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Jerusalem of tech: How the capital has given Tel Aviv a run for its start-up money
ByORRI J. AVRAHAM
January 16, 2017 13:00
The sleepy capital is becoming a hi-tech hub to be reckoned with.
Jerusalem

A general view shows Jerusalem's old city from an Israeli Air Force plane during an aerial show as part of celebrations for Israel's Independence Day to mark the 66th anniversary of the creation of the state, May 6, 2014. (photo credit:REUTERS)

When Time magazine picked Jerusalem as the world’s top emerging technological hub in early 2015, the city’s hi-tech scene seemed to have suddenly secured international attention virtually overnight; the Israeli media was certainly quick to join the hype and proclaim that Tel Aviv’s unchallenged hegemony over Silicon Wadi was finally nearing its end. Still, Time’s observation, striking as it may have been for many at the time, was actually far from prescient.

It is certainly true that greater Tel Aviv’s whopping 1,400 start-ups had dwarfed Jerusalem’s humble tech ecosystem as late as 2012. Back then, not a single “accelerator” program – created to guide up-and-coming start-ups through their first treacherous months – had even existed in the capital, reflective of a meager community of start-upists who might benefit from such a service. Naturally, neither avid investors nor ambitious entrepreneurs had sought their fortunes here.



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Yet in truth, Jerusalem’s untapped potential to grow into a global center for innovation, though it had been largely overlooked until a few years ago, was hidden close below the surface. What had been lacking in Jerusalem, says Helen Wexler of the Jerusalem Development Authority, was not an actual scarcity of human resources or infrastructure fundamental to any successful industry, but rather someone to assemble the existing pieces of the puzzle.

“We hold all the ingredients necessary for a good tech ecosystem,” Wexler explains.

“We already have a well-established industrial sector to build upon and a very large pool of talent coming out of some of the best academic institutions in Israel. Hundreds of top-notch scientists, engineers and designers graduate in Jerusalem every year, but the vast majority quickly move on to Gush Dan to build their future there. For a long time, all this talent just flowed out of Jerusalem entirely, instead of setting up shop here.”

The first signs of change came in 2012, following a few nudges from the top. Certainly, cutting down the corporate tax in the capital from 25% to 9%, coupled with a wide variety of grants, did much to set things in motion, but in fact some of the most effective measures have been much more subtle. The Jerusalem Development Authority’s Jnext program, today headed by Wexler, set out to facilitate any nascent idea for a start-up that might be budding in Jerusalem below the radar, quite simply by bringing all the necessary components – young entrepreneurs, experienced industrialists and probing investors – together in the same room. Four years later, it is now common wisdom in the tech world that such networking events are invaluable in making the magic happen.

“These events started out as unofficial gatherings with a couple of dozen people and a few pizzas,” says Wexler, “but they helped build a real tech community for the first time. Without them, there was just not enough flow of information for collaboration to happen. As the events became more frequent and attracted greater attendance, we saw more serendipitous interactions that actually got some ideas moving forward.”

It is worth noting that many of these events taking place today are arranged without any JDA involvement whatsoever. Rather, it is giants like Facebook and Google, as well as private law firms, accounting offices and sundry venture capitalists, who sponsor tech community meet-ups in the capital, including the famous “hackathons” (or hack marathons) where scores of programmers compete for cash prizes, coding the night away. There is perhaps no greater vote of confidence in Jerusalem’s promise as a burgeoning technological powerhouse than this train of private interests making their pilgrimage to Zion.

JVP TechCrunch meetup (photo credit: JDA)

Connecting the dots

Looking back on the year 2012 reveals it to have been a true watershed moment in the story of Jerusalem’s hi-tech scene. The number of new companies springing to life in the capital has since skyrocketed from 24 per year to a jaw-dropping 110 new start-ups established in 2016 alone, bringing the current total to over 600 companies. Such a spike could not have been possible, of course, without an equally impressive rise in investments pouring into Jerusalem, which, since 2012, have quintupled from $50 million to $250m.

A vital player in the local hi-tech scene responsible to a great extent for these growth figures has been the collective body of so-called accelerator programs and incubators that have gradually begun to set up shop in the city since 2012 – today a total of 12. Both species of programs were conceived to facilitate the early- stage efforts of promising young start-ups by offering professional mentoring, a free working space and invaluable networking. Incubators are distinguished in that they also offer either private or governmental investment in the companies working under their auspices, in exchange for equity in the companies’ shares. Either way, such platforms have proven an indispensable catalyst for up-and-coming companies that might not have otherwise taken off at all.

The first of these programs to launch in that fateful year 2012 was Jerusalem’s very own Siftech Accelerator, which so far has helped bring dozens of homegrown local start-ups on their feet, some already among Israel’s most recent success stories. Quite remarkably, in a move that undoubtedly had not escaped the attention of global investors, the Boston-based MassChallenge accelerator followed suit by opening its Jerusalem offshoot in 2015 – one of only five such branches worldwide. Just last month, an impressively diverse lineup of 48 new start-ups graduated the first cycle of its prestigious four-month accelerator program here in the capital.

“We picked Jerusalem for a very clear strategic reason,” Israel Ganot, head of the MassChallenge Israel branch, explains.

“It is fertile ground for innovation and already has all the right components to become a tech hub on a global scale. By concentrating our efforts on Jerusalem, we can help make it a true success story, modeled after Boston.”

In Massachusetts’s capital, within a few short miraculous years, nearly 800 successful start-ups have pulled in more than $1.5 billion in investment and utterly changed the urban landscape, creating countless jobs and attracting talent from all corners of the United States.

Key to realizing Jerusalem’s potential as a leader in tech, stresses Ganot, is to identify and cultivate the fields in which it is already a serious player. By focusing its attention and resources on those areas where the local tech industry is demonstrably strong and enjoys a clear comparative advantage, the city can effectively help these grow into first-class industries within a very short time span. Biotechnology and medical innovation, computer vision and image processing – in all these fields Jerusalem already stands out as a rising star and in a few years could, with the right push forward, become a true global leader.

Siftech tech meetup.(photo credit: YANIV DOR)

Playing on our strengths

The scramble for specialization in an increasingly globalized world is in fact long under way and has already borne ripe fruit in Jerusalem. Most notably, the city’s natural advantages as a hotbed for innovation in biotechnology have come into full focus and made it to city hall’s active agenda as early as 2006, when the JDA kicked off its BioJerusalem initiative, today still actively promoting the industry under the directorship of Shai Meltzer.

“The biotech knowledge base in Jerusalem is by far the biggest in Israel,” Meltzer points out.

“On the one hand you have the cutting-edge scientific research done at the Hebrew University, while a few miles away you have Hadassah University Medical Center’s world-renowned laboratories on the front line of global medical research. But the leap forward could not have come before these two finally began to collaborate.”

Today, as these two institutions nurture an increasingly tighter symbiotic relationship without parallel in this country, Jerusalem stands as Israel’s undisputed leader in biotechnology, with more than 150 companies in this field alone. It seems clear that what produced this deluge of innovation in recent years has been the fertilizing effect of joining scientific knowledge together with the practical insights of the medical world, enabling researchers to translate the latest breakthroughs coming out of academia into applicable technology for life-saving use in the surgery room.

The possibilities that such collaboration opens up seem limitless and may stretch the imagination of the reader. Without question, ingenious new methods for personalized cancer treatment based on individual genetic profiling of patients, developed by Jerusalem’s very own NovelusDx, have long been awaited by oncologists. Yet other young companies have effectively ventured into the realm of science fiction. A prominent example is the work done by Seevix Material Science – founded by a group of chemists and biologists on the Hebrew University faculty – to manufacture the next generation of fibers modeled after spider webs, the strongest found in nature.

Opportunities to refine university-owned intellectual property into marketable technology – and turn academic specialization into commercial prowess – are rife, and hardly confined to the realm of biotechnology. A prosperous computer-science department at the Hebrew University has gradually developed its own particular areas of expertise for which the institution is today widely known, most notably in the fields of image processing and computer vision. When the academic soil is thus fertilized with the rich knowledge base of its researchers and a growing reservoir of young talent, all it takes is for the wind to blow in the right seed.

Amnon Shashua, tenured professor of computer science at the Hebrew University, was unquestionably one such seed. Himself an expert on image processing and artificial intelligence, he founded Mobileye in 1999 and has since brought it to the global forefront of its field – developing lifesaving, vision-based Advanced Driver Assistance Systems (ADAS) – essentially a sophisticated camera fitted with algorithms to detect and warn of collisions in time for the driver to respond. Most recently, the company revealed plans to develop a completely autonomous driverless car by 2021 in collaboration with BMW and Intel.

More recently, a group of ambitious PhD dropouts specializing in image processing decided they would “much rather spend time developing cutting-edge products for real people than publishing academic papers,” as their website proudly reads, and in a matter of months had unveiled their first company, Lightricks. Having recognized that the existing arsenal of photo editing tools available to savvy programmers was utterly inaccessible to the average consumer, the ambitious Lightricks team sought to demystify complex algorithms into easy-to-use smartphone applications for editing photos on the go.

Their most popular application, Facetune, enables users to easily remove blemishes, improve complexions and perform other sophisticated manipulations on their own photos using their smartphones – corrections that would otherwise take an experienced Photoshop user to carry out via a desktop computer.

The revolutionary app boasts 10 million downloads worldwide so far and has already become a colloquial verb in some circles – in the sense that someone would “Facetune his selfie” to spruce it up before posting on social media.

“Our vision is to be the global leader in the field of digital content creation and editing on mobile platforms,” says Yaron Inger, CEO and cofounder of Lightricks; and with more than 70 employees in Givat Ram’s High-Tech Village, he and his team seem well on their way.

“One of our clearest advantages is the constant stream of bright computer science graduates coming out of Hebrew U right next door, in whom we invest even more through our intensive three-month training program. When I was a student a decade ago, there weren’t nearly as many opportunities for meaningful work here in Jerusalem; things have dramatically changed since then and we are eager to let young programmers know. Jerusalem is at the center stage of our field.”


Hidden treasures

Jerusalem stands out from the crowd of other global tech hubs, not only by virtue of its remarkable success stories, but also on account of its innumerable complexities as a city. The so-called Silicon Valley in the San Francisco Bay area seems like a tepid, homogeneous soup compared to the notoriously intricate conglomerate of Jerusalemite society, made up of subcultures not only vastly different from, but often also fundamentally at odds with one another.

Establishing a thriving hi-tech ecosystem in the capital is made doubly harder by the fact that significant chunks of its diverse population – namely its Arab and haredi communities – lag dangerously far behind in technological education and workforce participation. But increasingly, many in the industry have come to view the challenge of integrating Jerusalem’s “forgotten” communities not as an obstacle to be overcome but rather as a goldmine still undug.

Originally set up in Bnei Brak, the Avratech academy seeks out and fosters hidden talent in the haredi community, molding them into proficient programmers and active participants in the modern labor force.

“We accept young haredi men who, despite having little to no background in computers, have a good head on their shoulders,” explains Avratech cofounder Aharon Safrai. “Within one very intensive year of training – we start with math and English studies, followed by a practical, hands-on programming course – we hand them a profession.”

Avratech’s first program in Jerusalem kicked off only six months ago, with 30 promising students selected out of a whopping 600 who applied. What appeals to so many young ultra-Orthodox men, often married and with several children to feed, is the chance to obtain practical programming skills and concrete employment opportunities in a much shorter time period than is normally afforded by conventional academic platforms. Also important is the familiar environment the program has created for them – the course opens each day with a three-hour Talmud study period, the same as any yeshiva.

“Our students discover that to acquire coding skills and then work in the field, they don’t have to give up their way of life in any way,” claims Vered Mor, who runs RavTech, Avratech’s sister initiative. RavTech in effect functions as a small software company, providing employment for Avratech’s fresh graduates as professional programmers. Mor strongly believes that the secret to the success of these projects is the fact that they sprouted from within the haredi community itself.

“Imposing a patronizing solution on haredi society from the outside would have only antagonized it. The natural bottom-up approach allows our students to join our program from a position of mutual respect, rather than submission to the secular way of life.”

The number of haredim who have opted for vocational training and work in the tech sector has been steadily rising in recent years, all the while dismantling the sociological barriers that once kept them at arm’s length from such employment. Accordingly, many companies in Jerusalem have woken up to this change and begun recruiting from previously disregarded communities – not only Mea She’arim but also east Jerusalem – following the courageous example of a few pioneers who were quick to recognize the vastly underrated potential there.

Innitel, a Talpiot-based telecommunications company that provides cutting-edge software for call centers worldwide, began operating in 2013 and has already made a name for itself in more than one fashion. Apart from being a local rising star in its own right – it was recently rated Israel’s ninth fastest-growing tech company – what would truly stick out to any visitor at Innitel will be its remarkably heterogeneous workforce, unrivaled in the local tech scene.

Themselves a pair of olim from France and Ohio, founders Elie Rubin and Dan Leubitz were keen to seek out employees in places other recruiters had overlooked and pinpoint those talented applicants obscured by their disadvantaged backgrounds. The two were surprised to discover “an incredible economic force in the Israeli-Arab neighborhoods of Jerusalem,” Leubitz recalls, today manifested in a generation of bright programmers eager for a chance to prove themselves. It is surely not by grace or accident that a quarter of the company’s 35 employees are Israeli-Arab.

Alongside them are an unlikely assortment of workers, somewhat reminiscent of a bachelor’s bedroom drawer filled with sundry mismatched socks. Russian, French, Ukrainian and English are among the languages heard at Innitel’s offices – itself an invaluable edge for any business competing in a globalized economy – and a recent visit would have revealed a hanukkia proudly standing beside a decorated Christmas tree at the entrance.

Whereas most would find such a mishmash to be nothing short of a powder keg waiting for an opportune spark, Innitel’s management finds it is the common conviction in the company’s goals permeating through its workforce that keeps it firmly together.

“In the end we all have the same vision, and the same objective of making Innitel great,” says Leubitz. “Our office is a true microcosm of Jerusalem, and its dynamic can serve as a model not only for other companies, but for this city at large.”


Tilling the soil

If in the 1970s the signature sign of a developed economy was a globally competitive car industry, of the kind that Israel certainly never had, in 2017 it is transparently clear that even the most formidable automobile producer will be entirely left by the wayside without a hi-tech sector worthy of its name. Under these new rules of the game, small and previously obscure players like Finland, Ireland, Singapore and Israel have become the new linchpins of the global tech economy.

By the old rules, steel and coal had been the essential ingredients to economic prowess. Today, the key to the game begins and ends with human capital. Bringing together the pieces of Jerusalem’s manifold gambit for hi-tech preeminence reveals this idea to be the undercurrent beneath virtually all the changes in the local tech scene since 2012 that we have so far touched upon.

Human capital is the underlying rationale for keeping the gate between academia and industry wide open and for cultivating local specialties that have naturally taken hold in the Jerusalem tech biosphere – establishing accelerators as indispensable catalysts for ideas to materialize into start-ups and seeking out the hidden talents of each of Jerusalem’s composite communities for the prosperity of all. Even the tech community meet-ups set up by JDA to encourage “serendipitous interactions” between investors and entrepreneurs demonstrate a sober understanding that a prodigious matchmaking of human resources is the secret ingredient to a thriving tech ecosystem.

As any good farmer knows, however, in order to enjoy fruit-bearing trees in a decade we must labor to plant their seeds today. The question, therefore, that still begs to be asked is: what of Jerusalem’s next generation of entrepreneurs?

It is only fitting that one of Jerusalem’s most respected veteran start-upists should have taken up the mantle in raising today’s children to be tomorrow’s innovators. Elie Wurtman is the managing partner at PICO Venture Partners and a serial entrepreneur who founded six successful companies over the course of a decade, among them Vroom.com, the world’s first online direct car retailer. Yet the one initiative that truly twinkles in Wurtman’s eye is his very own PICO Kids project, a nonprofit he founded here in Jerusalem a mere three years ago to spearhead a change in the way we conceive of education.

It has become conventional wisdom that science and mathematics must be the bread-and-butter of the required curriculum in every country that wishes to prepare its youth to compete in a modern globalized economy. In countries like France and Germany, however, where high schoolers score well on the OECD’s PISA exams but whose hi-tech industries are still waddling around in their diapers, Wurtman and others have pointed to entrepreneurial education as a subject in its own right that must be taught at every school.

“STEM education – science, technology, engineering and math – is already adopted the world over,” Wurtman explains.

“Our mission is to promote STEEM education, with entrepreneurship as its centerpiece. To make Jerusalem into a center of innovation, we must make modern schooling relevant again and actively teach our children to develop their creativity and ‘outside- the-box’ thinking.”

Nowadays, more than 1,500 Jerusalemite youngsters who return home from the PICO Kids after-school programs excitedly tell their parents over dinner what they have learned: how to use a 3-D printer, design an Arduino circuit or build a robot, or perhaps some inspiring advice from an experienced innovator who came to relate his or her story.

Wurtman’s strong personal belief in Jerusalem’s tech future has likewise led him to set up PICO Venture Partners’ open workspace in the heart of Talpiot’s Industrial Zone, in spite of nearly unanimous advice to the contrary. Close enough for many young start-upists who live nearby to come by bicycle, rather than work from home in their pajamas, PICO’s hub quickly became a sizzling forum with more than 40 working start-ups, where “more collisions” between innovators has meant “more magic in the making.” No less important, PICO Ventures effectively planted a flag around which dozens of start-ups are now interspersed among bakeries and auto repair shops across Talpiot.

Ultimately, it is a fervent pursuit of bettering Jerusalem and a firm belief in the capacity of individuals to shape reality that drive Wurtman’s tireless push for a richer tech ecosystem in this city.

“At the end of the day, entrepreneurs are agents of change,” he emphasizes. “There is passion in the DNA of Jerusalemites that I have never encountered anywhere else, and that energy has to be harnessed to impact the livelihood of this remarkable city.”

The future of Jerusalem as a global center of creativity rests entirely in the hands of its residents. Isaiah’s ageless vision, that “out of Zion shall go forth the law, and the word of the Lord from Jerusalem” may yet find new meaning.
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