Coronavirus could help investors identify most promising start-ups

Israeli start-ups nimble enough to adapt to the changing market could do very well, if able to prove to corporations how their innovations can increase efficiency.

By DONNA RACHEL EDMUNDS
Japan's Prime Minister Shinzo Abe and his wife Akie Abe visit the Jericho Agro Industrial Park, May 2, 2018. (photo credit: MUSSA QAWASMA/REUTERS)
Japan's Prime Minister Shinzo Abe and his wife Akie Abe visit the Jericho Agro Industrial Park, May 2, 2018.
(photo credit: MUSSA QAWASMA/REUTERS)
The economic slow-down caused by the coronavirus pandemic presents an excellent opportunity for investors to find out which Israeli start-ups have the potential to make it, and which are faking it, investors have said.
As corporations globally seek to tighten their belts, the focus for many looking to invest in Israeli innovators has shifted from what a start-up can do, to how it can help streamline processes and increase efficiency. While this presents as a challenge, those who are flexible enough to adapt their approach accordingly could thrive in the new environment, attendees of the "Big In Japan" webinar hosted from Tel Aviv.
Co-organized by Japanese insurance company Sompo; Samurai Incubate Israel; IN-Venture, the Israeli venture capital fund of Japan’s Sumitomo; and law firm Pearl Cohen, the webinar's focus was on trade between Japan and Israel, which has surged in recent years.
"There will now be pressure on the corporations to cut expenditure and to become more efficient, and consequently startups will be required to show their economic advantages and especially how, with their help, it is possible to streamline work and cut costs," Yinnon Dolev, head of Sompo’s Israel Digital Lab said at the event according to Calcalist Tech.
"Unfortunately, most presentations by Israeli startups focus on what we can do and how we can increase your ability and that's great," he continued. "But what is your ability to help me as a corporation cut costs? A large corporation will find it difficult to adopt any new technology without the strong marketing value and so the key to entering Japan is creating this effect and presenting it to the corporations."
Nobuyuki Akimoto, managing director at AT Partners, a Japanese venture capital fund which invests in Israeli companies, was in full agreement.
"Corporations’ need to save on costs during the coronavirus, might lead to a certain slowdown and the appetite for innovation might shrink, but on the other hand, this is an excellent time to find out who is really thinking like a major player when it comes to working with startups and who is faking it and disappears at the moment of truth," he said.
Japanese investors have been taking an increasingly keen interest in Israeli innovation in recent years. According to investment firm Harel-Hertz,  2019 was a record-breaking year for the market, with 35 investments in the first half of the year alone, nearly matching the overall number made in 2017 - the previous record year. The market also registered significant growth in terms of volume, reaching $550m in the first half of 2019, equal to the total reached in the whole of 2018.
"In recent years, we see major interest from Japanese companies in Israeli industries. There are more than 220 Japanese companies with activities in Israel, and some of them have local teams,” Guy Lachmann, senior partner at the Pearl Cohen law firm told the audience at the webinar, according to Calcalist Tech. “This trend is continuing to grow. 70% of the investments are made by companies for whom this is the first investment in Israel and this is a very optimistic sign.”
Last year, El Al announced plans to launch a direct route between Tel Aviv and Tokyo, slashing the travel time in half from 24 hours to 12, making short-stay business trips a much more viable proposition. Reciprocal visits by Prime Minister Benjamin Netanyahu and Japanese Prime Minister Shinzo Abe also served to foster ties between the high-tech nations. With the world slowly moving on from the coronavirus crisis, rekindling those links will be of vital importance to both Japan and Israel.
"Like every post traumatic syndrome, the influence of the coronavirus in the short term will disappear, people will exit lockdown and will see that there is still a world outside, so the appetite to implement technologies and investments will recover," Eitan Naor, Managing Partner at IN Venture said.
"We are very optimistic but still cautious about the investments and looking for entrepreneurs and companies that manage their money carefully. During a crisis cash really is king, and we want to make certain that investors will understand the importance of managing money and will understand the importance of being very precise about the marketing abilities of the product."


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