The "Innovation during War" Conference, organized last week by Ibex Investors and Pearl Cohen law firm Hi-Tech Group, discussed the challenges for entrepreneurs and investors during times of crisis and war.
Among the speakers at the conference were Unity Software president Tomer Bar-Zeev, who served as ironSource CEO until its merger with Unity, and is expected to leave his position at the company in the summer; Eynat Guez, Papaya Global CEO, an Israeli unicorn, which is developing products to manage salaries for employees of global companies; Shimon Elkabetz, CEO of unicorn Tomorrow.io, which promises more accurate weather forecasting; Nicole Priel, Ibex Investors partner; and Adv. Guy Lachmann, co-chair of the Hi-Tech Group at Pearl Cohen.
Elkabetz said: "Despite the security situation, I believe that we have to convey abroad that it is business as usual. The empathy that we are receiving from investors and colleagues during this period is important but it cannot hold up over time and towards the outside world we have to convey strength. However, domestically I am concerned about our genuine ability to conduct business as usual here over time."
Guez referred to hiring employees in the tech industry during the war period: "Quite surprisingly, the number of employees that international companies are hiring in Israel during the first quarter is the highest it has been in the last three years. In my opinion, that fact that Israel is in the headlines actually increases interest in the talents here and at the same time we have recently seen a wave of acquisitions of companies in the cybersecurity industry. Anyone who has been in the high-tech world long enough does not see the security situation as an event that has sealed Israel's fate in the tech industry."
US investment management company Ibex Investors partner Gal Gitter said, "During periods of crisis like this heavy disaster that has landed on us, Israeli entrepreneurs see two unique things. The first is an incomparable will to survive. During a time of crisis, I would bet on Israeli entrepreneurs much more than on other entrepreneurs. The second thing is the creativity. During these periods, there is nobody else like Israeli entrepreneurs to invent new paradigms that change the reality. This has helped us bring a lot of money into Israel. Gitter added that the experience of previous crises teaches us that after these crises, we see an increase in entrepreneurship and new developments in the army and in startup companies."
Ibex Investors partner Nicole Priel presented things from the investors’ perspective. "There are early-stage deals but I don’t see too much foreign money that is entering Israel. On the other hand, Israeli funds have quite a bit of money and they are pursuing those deals. It is important to pint out that we see a change for the better in the quality of entrepreneurs compared with years gone by. I believe that there will be less deals but the size of financing rounds will be the same as those we have seen in recent years." Elkabetz added, "The amount of investment worldwide has fallen dramatically and investors are looking for quality deals. I can honestly say that if I was to start founding Tomorrow.io at this time, the company would shut down. We made so many mistakes and what saved us was the fact that the interest rate stood at 0% and the pension funds were throwing money at the venture capital funds. Today is a different period regardless of the war. I don’t think that Israel’s story has ever helped anybody to raise money and I at least have not encountered this. Build good businesses and the money will come."
The moderator of the session, Adv. Guy Lachmann, co-chair of the Hi-Tech Group at Pearl Cohen said, "We see a large number of Israeli startups that choose to incorporate their companies in the US. In my estimation, more than 50% of new ventures that are currently being set up are choosing Delaware. But the entrepreneurs are not always aware of the complexities entailed in this in terms of the taxation and intellectual property issues. There is a mistaken impression among entrepreneurs that if they register as American companies then they have an insurance certificate against the political risks in Israel. In my eyes, these entrepreneurs are deluding themselves because if a foreign player has an ideological problem with Israel or their fund’s documents do not allow them to invest in Israel, the fact that the startup is registered in the US but all its activity is in Israel will not help the entrepreneurs."
Later in the Conference Bar-Zeev and Elkabetz spoke about the gap between Israel and the world on everything regarding the global AI revolution. Bar-Zeev: "AI is not a trend. It is probably one of the most important revolutions on a scale that really changes industries and economies. We are lagging behind to some degree because of the judicial reform, the war and the difficulties that Israel is going through, and consequently the approach to AI needs to be holistic and to include in it government investments and investments by academia. We need a big infrastructural overview and investment, so that we don't miss this trend, and we can easily miss it and become an AI industry that establishes smaller companies that missed this wave. I very much hope that this does not happen."
On the other hand, Elkabetz explained, "How many companies are there like OpenAI in the world? Very few. All the rest of the companies that can be found on the AI wave throughout the world are based on people that are do a plug in to ChatGPT. We have to admit this. It is absolutely fine that in Israel an AI power has still not emerged but there are companies here that are doing interesting things. It’s important to be part of the world trend but it is not always an issue of the ecosystem but of entrepreneurs who have to choose the relevant businesses for this period."
Published by Globes, Israel business news - en.globes.co.il - on March 19, 2024.
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