 4 ★ FINANCIALTIMES Tuesday 22 March 2016 Israel Technology & Innovation Hotter world craves food tech revolution

Companies combining data analytics with farming are leading the ‘fourth agricultural revolution’, writes John Reed

aking the desert companies are harnessing high-tech “mostly a big data company”,says chief Data farmers: food for more people, you need to make an incubator called The Kitchen in the bloom” is one of the tools, such as big data analytics, to fine- executive and co-founder Ofir Schlam. Ofir Schlam of healthier food,” says Eran Baniel, chief southern city of Ashdod. Launched in most enduring — if cli- tunetheiroffering. It applies advanced analytics to crop Taranis (left) and executive of DouxMatok, a company 2015,itishometothreestart-upcompa- chéd — images of Zion- “Agriculturewentthroughthreerevo- spraying. Isaac Bentwich developing a process to make sugar nies: Yofix, which is developing a vegan ‘M ism, and something at lutionsthatshapedit:theindustrialrev- The company has developed a of Cropx (right) sweeter with fewer calories and without yogurt; Bactusense, which offers manu- whichIsraelicompanieshave excelled. olution, the chemical revolution, and weather forecasting model — looking at Eyal Warshavsky theaftertasteofartificialsweeteners. facturers a rapid system for detecting Irrigation technology, desalination, the biological revolution,” says Isaac factors such as precipitation, humidity The company is running its first labo- pathogens in food plants, and Deep and crop management are all industries Bentwich, chief executive at Cropx, a and temperature — to determine where ratory pilot, testing the product in Learning Robotics, which trains robots. the Jewish state built because of the exi- company with headquarters in San farmers need to spray to avoid fungal yogurts,breakfastcerealsandbiscuits. Strauss plans to pilot this on one of its gencies of their country’s limited terri- Francisco but with development facili- diseasesandbacteria. Other Israeli companies are working chocolate production lines. “This is tory,scarcewater,andharshclimate. ties in Israel. “Now it is going through a “Our goal is to build predictive solu- A push in the growing field of “nutraceuticals”, about building an ecosystem,” says All have developed into lucrative fourth:information.” tions,” says Mr Schlam. The company against or foods with added health benefits. Jonathan Berger, the incubator’s chief export industries for which there is Cropx, founded in 2013, helps farm- has clients in Israel, southern Russia, Alga Technologies, for example, culti- executive. growing demand as temperatures rise, ersoptimisetheiruseofwater.Thecom- andBrazil. sugar and vates microscopic algae used in dietary Separately, in the northern andtheworldbecomeshotterandmore pany’s system maps a farm’s soil types Israeli “food-tech” companies, mean- fat may help supplements in glass pipes in the sunny region, researchers, investors and local crowded. India is the largest market and topography, advising farmers via a while, are hoping to capitalise on the southernAravadesert. officials are working to create a “food after the US of Netafim, Israel’s biggest mobile phone app how much water to push by governments to legislate ‘food-tech’ Two centres of food-tech excellence hub” similar to the cyber-security hub dripirrigationcompany,forexample. applytodifferentpartsofthefield. againstsugarandfat. start-ups are emerging. The Strauss Group, now being built at Beer Sheva in the Israeli agricultural technology Taranis, another agri-tech start-up, is “Not only do you need to make more Israel’slargest food producer,has set up south. Tech companies slow to hire Ultra-Orthodox and Arabs

serveintheIsraelimilitary,whoseranks ($500,000) grant from Israel’s Office of Minorities — most notably the elite intelligence the Chief Scientist, he is now looking for corps like Unit 8200 — are a primary newinvestors. Arabs make up a fifth of the source of networking and recruitment “It is to Israel’s benefit that Arabs go country’s population but for tech jobs. Many Israeli companies into high tech,” he says. “But there is a fewer than 3 per cent have, for security reasons or simple dis- problem in funding Arab Israeli entre- crimination, been historically reluctant preneurs:almostnoonegetsfunded.” of employees at technology tohireArabs. Another start-up with both Arab and companies, writes John Reed “Thehigh-techsectorusuallyrecruits Jewish co-founders is Haifa-based Min- in the method of ‘a friend brings a doLife, which is developing cyber friend’,” says Michal Tzuk, a deputy security software for internet-con- Israeli technology companies complain director-general in Israel’s economy nectedappliances. of a shortage of programmers and engi- ministry. WhenaskedwhysofewArabsworkin neers. But Nizar Haddad, 25, said he Israel’sgovernment wants to lift Arab high-tech companies, Rami Khawaly, struggled to get a job after graduating and ultra-Orthodox groups out of pov- MindoLife’s co-founder, says: “I think with a computer science degree last erty or blue-collar work. Both groups the problem is the attitude from home. year.“Ihadproblemsfindingsomething have higher than average birth rates, When I said to my parents, ‘I’m going to relevantforme,”hesays. and could over time be a demographic quit my job and open a start-up’, they Mr Haddad belongs to Israel’s Arab drag on Israel’s economic didn’tlikeitsomuch.” minority, who make up a fifth of the competitiveness. When Mr Khawaly, whose father was country’s population, but fewer than Tech companies, too, encouraged by a blacksmith, was studying computing 3 per cent of employees in the high-tech government tax breaks and training in Tel Aviv, he was the only Arab in his sector. Like many , he lives funds, are taking steps to recruit from class. in the northern Galilee region, far from both groups because of a shortage of “If you talk to any angel or VC inves- the technology companies that cluster candidates. tor, if you say you are outside the “Tri- inIsrael’scentreandalongthecoast. angle” — a nickname for the area of cen- Today, he is working for Galil Soft- tral Israel where most tech firms are ware, a company in Nazareth that han- Nazareth Business based—youareoutsidetheecosystem,” dles some of the research and develop- Incubator Center’s says Fadi Swidan, co-founder of the Fadi Swidan says: ment work that big Israeli tech firms ‘The aim is to find a NazarethBusinessIncubatorCenter. had been outsourcing to places like way to engage the The NBIC, which receives govern- India. Arab community’ ment subsidies, was launched 2012 and Mr Haddad got the job after taking a has offered incubator and acceleration course in Java, the programming lan- Some green shoots are emerging in programmes for a number of Arab-led guage, organised by Tsofen (Hebrew for Nazareth,theregionalcapitalofGalilee. businesses, including Optima Design “code”), a government-sponsored Jamil Mazzawi, who graduated from Automation. organisationthataimstointegratemore Haifa’sTechnion—Israel’stoptechnical On March 3 NBIC announced a co-op- Arabsintohightech. university — in 1993, initially struggled eration programme with the alumni Israel’s government is working to to find work because, he says, “Arabs association of Unit 8200 aimed at build- bring more Arabs and ultra-Orthodox andhightechdidnotmixatthetime”. ing a bridge between the Galilee’s tech Jews — another marginalised and After a spell in the US, he returned to sceneandthemuchbiggerecosystemin largely poor group — into high tech. The Nazareth and in 2014 founded Optima TelAviv. two minorities together account for Design Automation, which makes soft- “Theaimistofindawaytoengagethe about a third of Israel’s population, but ware used to test and certify the micro- Arab community with the Start-Up are mostly missing out on Israel’s tech chipsusedincars. Nation,” Mr Swidan says. “If we have boom. After initially self-funding the com- one big success in Nazareth, our busi- One reason is that few in either group pany and getting a 2m shekel nessesherewillinvestinhightech.”

Contributors

John Reed Maija Palmer For advertising details, contact: Jerusalem bureau chief Commissioning editor Mark Carwardine, +44 (0)20 7873 4880, [email protected], or Murad Ahmed Steven Bird David Applefield, +33 (6) 6069 4857, Technology correspondent Designer [email protected]

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