Israeli high-tech companies work to develop solutions against coronavirus
Israeli startups are facing many challenges due to the coronavirus pandemic, but they are also trying to create new opportunities.
By SARAH CHEMLAWhile Israeli startups are facing many challenges amid the coronavirus pandemic that shook the worldwide economy, some companies in Israel are trying to create new opportunities.Edouard Cukierman, a leading Israeli investor and a founding partner at Catalyst Investments - a leading private-equity multi-fund firm in Israel, aims at exposing the Israeli market to international investors through a series of conferences named "GoforIsrael."Cukierman recently held a large online conference gathering more than 600 investors, and he told JNS that “it also brought more than 100 Israeli companies that are developing technology to combat COVID-19. This shows that the private sector in Israel responds very quickly to crisis and certainly faster than the government here.”Nevertheless, unlike American and European companies, which have very large local markets to handle and no travel restrictions to face in Europe, the Israeli startups almost exclusively focused international markets. Israeli companies cannot compensate the absence of physical presence in overseas markets with the local market, which means they have hit a significant difficult situation.“Today, the Israeli company representatives cannot travel abroad. They can conduct online and Zoom meetings, but we see that this reality is challenging Israeli companies,” said Cukierman.An even larger challenge, Cukierman told JNS, is the fact that many international investment funds that usually operate in Israel, and which enable mergers and acquisitions, are not currently active in Israel. “It is very hard for these funds to invest in Israel right now because they can’t arrive and conduct due diligence. We are one of the few countries that remains totally closed,” he said.For high-tech companies in Israel, raising funds from investors is the principal way to reach significant profit. More than $8 billion was raised in the Israeli market in 2019 by international investors. This year, said Cukierman, he estimated that this would go down to approximately a billion dollars.“My assessment is that although the first half of 2020 was relatively good, that was because of the due diligence that occurred beforehand, which takes around eight to nine months to carry out. The third and fourth quarters will see lower results. This will have an impact on the high-tech industry,” he stated.Last year saw $20 billion in mergers and acquisition deals in Israel. That number is likely to be far lower in 2020.
“This creates a very big challenge,” said Cukierman. “On the other hand, it also allows those funds that do have money to make attractive investments for those who can invest.”Yet, despite the crisis, Cukierman remains hopeful that the power of Israeli entrepreneurship will overcome the challenges eventually. “In our country, we have unfortunately dealt with many crises, and we can respond efficiently and rapidly, especially in the private sector—more so than the government,” he said.The highly skilled workforce that powers the high-tech economic engine makes Israel highly attractive to international investors, he added. “Technological entrepreneurship has turned us into a regional and global influencer,” he said.However, Cukierman criticized the way and the slow speed the government was responding to the pandemic. Comparing with the private sector, he said, “we can unfortunately see that they function at a very different pace. We see how the high-tech sector holds up the country economically. To emerge from this crisis, the private sectors will likely enable this more than the government.”He granted the army as playing a significant role in some of Israel’s competitive advantage by teaching the new generation how to handle many responsibilities and by creating a quality personel that is difficult to replicate. He served himself as a reserve officer in the Israel Defense Forces’ Crisis and Hostage Negotiation Team and in the IDF Spokesperson’s Unit.“We were the only fund that invested in [the autonomous driving vision company] Mobileye. We looked at seven competitors. One of the main reasons that led us to invest in Mobileye is that while the competitors knew how to identify red lights and white lines on the road, only Mobileye could identify people. This Israeli technology is based on algorithms, real-time insights and last-second diversions, which came from Israeli military technology. It’s not coincidental that many of Mobileye’s developers come from Unit 8200 signals intelligence unit and other military units.”“Another very important aspect is the value system that comes from Judaism—tikkun olam, the desire for freedom, the Passover story," he finally noticed. “These have found expression in startups, in companies that initiate. Some of the values that help them to think outside the box come from Judaism.”