A woman walks near high-rise buildings in the hi-tech business area of Tel Aviv.
(photo credit: REUTERS/AMIR COHEN)
As we ring in 2018, what better time than now to take a look at what awaits the Israeli hi-tech community in this new year. Here are four major trends that I believe will come to pass in 2018:
• Consolidation of the local security industry: Israel’s cyber industry is well-known around the world for its ingenuity and ability to identify and eliminate threats before they become attacks. However, the local cybertech market mainly consists of dozens of small vendors, many of whom ultimately compete against one another for business from a handful of potential customers. To better position themselves to win strategic business, over the next year we will see the beginning of a larger process of consolidation through mergers, acquisitions and partnerships among and between local Israeli cyber vendors, as well as with international companies.
There are three primary factors contributing to this shift: lack of inexpensive, holistic cybersecurity platforms; the inability of smaller vendors to compete with industry giants; and demand for greater value from cyber-defense systems to protect against new threats.
By merging or partnering with other industry players, smaller Israeli vendors can offer their customers the ability to manage an increased number of functionalities on one platform, while providing a larger holistic platform at a more affordable price, and can more easily and effectively identify and defend against new threats.
• Israeli companies will flock en masse to the Australian Stock Exchange: As of 2017, 16 Israeli companies have listed on the ASX. Companies across a range of industries are represented, including telecommunications, digital health care, social media, semiconductors, medical cannabis, nanotechnology and satellite technology.
How have so many Israeli companies ended up on the ASX? In its 2017 recap presentation, the ASX executive team highlights Israel no fewer than three times, listing it as the only one that the ASX actively designated for a heavy marketing and sales campaign with the hope of attracting local Israeli start-ups to go public in Australia.
Additionally, the ASX’s “sweet spot” is companies with market capitalizations of somewhere between $50 million to $500m. That fits perfectly for many Israeli tech executives who have built their companies from just an idea into a growing business; they are ready for an exit but have not received interest from potential acquisition partners.
Given these factors, and the continued interest from the ASX to pursue Israeli technology companies, I expect the number of ASX-listed Israeli companies to jump from its current 16 to 30 by the end of 2018.
• ICOs? That was so 2017: One of 2017’s most dominant technology themes was the prevalence of the word “blockchain” and the resulting cryptocurrency gold rush built upon blockchain technology. In their rush to cash in, numerous Israeli companies undertook a process called an ICO, which stands for initial coin offering. These ICOs, also known as token generation events (TGE), allow any company to create their own cryptocurrency and then sell that currency (which are purchased as tokens, hence TGE) to the public in exchange for an existing cryptocurrency, such as Bitcoin, Ethereum, NXT or others.
I have heard about Israeli companies from across the entirety of the technology industry – from cloud storage to food startups – trying to get into the ICO game. This increased obsession with trying to capitalize on the hype surrounding cryptocurrencies has invited the attention of the Israel Securities Authority, which is most likely going to regulate ICOs much the same way it does traditional securities, essentially slamming the door shut on less-than-reputable players looking to earn some quick cash through an ICO.
Israel is already worried that the rise in ICOs is a direct result of the crackdown in the local binaries market. The head of the ISA has already said it will be closely examining every ICO attempt coming out of Israel, leading to a significant slowdown of blue-and-white coin offerings.
• Jerusalem’s start-up ecosystem will boom: While Jerusalem can’t compete with the number of start-ups established in Tel Aviv, 2018 will see one major change that will help Jerusalem more firmly establish itself as a major tech hub, not just in Israel but globally: the opening of the long-awaited, long-overdue high-speed train between Jerusalem and Tel Aviv.
In just 28 minutes (versus 90 minutes at the peak of rush hour), Jerusalemites can be in Tel Aviv and, more importantly, Tel Avivians can be in Jerusalem. While it will certainly make it easier for those commuting out of Jerusalem, when it comes to the local tech ecosystem, having an easy, efficient and comfortable means of public transportation from Tel Aviv to Jerusalem will allow Jerusalem-based start-ups and technology companies to more aggressively recruit the country’s top talent, many of whom live in the center of the country around Tel Aviv.
Additionally, it will allow Jerusalem-based tech entrepreneurs to establish – and keep – their companies in Jerusalem, which will in turn help foster a stronger Jerusalem hi-tech ecosystem.
It will also allow those who do work in Tel Aviv to not be forced to relocate to live closer to their places of work, reversing the trend of young, bright and creative Jerusalem residents picking up and leaving the city upon graduation.
While there is a (slight) possibility that my forecast will miss its mark, I can guarantee that the Israeli hi-tech community will continue to push the boundaries of innovation and ingenuity, creating new technologies and opportunities for people all over the world.
Matt Krieger is the founder and CEO of Tel Aviv-based GKPR. Follow him on Twitter @mattkrieger1