Israel’s Entrepreneurs Keep Making Magic
Shelly Hod Moyal and Mor Assia, co-founders of the women-led VC firm iAngels, tell us why Israeli entrepreneurs continue to dominate in fast-growth areas like cybersecurity, agtech and Web 3.0. By Paul Ust
When Startup Nation reached The New York Times and Wall Street Journal bestseller lists in 2010, it opened the world’s eyes to how Israel, a nation of just seven million people at the time and in a constant state of war since its founding, could produce an abundance of innovative startups.
Today, Israel is seeing the fruits of its long-term value creation, and some of the country’s earliest high-tech pioneers continue to innovate and invest there. Nearly $26 billion was raised by Israeli startups in 2021, helped by the entrance of veritable VC giants like Insight Partners and Tiger Global. On a per-capita basis, venture capital in Israel is leaps and bounds over what the U.S. sees, across a wider spectrum of sectors.
We talked with Shelly Hod Moyal and Mor Assia, co-founders of Tel Aviv-based VC firm and investment platform iAngels, to get their take on how Israel’s startup scene stays so vibrant, and their promising investments in high-growth areas like bee tech, alternative fuels and crypto-trading apps.
Archie: Israel now has bragging rights to startups and unicorns per capita. What has changed since Startup Nation came out 12 years ago?
Assia: Israel didn’t earn the nickname ‘Startup Nation’ for nothing. Statistically speaking, we are a country of nearly nine million people, and we have more startups and unicorns per capita than any other country, and saw 28 times more VC activity than the U.S. in 2021. However, where this term is outdated is that these days, long-term value creation has taken precedence over short-term monetization. Rather than looking for quick exits as founders may have done 10 years ago, today’s startups understand the value of staying private longer and are looking to grow their business. Whereas founders may have previously felt incentivized to sell upon the first acquisition offer, take the money, then ideate another company, today many founders, employees and shareholders are aligned in working towards exits in the billions not millions. Prior to founding iAngels, there were fewer than 10 Israeli tech companies valued at $1 billion or more. Today, Israel is still producing some eye-popping numbers and is home to nearly 100 unicorns and over 50 companies that generate revenue of $50 million and up annually.
Archie: What is unique about Israeli culture that enables founders to thrive in the tech industry?
Hod Moyal: Many Israeli entrepreneurs we have worked with have shared characteristics critical to a startup’s success, such as perseverance, emotional fortitude and intellectual adaptability. This is probably best explained by some combination of the Israeli ‘survival mentality,’ mandatory conscription to the military and our limited natural resources. These characteristics are ingrained in the Israeli tech ecosystem, and as they manifest, the ecosystem continues to grow and develop into new realms.
Archie: Your country also has a mature ecosystem of former entrepreneurs turned investors, which I imagine benefits young businesses in a powerful way?
Hod Moyal: Israel has a uniquely deep ecosystem of entrepreneurs who are now investors, many of which exemplify decades of experience in differing positions at various stages from startups to more developed companies. This provides insight into M&A, IPOs and growth hacking. Our Chairman here at iAngels, [Mor’s father] David Assia, is an example of this. He founded Magic Software Enterprises, Israel’s first software company to go public on the Nasdaq. David took his success and transitioned into an angel investor and later, at the time of iAngels’ founding, into a fully fledged venture capitalist. Now, as a veteran in the industry, hundreds of up-and-coming entrepreneurs benefit from his experience. Last year, Israel’s VC deal activity reached new heights, with nearly $26 billion invested in over 780 deals, a year-on-year increase of 146% from the amount raised in 2020.
Archie: In Startup Nation, authors Dan Senor and Paul Singer used the phrase “Battlefield Entrepreneurs” to explain how serving in the Israeli military gave entrepreneurs there a head start. How so?
Assia: With mandatory conscription, young Israelis are provided a vast array of different paths to take, depending on their interests and skill sets. Many of these, specifically in the arena of national security, have a significant overlap for providing useful skills in today’s technological world. For example, soldiers in combat units who deal with critical high-stakes life-and-death situations develop essential entrepreneurial skills, which include teamwork, resilience, self-discipline and the capability to thrive in times of uncertainty. As a result of their military service, many Israelis are privy to learning at a young age the innovative skills that employers are most keen to hire and which startups require most for success. Once released from these elite units, veterans join the workforce with years of technological training and proven experience in solving some of the world’s most complicated and pressing issues.
Archie: You gave a great example of water resource management as a proxy for self-education in entrepreneurship.
Assia: Like many countries in the Middle East, Israel has always faced extreme water shortages and droughts that threatened stability on a strategic level. We remember that as kids we would go into the shower with a timer, limiting our shower time so as not to waste water. Only a few decades and a handful of inventions later, Israel is now a net exporter of water to its surrounding region. In fact, I served several years in Unit 8200, an elite intelligence unit composed of some of the nation’s top technical minds. My time in 8200 was a defining experience both in forming analytical and leadership skills that are easily transferable to our fast-paced, deal-making world and the ability to evaluate technologies and innovations.
Archie: What are the biggest challenges you face as a women-led VC firm operating in the global innovation system?
Hod Moyal: When we started iAngels, it was rare to find women in venture investing at any level, let alone management teams and general partners. A formative conversation took place in our early days with one of the most successful angel investors in Israel when he told us, “You look like intelligent girls: You should go do something else!” The fact you have a nice smile doesn’t mean you will be successful? Today, eight years later, we have invested in 100 companies, with six unicorns in our portfolio and 24 profitable exits. The strides women have made to close the gender gap in VC and tech more broadly have been remarkable. Each year, we find new women-led companies to add to our portfolio, and we feel that due to the fact that we are a women-led fund, we have less of a ‘gender lens,’ and thus have seized the opportunity to invest in some incredibly driven and highly motivated female founders.
Archie: Can you share some of your notable female-founded investments?
Assia: One is with Moran Snir, co-founder and CEO of Nest Genomics. In 2017, we invested in the pre-seed round of her previous company, Clear Genetics, which was acquired by the publicly traded company Invitae. Other examples are Maayan Cohen, founder of Hello Heart and Iman Abuzeid, founder of Incredible Health. We invested in these mission-driven companies in their seed stage, and have since seen on-paper appreciation by the thousands of percentages. Moran, Maayan and Iman are just three in a comparatively long list of female founders in our portfolio, many of which have also invested back into our own funds. But still, serious barriers to entry hinder the growth towards true equality, with Israel being no exception. While strides have certainly been made over the past decade, there is still plenty of progress to be made.
Archie: The Israeli tech sector is broad, growing and diverse. How do you determine your areas of focus?
Hod Moyal: Startups are venturing in virtually every direction imaginable. We’re seeing innovative advancements in digital health, agricultural and food technology, artificial intelligence and Web 3.0, just to name a few. Three of our investments showcase the broad-based nature of the ecosystem and have been ranked in Calcalist's top 50 most promising Israeli startups of 2022. WSC, founded by Daniel Shichman, Shmulik Yoffe, Hy Gal and Aviv Arnon, employs proprietary AI technology to automatically generate sports-highlight reels from live broadcast footage. BeeHero, founded by Omer Davidi, gives beekeepers and farmers real-time data insights on [pollination-creating] bees, collected from sensors in hives and put through a novel machine-learning system. H2Pro, founded by Talmon Marco, enables the wide-scale adoption of green hydrogen fuel, a renewable solution devoid of unintended pollutants.
Archie: Mor, your husband Yoni founded eToro, the stock and crypto trading app valued at nearly $9 billion. What’s the current appetite for crypto and blockchain in Israel?
Assia: Though sentiment is depressed due to the macro environment’s outsized influence on digital assets, we feel that silver linings abound. Because even though risk assets are taking the brunt of the rise of the cost of capital, technological advances, innovations and use-cases continue to expand, allowing for great opportunity to build. Whereas previously the space was filled with white papers, empty websites and promises, today there are products, applications, games and burgeoning institutional buy-in. As Web 3.0 gains traction, the industry is experiencing a natural evolution that allows individuals to own their own digital assets on the Internet, making way for more transparency and equity. This shift is drawing top talent to the industry, despite the volatility. We’re taking full advantage of this here at iAngels. Many of our portfolio companies are leading the way in blockchain infrastructure, cybersecurity and DeFi. It’s the house view here that the future of technology will be partially defined by decentralization.