Israeli companies eye SA’s hi-tech financial prospects
The Israeli government is increasing investment in hi-tech industry as many of its companies seek expansion opportunities in emerging markets, including SA.
In SA, Israeli technology companies are eyeing the financial technology space.
Dubbed the "start-up nation", Israel is home to many inventions that have revolutionised industries, including vehicle transportation, agricultural irrigation, medicine and gaming.
International firms such as Intel, Google and Alibaba have snapped up technology companies in Israel that have given them access to new growth areas.
Innovation from Israel in recent years has been focused on areas such as artificial intelligence, machine learning and virtual reality that are becoming critical business tools.
Digital health products in the form of voice recognition, and image recognition and technology products focusing on the financial services sector are also becoming popular.
Through the Israel Innovation Authority (IIA) the government is spending about $400m a year in technology companies with two-thirds of the money going to start-ups while the rest goes to medium to large entities.
Itai Melchior, consul for economic affairs at the Israel Economic Mission to SA, says the Israeli government has recognised the importance of research and development and innovation as a job creator and invests a high percentage of GDP into that area.
He says the government identifies areas in which there are gaps and invests in them.
In SA, Israeli technologies are widely used in agriculture, manufacturing and in the telecommunications industries.
Melchior sees more opportunities for Israeli companies in areas such as insurance and wealth management, whose operations are still traditional.
"There is a gap for technology to enhance the legacy systems and processes [in those areas], he says.
Commenting on the Israeli technology ecosystem, Uri Gabai, chief strategy officer at the IIA, says "there are many components working together to make this a reality".
For example, the army contributes many of the engineers in the technology industry.
The academic sector is doing the same by producing students that are coming up with new ideas that can be harnessed in start-ups.
One success to come out of the IIA is Waze, a mapping and navigation company that was bought by Google in 2013.
Gabai says that for innovation to flourish, decision-making must be fast. "You can’t have a fast-moving industry if you have a bureaucratic process. The government understood we have to be more agile and react a lot faster."
The Israeli technology sector is concentrated in Tel Aviv, but Jerusalem is rising in the start-up hubs rankings.
The government and the private sector have set up hubs and accelerator platforms in both cities to provide mentorships and office space and to help entrepreneurs access funding.
Despite its flourishing hi-tech industry, Israeli technology entrepreneurs have been criticised for selling their businesses too early, before realising the full benefits of their products. This used to be due to a lack of funding beyond the early stages and required skills to expand the business.
Many exit within about five years after launch and move on to the next innovation.
Yonatan Machado, partner at Jerusalem Venture Partners Labs, agrees, but says there is a move towards changing that.
Many entrepreneurs have recognised the need to scale up businesses.
As a result there has been a rise in the past three years in growth funds that have been set up specifically to expand start-up operations.
"This will be good for our industry and the country as a whole as it will lead to, among other things, job creation," Machado says.
The writer was in Israel as guest of the embassy of Israel in SA.