A survey for "Globes" by TerraLab Ventures sought to find the common characteristics of Israeli start-ups through a representative sample of more than 200 companies in a range of fields, and ranging from the preseed stage to first financing round.
The study found that Israeli entrepreneurs are older than is usually thought: 78% of the respondents said that they were 26-45, and fewer than 5% were aged 18-25. 10% were older than 55.
There was no surprise about gender: 84% of the respondents were men and just 16% were women.
"There is no doubt that the entrepreneurship industry has matured rapidly in the past decade, especially since the high-tech bubble burst in 2000," says Barak Goldstein, a venture partner in Terra Venture Partners, TerraLab's joint owner with Corporate Storyteller Donna Abraham. "We estimate that, in 2013 alone, almost 1,000 start-ups were founded in various fields. For every start-up that closes, two new ones are opened."
Despite the government's efforts to encourage entrepreneurship outside central Israel through incubators at Yokne'am, Ariel, and elsewhere, 72% of entrepreneurs still live in the center. 17% live in the north, and just 4% of the respondents live in the south of the country. The responses fit in with the responses on residence: 87% of the respondents said that they live in cities, 10% live on a moshav, and just 2% live in a kibbutz.
63% of the respondents are married, 33% are single, and 4% are divorced. 60% of the respondents have children and 40% do not. Among the parents, 24% have two children, and 8% have three children or more.
The road to a start-up first passes through university. 46% of the respondents have a BA or BSc, 35% have an MA or equivalent degrees, and only 5% have only a high school education, the same proportion as have PhDs. 36% of the respondents have technological degrees, such as computer science, 25% have degrees in the sciences, 13% have degrees in the social sciences, and 10% have degrees in the arts and humanities.
86% of the respondents served in the IDF, 36% of them in technology units (Mamram computer and IT systems unit, Talpiot program, or Intelligence). 36% served in combat units, and 10% served in administrative units. "Military service has an important role in shaping the personality of Israeli entrepreneurs. It teaches responsibility, creativity, and management skills - experience that American entrepreneurs, for example, gain only at a much later age. The American counterpart has to work in several positions within an organization to acquire the skills that Israeli entrepreneurs acquire in the army," says Goldstein. It also seems that being an IDF officer does not increase the chances of leading a technology start-up: 37% of entrepreneurs were discharged from the IDF as officers and 63% were NCOs.
A good idea needs more than one person. Most entrepreneurs are team players: 78% of the respondents said that two or more people co-founded their ventures, and just 22% said that they founded their venture alone and that the concept was exclusive to them.
48% of the respondents said that their current venture was not their first, 33% said that they were involved in another venture, 25% said that they had two start-ups. Unexpectedly, 40% of the respondents described themselves as serial entrepreneurs who were involved in more than two start-ups before their current venture.
5% of the respondents said that they worked from home, 32% said that they worked in an office, and 14% staid that they worked at a technology incubator or accelerator.
One of the entrepreneurs' most difficult problems was to earn a living and the need to live off their savings while trying to develop their venture, but it seems that they realize that they have to bootstrap to succeed. 66% of the respondents said that they were not salaried employees while working simultaneously in their venture, and just 25% said that they did both at the same time. The following statistic indicates the difficulty in holding two jobs: 44% of the entrepreneurs work at least 50 hours a week in their ventures, and 85% said that they work on the weekends.
Waiting for an exit
How realistic are entrepreneurs about making an exit and getting rich from their ventures? 31% of the respondents believe that they will achieve an exit within three years, 33% said within 3-5 years, and 8% believe that it will take more than five years. The remainder said that they were not thinking about an exit. "The statistics tell us that a start-up needs an average of over five years to reach an exit. The really interesting figure shows that 28% of the respondents said that they were not thinking about an exit, but wanted to establish and manage the company for many years," says Goldstein.
Asked about their venture's exit potential, 12% of the respondents said that they 'would be the next Waze', 29% believe that they could make more than $100 million, and 42% said $10-100 million. "It can be seen that the exit amount has been gradually rising over the years, but this should not mislead you," says Goldstein. "These numbers have been seen in the start-up industry and have fired the imagination of both entrepreneurs and funds. The Israeli entrepreneur is an irredeemable optimist, but the reality is that the chances of a $100 million exit are close to zero."
He adds, "Happily, the Israeli entrepreneur tends to ignore dry statistics and loves risks and adventure. This is what makes Israel one of the best start-up creators in the world. The chance that an entrepreneur's first start-up will achieve a $100 million exit barely exists. Israelis who achieve this are usually experienced entrepreneurs; it usually isn't with their first venture. They have widespread ties in Silicon Valley, and they sell to industry or big companies. The statistics don’t favor them either: their chances are no more than 2%. Israelis should not fall for Cinderella stories like Viber or Waze. They are very rare."
Engaged in mobile
Most Israeli entrepreneurs work in mobile or Internet ventures, with 50% of the respondents saying that they work in either or both of these fields. Other top sectors are media, cyber, and gaming. Just 16% work in cleantech or medical ventures. "We see congruence between the kind of venture and the entrepreneur's age. The younger the entrepreneur, the less likely he'll work in medicine. Most young entrepreneurs are blinded by fast exits and go for developing apps with low impacts," says Goldstein.
"In the past two years, we've seen a major increase in cyber ventures, as part of the growing mini-bubble in this sector in Israel. There is no question that Israel has an advantage in this sector, mainly because of military service. The next two sectors which we see picking up in the next two years are Google Nest and networked cars. The vehicle industry is about to undergo a revolution to network our cars, which will of course be followed by automated driving."
66% of the respondents have not yet raised capital for their ventures, and 34% have done so. Of the respondents who have raised capital, 34% have raised $50,000-400,000, 25% have raised $400,000-1 million, and 34% have raised more than $1 million.
Published by Globes [online], Israel business news - www.globes-online.com - on April 10, 2014
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