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The number of successful startups in Tel Aviv grows 20% annually

Author : Oleksandr Paskhover

12:57, 18 July 2016
The number of successful startups in Tel Aviv grows 20% annually

Author : Oleksandr Paskhover

In 2015, Tel Aviv became fifth world technology center with the best conditions for running a startup. Though the US Silicon Valley, New York, Los Angeles, and Boston are ahead. London, Chicago, Berlin, and Singapore are behind.

12:57, 18 July 2016

Read the original text at NV.UA.

The Bible calls the Promised Land as the land "flowing with milk and honey." Absence of the natural resources is compensated by effective use of brains and fresh ideas. The number of successful startups in Tel Aviv is growing 20% annually.

According to Deloitte research, in 2015, Israel is second after the U.S. in terms of venture capital investments - $ 4.4 billion. Only 10% of this capital is local investments. The rest are the money collected from the world.

Brains do work

Several business teams work behind the doors of Jerusalem JVP office. There is a special sign on the door: “Start-Up National Center.” In 1948, when Israel declared independence, in this room, the first shekels of the young state appeared. So making money was the first startup of the office. Today it is almost the same; people are making money here. How? As usual - from the air.

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Here is a fresh example. Two army comrades Liran Tancman and Shlomi Boutnaru, developed a system which, using the known viruses, predicts their development and thus protects servers from the cyber-attacks. In November 2013, JVP, and later German Venture Capital Unit of Siemens, invested $ 1 million in the research work of young CyActive.

In March 2015, the international payment system PayPal bought the entire project for some $ 60 million. Now the Americans are building a research center in Negev desert, in Beersheba, 100 employees of CyActive have moved there.

Over the past four years, JVP office earned $ 1.3 billion on sales of similar start-ups. Many of them successfully trade on the international stock exchanges. Most of the Israeli companies could be seen in a list of NASDAQ. As of 2015, in about 1.4 thousand startup companies appeared in Israel. 300 high-tech multinational giants that placed their offices in Israel were closely monitoring them.

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The total amount of M&A transactions (mergers and acquisitions, ed.) among Israeli startups in 2015 reached $ 7.2 billion. This means that during last year, this market grew by 44%, which is an unprecedented indicator. Last year, Microsoft absorbed five local startups. Jerusalem is becoming the center of Israeli startups. But we should not forget about Tel-Aviv.

In 2015, Tel Aviv became fifth world technology center with the best conditions for running a startup. Though the US Silicon Valley, New York, Los Angeles, and Boston are ahead. London, Chicago, Berlin, and Singapore are behind.

Totally, there are 1,000 startups in such a small city. This means that for every square kilometer some 90 startups.

Capital tricks

Daya Tolkattsir, presenting the most delicious Israeli startup, EatWith, says: “When I am going to London, Paris or anywhere else, the first thing I do after booking a ticket is looking for a place to eat. If I go to Kyiv for the first time, I will not think about finding a restaurant. I do not want to spend some five hours for it, so I will go wherever I am called. What will I eat there? Local food, a special soup, such as borshch, some pork or salads.”

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In 2011, an Israeli businessman Guy Michlin and his family went to rest in Crete. On the fifth day of the trip, he told his wife: "I cannot eat souvlaki (Greek dish, ed.)." Michlin stopped a woman on the street and asked her where the local people used to eat. And she said that local people eat at home. Great idea, thought Michlin.

After returning from a trip, Michlin offered his business partner to create a portal where the tourist can order a lunch in a house of a local family.

In 2012, Genesis Partners venture capital fund has invested $ 8 million into this startup. You order a dinner in one of 160 cities (of the 30 countries), getting with the owners. The average bill is $ 40 per person. EatWith receives a commission of 13%.

Revenue losses

In 2010, Gon Ben-David bought tickets to Iceland and booked a room in the local hotel. Suddenly Eyjafjallajökull volcano awakened in these northern lands, and the local airports closed immediately. Hotel room was already paid for and the return the money was impossible. Gon Ben-David has lost all the money. And then he realized that he was not alone; millions of tourists annually cancel their trips.

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That is why he decided to create a special system that would allow reselling the booked room. Annual turnover of US hotel market is $ 155 billion. Just over 6% of this volume is lost because the visitors for various reasons were not able to come. That is about $ 9.7 billion. Gon Ben-David and his friend Ben Frumin prepared a startup for reselling the booked hotel rooms. They called it Roomer. Venture capitalists found the project reasonable invested $ 6 million in it.

There are thousands of such start-ups in Israel. They form a new social stratum - a nation of entrepreneurs specializing in innovation. And here is the result. In 2015, Israel has established a national record - exports of high-tech country exceeded $ 37.5 billion. This is 41% of Israeli exports, more than the entire agricultural, metallurgical and machine-building exports Ukraine together.

There are at least three components of success of the local startups. First is they are not afraid to make mistakes. Past failures of a freshman are regarded as positive experience of a negative experience. The second is the influence of the army. This is a great social network, which has gathered all sectors of society. A lot of startups are based on the military relations. Well, and Israeli insolence; they did not hesitate to knock on the door of very rich people. 

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