Silicon Wadi

In the beginning, there was Silicon Valley, the original tech hub that changed the world. Now, tech innovation and investment is flourishing around the world. Here, Mathias Becker takes an up-close look at the thriving hi-tech scene of 'Silicon Wadi' in Israel, while on the following pages Rhymer Rigby outlines four emerging hubs that should be on your radar.

 

 

was an officer on board the INS Hanit when the ship was hit by a missile.” Ami Daniel stands by a full-length window on his 35th floor office, and allows his gaze to wander across the rooftops of Tel Aviv toward the Mediterranean Sea. It happened in 2006, during the Second Lebanon War when he was 23 years old. Daniel lost four comrades in the attack.

A few years later, Daniel quit the forces and studied information technology. “Despite the incident, seafaring remained my passion,” he says. Together with Matan Peled, a comrade from the navy, Daniel developed the idea for software that monitors maritime traffic on the oceans. And in 2010 the two men formed their company Windward.

Today, seven years and US$23 million of investment later, a large screen in Daniel’s office displays a world map. Countless brightly lit dots cover its dark oceans. “We can identify every ship and observe its route with precision,” says Daniel. Previously, it had been unclear in most cases what ships were doing while at sea. Human trafficking, smuggling or illegal fishing remained largely undiscovered. “Those days are over thanks to our software.”

The company has recently moved its 75 employees into new premises in one of the glass office buildings that tower over the city. Walls painted green, antique ship lights for decoration, and a seemingly endless supply of fruit and nuts create a pleasant working environment. Sources at Windward say the company has no difficulty attracting top talent, perhaps reflecting a new ambivalence among some of the country's emerging workforce about devoting a working life to a global tech behemoth. “Our systems work,” says Daniel. “We no longer need any financing rounds. Now we begin to earn money.”

Millionaires can be made here, fast. But many company founders aim even higher. Their dream is to create a unicorn – start-ups valued at more than US$1 billion. Gett, the taxi app, and Mobileye, the manufacturer of driver assistance systems, are two such Israeli unicorns.

The country currently has around 6,000 start-ups, almost half of which are based in the Tel Aviv region. That equates to one start-up for every 290 residents – the highest density in the world. Data service provider, Compass, ranked Tel Aviv as the world’s fifth most agile start-up hub. Israel has even earned the nickname Silicon Wadi, the Hebrew word for a valley.

Rothschild Boulevard, in the center of Tel Aviv, is the epicenter of the Israeli start-up boom. Here, young innovators would rather fail time and time again with a start-up than never try. This attitude is known as ‘chutzpah’ or ‘courage’. It’s no coincidence that a man like 37-year-old Yariv Bash can be found here.

After spending a decade working as an electrical engineer in the armed forces, Bash founded the company Flytrex in 2013 together with his friend Amit Regev, 35. Initially they sold black boxes for civil drones – small devices used to trace the machines. But now that’s just a sideline. Their new pro-ject involves systems for drone delivery services. “That is the future,” says Bash. Investors have put up US$3 million and Flytrex is now negotiating with prospects across the world.

While aviation regulations are currently delaying take-off, Bash remains in no doubt. “It won’t be long now,” he says. Besides, those who found a start-up must think ahead. “150 years ago,” Bash adds, “nobody believed that we would one day travel in planes.”

Wendy Singer believes that this attitude is at the heart of the Israeli success story. “The people here are driven by the search for the problems and solutions of the future,” she says. Singer, 53, is the managing director of the Start-Up Nation Central network, a kind of midwife for start-ups that brings inventors and investors together – free of charge. The organization is financed by patrons, predominantly from the USA and Europe. Their aim is to help ideas get to market. That innovation flourishes in Israel is no coincidence, says Singer. One reason is compulsory military service. Men must serve in the military for three years, women for two. “During this time they learn all about team spirit and determination,” she says. Many eventually leave with extensive IT knowledge, providing the spark for start-ups and the ideal foundation for a degree course.

“Immigrants are also driving the boom,” says Singer, who herself emigrated from the USA to Israel 22 years ago. She used to advise politicians in Washington, but – like many others – wanted a fresh career start. According to Singer, each immigrant is a little like a start-up entrepreneur, rebuilding their lives from nothing.

Those who take a risk, however, must also be prepared to fail. “Around 90 percent of start-ups in Israel fold sooner or later,” says Singer. “Failure is part of the game.” A bit like the process of evolution. Despite this, investors from across the world pumped US$4.5 billion into the Israeli start-up scene last year alone.

“The state laid the foundations for today’s development back in the 1990s,” says Kobi Rozengarten. The tall 60-year-old is a partner at JVP, one of the biggest venture capital firms in Israel. Under the state’s Yozma initiative in

1993, which incentivized international VC funds to partner up with a local Israeli, he managed to double the private funds in start-ups.

To remain at the forefront, JVP is attracting start-ups to Jerusalem – an emerging second hub. On the edge of the historical old town is the Media Quarter, a kind of boot camp for start-ups. “Close contact with investors and other developers is hugely important,” says Ezra Daya, whose company, Aspectiva, is based here. Its software understands comments posted about a product on social media and generates an overview of opinions out of the clamor – saving consumers from having to click through countless forums before

buying.

Daya knows that Aspectiva works. What he doesn’t know is whether he’ll conquer the market fast enough. If he doesn’t, the risk is that the next company will come along with similar software and make all the big money. That’s why investors have pumped a total of around US$12 million into development and marketing. The aim is to emulate the market entry made by Argus. Launched by Yaron Galula, 35, and Oron Lavi, 33, Argus protects connected cars from hacker attacks. Since it was founded in 2013, it has attracted US$30 million and experienced a meteoric rise.

Filled with start-ups at the most exciting stages of their lifecycle, Silicon Wadi is proving fertile ground for venture capital from across the world. Will it create the next unicorn? Very possibly. Awash with capital and creativity, this valley has become an oasis of opportunity drawing investors and innovators alike.