Feet on the Ground: Connecting Israel’s FinTech
I’ve long appreciated Israel’s contributions to fintech from afar, but during my first trip to the “Startup Nation” I was amazed by the maturity of its startup ecosystem. I was part of “FinTech and Falafel,” a delegation of investors sponsored by The Israel Economic Mission to foster collaboration between USA/Canada and Israel.
Some of my observations:
Israel takes government R&D initiatives to a whole other level. Over the last decade, the government R&D spend has been roughly equal to 4% of GDP (Source: World Bank) — significantly greater than other countries. The Israel Innovation Authority, the agency tasked with overseeing the R&D allocations, has a wide range of programs to help entrepreneurs from concept to growth phase. In an increasingly competitive global market for technology expertise, a focus on creating more high value jobs and retaining tech talent should yield long-term benefits.
The quality of the technology talent in Israel has always been impressive. The universities and the military are widely recognized for cultivating fantastic engineering talent. Another common attribute is the global ambitions of most entrepreneurs in Israel. Unlike other global fintech hubs I’ve lived and worked in, Israel does not have the luxury of a large domestic market. This forces startups to think about international markets from day one.
What was also palpable during the interactions with founders and government officials was the can-do, must-do attitude and discipline in the face of 360-degree geopolitical adversity. This sort of determined pragmatism — along with experience working as a team — translates exceedingly well to the startup lifecycle. Even the need to question, challenge, and understanding directives — an expectation in their military experience — fits well with the rigor of startup culture.
Through the lens of a prospective non-local investor the biggest challenge seems to be about identifying the best of the best entrepreneurs among such a strong talent pool. Fortunately the tight-knit community helps with navigating, and feedback from former professors and commanding officers are often just a phone call away. (For example, it seemed like most entrepreneurs came from a same unit within the IDF.) Developing a close working partnership with local investors and advisors will be key. Almost every venture firm that I met in Israel seemed eager to collaborate with international funds, especially those that can provide sector expertise and connections to larger markets in the U.S. or Europe.
Overall, we at Propel are very excited about the fintech investment opportunities in Israel. As Propel develops its international portfolio, this will be the first of many trips to Israel for me. We’d like to be a significant node in the Israeli fintech community’s global network and the time in the air is well worth the time on the ground.
I want to give a shout to my fellow Propel partner Ryan Gilbert and Yael Kleinman of The Israel Economic Mission for organizing this delegation. Experiences like these give one a better appreciation of the quality of startups around the world and bring Silicon Valley closer to other cities.
I am hoping we can repeat this model in other innovation economies…fintech and tacos or dosas anyone?