The incubator effect

Three incubators will assist the "Globes"-Bank Hapoalim smartup2 competition.

Those who follow Israel's start-up industry cannot ignore the rise of the incubator, technology accelerator, and shared workspaces, which in the past few years have sprouted like mushrooms after the rain. They all have a common objective: to provide a warm and supportive atmosphere for entrepreneurs dreaming of founding a real company, one that will generate revenue, create a critical mass of users, and recruit investors.

Last week, "Globes" fired the opening shot of the smartup2 competition, a collaboration with Bank Hapoalim (TASE: POLI). This competition will select three new start-ups, which will receive assistance from the newspaper's correspondents, incubator and accelerator experts, and bank advisers over the next several weeks.

"Globes" is now shedding light on the three incubators that will assist the competition, help choose the winning companies from the scores of candidates, and closely advise them. What drives these incubators and makes them special?


A fund with an unusual name is one of the three arms run by Moldawsky Group's Plus Ventures. In addition to two funds that invest in very early-stage start-ups, the company and the Chesin family's 2B Angeles operates Explore.Dream.Discover in Yokne'am.

"We're seeking extraordinary entrepreneurs, whom we first of all believe in, and who can bring a product or service to market, even if they have to make corrections or changes in direction," says Explore.Dream.Discover CEO Duby Lachovitz. "It's important that the product or service will be interesting enough with a big enough market. We won't invest in one-off things like a single game. We'll invest in platforms, things that are more generic, which have a range of uses."

Since early 2011, 22 companies have passed through the incubator, including user opinion management platform developer Yotpo, which has raised $13 million to date; Project Ray, which has developed a device to help the visually impaired use smartphones; CallVU, which has developed a visual menu for call centers.

"Together with 2B Angels, we can invest in incubator companies beyond what the Chief Scientist requires," says Lachovitz. He adds that Plus Ventures has small private investor activity alongside seed-plus investments, providing a foundation for follow-on investments in incubator companies, and in general. "The fact that we function as investors besides operating the incubator gives us diversity and a perspective of companies that we want to foster and promote," he adds.

8200 EISP

The name of the 8200 EISP (Entrepreneurship and Innovation Support Program) is a paean to Military Intelligence Unit 8200. The unit became a production line for leading Israeli entrepreneurs a long time ago. The program is the brainchild of Unit 8200 alumni to impart their cumulative experience and knowledge to young entrepreneurs. The unit's veterans include Check Point Software Technologies Ltd. (Nasdaq: CHKP) founder, chairman and CEO Gil Shwed, Imperva Inc. (NYSE: IMPV) and Trusteer Inc. founder Shlomo Kramer, and Ltd. (Nasdaq: WIX) founder and CEO Avishai Avrahami.

The program is run by Inbal Arieli and Yinon Glasner, and notwithstanding its name, it is not only intended for Unit 8200 veterans. The program has had three classes with 60 entrepreneurs to date, and the fourth class is due to start soon. In contrast to other programs and incubators, it has no mentors who provide start-ups with regular assistance, but has leading entrepreneurs who give lectures on various topics.

8200 EISP graduate companies include interactive video clip advertising developer Carambola Media Ltd., which has raised $5 million and has a cooperation agreement with AOL Inc. (NYSE: AOL); Lacoon Mobile Security Ltd., which has raised $10 million; and tourism planner app Desti Ltd., which has raised $2 million, including from Hong Kong billionaire Li ka-Shing.

Glasner says that what makes 8200 EISP unique is "the fact that we are an NPO. We don’t invest in ventures, nor do we take shares in a company. Every participant pays NIS 500 and promises to support the community through ORT's lectures on entrepreneurship program. We focus on ventures at the very early stage, sometimes even during the concept stage before there is a first product.

Nielsen Innovate In the Caesarea industrial zone, US media research giant Nielsen Holdings NV (NYSE: NLSN) and its Israeli partners are trying to keep their fingers on the pulse of Israeli innovation and entrepreneurship. The success of the Start-Up Nation brought Nielsen to Israel to learn from up close the next hot thing, with a focus on its core businesses of consumers, measuring, and advertising.

Nielsen Innovate, part of the Office of the Chief Scientist's Incubator Program, was founded a year ago by Nielsen and Partam Hi-Tech, the private investment fund real estate magnate Igal Ahouvi. New investors joined in March, including Estee Lauder Companies Inc. owner Ron Lauder. The incubator currently has eight companies, which stay for two years. "We plan to add 5-6 companies a year, and we believe that we'll have 10-12 companies by the end of this year," says Nielsen Innovate CEO Esther Barak-Landes.

Nielsen Innovate's edge is its connection with Nielsen. "There was interest by foreign companies in the recently closed tender," says Barak-Landes.

"I warmly recommend this. It brings in foreign money to the country, and as part of the commitment to the Chief Scientist, part of the company must stay in Israel. On the other side, the foreign companies get an opportunity to establish innovation centers for themselves, to see new technologies, and invest in ventures. For them, the state's support gives them a lot of confidence."

Barak-Landes explains that the Nielsen connection has done wonders for new start-ups. "One of the incubator companies, Revuze Ltd., which analyzes online reviewers' criticisms to recommend products on e-commerce sites, and is about to sign four revenue-generating contracts with big companies within six months after graduating from our incubator," she says. "On their own, they could have done this so fast. Nielsen makes it possible for start-ups to link up with its customers by opening doors. When you come with a partner like Nielsen to a company like Procter & Gamble (NYSE: PG) and say, 'I've adopted this company's technology,' you're treated differently from a Caesarea company with three employees."

On the basis of the Chief Scientist's model, Nielsen Innovate invests $2 million in each company for a 30-40% stake in it.

Who will win smartup2?

"Globes", in collaboration with Bank Hapoalim is launching the second annual SmartUp competition for Israeli start-ups. As part of the project, "Globes" correspondents will track three start-ups, which receive assistance from incubator experts and Bank Hapoalim advisers, based on the understanding that many companies with good groundbreaking ideas get stuck at the start because of difficulties that prevent them from achieving their potential.

The project is designed for Israeli companies that have raised at least NIS 250,000 in seed funding. Each company selected for the program will receive over three months advice from the high tech and business world on a range of topics relevant for early-stage start-ups, such as marketing, financing, human resources, and heading overseas. All they have to do is to register at smartup2 page (in Hebrew), and tell us why your start-up should participate. Participating companies will receive a start-up package from Bank Hapoalim, including a high-tech account at preferred terms and a NIS 20,000 grant.

The three winners will receive assistance from leading Israeli incubators and accelerators Explore.Dream.Discover, 8200 EISP, and Nielsen Innovate.

Published by Globes [online], Israel business news - - on April 29, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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