2021 was a record breaking year for Israeli startups. What now?

2021 was a banner year for Israeli startups, breaking new records in fundraising, new unicorns, and exits. But if we take out the rosy glasses, what are the risks ahead? What comes next?

In this posts I review the potential risks for the Israeli tech ecosystem and the mitigating factors that counter some of them.

Where are we now?

Israeli startups are on fire. According to the 2021 Tech Review report by IVC, Israeli tech startups attracted a record of $25.6 billion last year in 773 deals, more than double the $10.5 billion raised in 2020. Exits of Israeli startups in 2021 reached $82.4 billion, also a record amount. There are 80 Israeli unicorns, private companies valued at $1 billion or more, with 42 companies joining the Unicorn club in 2021 alone.  

Israeli tech investments 2015-2021 (source: IVC)

For the record, Startup Nation Central and Pitchbook share slightly higher numbers ($26.6 billion), who also compared Israel to other leading startup hubs:

When compared to growth rates of other countries based on comparative data compiled from PitchBook on January 1st, 2022, Israel’s 147% found itself at the top of the rankings, beating out traditional tech hubs like the US (93%), the UK (119%), Singapore (100%), Sweden (144%), Ireland (108%), and France (56%). The only countries that saw higher growth in tech investments were Germany (170%) and India (164%). 

2021 Tech Trends: Israel is winning the global race for tech funding

Part of a global trend

Records were broken globally as well, both in terms of funding and number of unicorns. According to Crunchbase, Global venture investment reached $643 billion in 2021, compared to $335 billion for 2020—marking 92% growth year over year. In the US alone, startups raised $330 billion. In the UK, by far the largest tech hub in Europe, startups raised $26 billion.

To put things in context:

Risks and challenges for the Israeli startup ecosystem in 2022 and beyond

Will the golden age for Israeli tech continue this year? It’s not a question of will it go down, it’s a question of when. What goes up must come down and cycles exist everywhere. If we are aware of what can go wrong, perhaps we have a chance to fix it. Below are some of the more pertinent challenges for Israeli startups in 2022:

Talent

  • Shortage of talent – Israel is a country of 9 million people, and according to a recent report by the Israel Innovation Authority, only about 334,000, about 9.8% of the workforce, participate in the high-tech industry. The government set a goal to increase the percentage of people employed in tech t0 15% but it cannot be achieved overnight. The Israeli innovation authority deems the sector suffers from ‘chronic employee shortage’. The battle for talent has meant that companies had to lure potential employees with billboards, influencer videos, referral schemes, etc.
  • Cost of talent – With increasing competition from the large tech companies (Israel has over 350 International R&D centres for some of the world’s biggest tech companies including Microsoft, Intel, Nvida, Google, Snap, TikTok, etc, startups must also compete with the growing stable of local unicorns like Rapyd, Monday, Playtika, Ironsource, etc) with their ever growing perks and higher salaries.
  • Diversity – Women make up about 33% of the start-up workforce in Israel, according to a new report from Power in Diversity. In management positions, women representation is 23.3%. It’s much better than the UK, with 19% of women in tech in 2021 according to Tech Nation, but there’s still work to be done.

SPACs have backfired

There are two main forms of exits for startups: trade sale/M&A or IPO. SPACs had their moment in the sun in 2021, with a record number of companies choosing to go public using the SPACs in favour of traditional IPOs. Why do Israeli startups might find them attractive? I commented on this to Israel21c in the early days of the trend.

Many of the companies that went public via SPACs saw their valuations dramatically reduce in the months that followed post IPO. Both employees and investors typically have a 6 month lock up period (exceptions apply of course) so this can have devastating effects on liquidity and retruns. Examples include Riskified (which declined 70% post IPO), eToro (which saw its value dip at least 15%) REE and others. Given that some of these new stocks have low trading volume, in practice the lock up period can be longer.

This will make boards think twice before they choose the SPAC route for liquidity going forward (unless they don’t have a choice, in which case the writing was on the wall).

13 Israeli companies that went public via SPACs in 2021 and later saw their values slashed (source: IVC)

Tel Aviv became the most expensive city in the world

The Economist crowned Tel Aviv as the most expensive city in the world in 2021, a dubious title at best. This excludes real estate prices and relates mainly to cost of living (prices of goods). The effect is additional pressures on the talent costs mentioned above, where startups struggle to compete with larger players in the market.

In addition, the combination of rising prices (part of global and local inflation) and the historic strength of the NIS has meant that the funding startups raised (in USD) is worth less than it did a year ago. Anecdotally, one founder complained to me that this has shorten his runway by 30%. Several discussions on social media have founders asking if they should hedge their FOREX risk.

Most expensive cost of living cities in the world (source: WEF)

Global tech correction

Nobody really knows how long the current tech rally would last. January saw tech stocks rattle (read Fred Wilson’s the Selloff). Out of Israel’s $26 billion raised (approx), 73%, or $18.64 billion, was by foreign investors in 2021. A burst in the global financial markets will certainly have an impact on funding for Israeli startups. This is primarily the case for the US. Japan alone tripled its investments in Israeli startups in 2021, reaching $2.9 billion (15.8% of total foreign investments in 2021)

Foreign investors accounted for 73% of the total funding in 2021 (source: IVC)

Mitigating Factors

The Israeli tech ecosystem also stands on some strong pillars that ensure its stability, at least in the short term.

Plenty of fresh powder in the market across stages

  • Just in the past few months we’ve seen several new fund announcements

In addition, Israel is getting increasing action (and on-ground presence) from some of the largest growth funds globally. This includes:

  • Softbank Vision Fund – the with the appointment of former head of Mossad, Yossi Cohen, as partner
  • Blackstone – with $619 billion under management globally. Blackstone added Yifat Oron to lead the local office, and the team has already invested in Wiz, a cybersecurity startup that reached $6 billion valuation in two years.
  • Insight Partners – Insight manages more than $30 billion and was the most active fund in Israel in 2021 (with 46 rounds). This is even before serial entrepreneur Liad Agmon joins as partner. Several other hires are underway for the local office.
  • Tiger Global – with $95 billion under management, Tiger doesn’t yet have a local office, but started placing bets in the market including a $47 million investment in Guardio, a consumer cyber startup.
  • SPACs – despite of their poor performance, there are many active SPACs still out there searching for targets. Questions about the pipe loom, but nevertheless they will probably be deployed.

Education

Israel’s universities are some of the top in the world, especially when it comes to tech and entrepreneurship. In Pitchbook’s 2021 Ranking of the 50 Leading undergraduate programs that produce the most VC-backed entrepreneurs, 4 Israeli universities were ranked with Tel Aviv University in the top 10, and the Technion placed #12.

K-12 education is where the real challenges are. The government has a lot of work ahead to revamp the curriculum and ensure that the periphery and minorities are also versed in STEM subjects at the level of global tech hubs.

Strong foundations

  • Sectors – Israel attracts about 30% of the global cybersecurity investments worldwide. It is also punching above its weight in semiconductors, health, food tech and gaming. The plethora of established companies and unicorns in these spaces should continue to create the next generation of founders.
  • Culture – entrepreneurial culture and plenty of role models means that young graduates (from university or technical units in the army) see entrepreneurship as a viable career path. Israeli ‘chutzpah’ also has a role to play, giving young people a healthy disregard of the impossible and a ‘pushiness’ that’s needed to lift a startup off the ground.
  • Global mindset – Israel’s local market is negligible, so founders have to think globally (typically that means US first) from day one.
  • R&D expenditure as a percentage of GDP – Israel ranks 2nd globally in this metric, following closely after South Korea. The trend is expected to continue and is supported by government grants, the Israel innovation authority etc. These funds can help cover some of the R&D costs even in the case of less funding available in the private market.
Leading countries by research and development (R&D) expenditure as share of gross domestic product (GDP) worldwide in 2021 (Source: Statista)

Overall, I’m optimistic about the future prospects of Israeli startups in the years to come. With tech playing an ever growing role in every industry, and consumers spending more time and money online, Israeli startups might face increasing competition but are generally well positioned to win.

On a personal note, I feel privileged to play a small role in Israeli innovation with Remagine Ventures. I’ve had a chance to feel this year’s excitement up close, by cheering up on the movers and shakers in Israeli tech on my weekly #Firgun posts and newsletter. Keep on creating!

The post 2021 was a record breaking year for Israeli startups. What now? appeared first on VC Cafe.

5 Israeli Creator Economy Startups to Watch

Readers of VC Cafe already know that we’re fascinated by the creator economy and its potential to completely disrupt the $2 trillion media and entertainment industry. When you boil it down, the innovations around the creator economy consist of new ways to create, distribute and monetise content as well as direct to consumer models for fan engagement, monetisation and commerce.

Value of the global entertainment and media market (Source: Statista)

As a fund that covers entertainment and media tech in Israel, we at Remagine Ventures keep a close eye on interesting developments in the Creator Economy. You might also be interested in my post on the biggest startup opportunities in the Creator Economy. I was recently asked by Sifted to recommend exciting Creator Economy startups to watch, that are not part of our portfolio. The post is behind a paywall, so I’m sharing a slightly expanded list below.

5 Israeli creator economy startups to watch

  • Lightricks – video and image editing mobile apps
    • Why is it interesting: started in 2013, Lightricks rose to fame with Facetune, a ‘selfie’ editing app as Instagram was becoming popular. It became the perfect “companion” app – edit your pictures before sharing them. It has since built a lucrative business and crossed the $100M in annual revenue. The company recently raised $130M in September, but also came under scrutiny with the recent Facebook reports on Instagram’s impact on teens self esteem.
The growing app portfolio of Lightricks: from Facetune to small businesses, Lightricks wants to be the mobile photoshop and video editor
  • Riverside – an online podcast and video interviews recording studio. 
    • Why is it interesting: I believe that audio is under optimised and that creators will leverage podcasts and social audio as an important channel to engage their audience. The tools in this space are still lacking and normally require a hodgepodge of software and hardware for editing and post production. Riverside streamlines the process online and is getting rapid adoption in the podcasting community. 
The full suite tools for podcasts and video casts (source: Riverside.fm)
  • Nas academy – an online creator school – live classes, feedback sessions and community
    • Why is it interesting: founded by world-renowned Palestinian-Israeli video creator, Nuseir Yassin, better known as Nas Daily, Nas Academy taps into one of the biggest needs in the creator economy – education for more creators to enter the space. It turns creators into educators. This picks and shovels approach has the potential to rise with the tide in the entire creator space, as more enthusiasts and hobbyists consider becoming creators.
Learn from experts on how to develop skills to become a better creator (Source: Nasacademy)
  • Wisio – A Follower-to-Creator platform that enables followers to receive personalised video advice messages and services from their favourite creators. 
    • Why is it interesting: monetisation is the key for unlocking creativity. Wisio monetises attention by enabling creators to share their wisdom with their followers via 1:1 paid video consultations. Fans can book a chat with their favourite vocal coach, astrologer or ASMR artist and receive an exclusive video, tailored for their question.
Get 1:1 private interactions with your favourite creator (Source: Wisio)
  • Audiolabs – building monetisation and engagement tools for social audio creators
    • Why is it interesting:: Clubhouse put a big bullseye on social audio (see my blog post) and every major platform is experimenting with the format. Monetisation for social creators remains an unsolved problem, and Audiolabs wants to do for this emerging space what Stream Elements, who recently raised $100M to continue to grow their suit of production and monetisation tools for gaming streamers.
udAudiolabs offers tools for both audio creators and brands (source: Audiolabs)

There are many more worth mentioning, I’ll showcase another batch next!


Remagine Ventures is a seed/pre-seed fund investing in the future of where consumers spend their time and money. We focus on the intersection of tech, entertainment, gaming and commerce with a spotlight on Israel and the UK. If you’re an Israeli founder building solutions for the creator economy, let’s chat!

The post 5 Israeli Creator Economy Startups to Watch appeared first on VC Cafe.

5 Israeli Creator Economy Startups to Watch

Readers of VC Cafe already know that we’re fascinated by the creator economy and its potential to completely disrupt the $2 trillion media and entertainment industry. When you boil it down, the innovations around the creator economy consist of new ways to create, distribute and monetise content as well as direct to consumer models for fan engagement, monetisation and commerce.

Value of the global entertainment and media market (Source: Statista)

As a fund that covers entertainment and media tech in Israel, we at Remagine Ventures keep a close eye on interesting developments in the Creator Economy. You might also be interested in my post on the biggest startup opportunities in the Creator Economy. I was recently asked by Sifted to recommend exciting Creator Economy startups to watch, that are not part of our portfolio. The post is behind a paywall, so I’m sharing a slightly expanded list below.

5 Israeli creator economy startups to watch

  • Lightricks – video and image editing mobile apps
    • Why is it interesting: started in 2013, Lightricks rose to fame with Facetune, a ‘selfie’ editing app as Instagram was becoming popular. It became the perfect “companion” app – edit your pictures before sharing them. It has since built a lucrative business and crossed the $100M in annual revenue. The company recently raised $130M in September, but also came under scrutiny with the recent Facebook reports on Instagram’s impact on teens self esteem.
The growing app portfolio of Lightricks: from Facetune to small businesses, Lightricks wants to be the mobile photoshop and video editor
  • Riverside – an online podcast and video interviews recording studio. 
    • Why is it interesting: I believe that audio is under optimised and that creators will leverage podcasts and social audio as an important channel to engage their audience. The tools in this space are still lacking and normally require a hodgepodge of software and hardware for editing and post production. Riverside streamlines the process online and is getting rapid adoption in the podcasting community. 
The full suite tools for podcasts and video casts (source: Riverside.fm)
  • Nas academy – an online creator school – live classes, feedback sessions and community
    • Why is it interesting: founded by world-renowned Palestinian-Israeli video creator, Nuseir Yassin, better known as Nas Daily, Nas Academy taps into one of the biggest needs in the creator economy – education for more creators to enter the space. It turns creators into educators. This picks and shovels approach has the potential to rise with the tide in the entire creator space, as more enthusiasts and hobbyists consider becoming creators.
Learn from experts on how to develop skills to become a better creator (Source: Nasacademy)
  • Wisio – A Follower-to-Creator platform that enables followers to receive personalised video advice messages and services from their favourite creators. 
    • Why is it interesting: monetisation is the key for unlocking creativity. Wisio monetises attention by enabling creators to share their wisdom with their followers via 1:1 paid video consultations. Fans can book a chat with their favourite vocal coach, astrologer or ASMR artist and receive an exclusive video, tailored for their question.
Get 1:1 private interactions with your favourite creator (Source: Wisio)
  • Audiolabs – building monetisation and engagement tools for social audio creators
    • Why is it interesting:: Clubhouse put a big bullseye on social audio (see my blog post) and every major platform is experimenting with the format. Monetisation for social creators remains an unsolved problem, and Audiolabs wants to do for this emerging space what Stream Elements, who recently raised $100M to continue to grow their suit of production and monetisation tools for gaming streamers.
udAudiolabs offers tools for both audio creators and brands (source: Audiolabs)

There are many more worth mentioning, I’ll showcase another batch next!


Remagine Ventures is a seed/pre-seed fund investing in the future of where consumers spend their time and money. We focus on the intersection of tech, entertainment, gaming and commerce with a spotlight on Israel and the UK. If you’re an Israeli founder building solutions for the creator economy, let’s chat!

The post 5 Israeli Creator Economy Startups to Watch appeared first on VC Cafe.

5 Israeli Creator Economy Startups to Watch

Readers of VC Cafe already know that we’re fascinated by the creator economy and its potential to completely disrupt the $2 trillion media and entertainment industry. When you boil it down, the innovations around the creator economy consist of new ways to create, distribute and monetise content as well as direct to consumer models for fan engagement, monetisation and commerce.

Value of the global entertainment and media market (Source: Statista)

As a fund that covers entertainment and media tech in Israel, we at Remagine Ventures keep a close eye on interesting developments in the Creator Economy. You might also be interested in my post on the biggest startup opportunities in the Creator Economy. I was recently asked by Sifted to recommend exciting Creator Economy startups to watch, that are not part of our portfolio. The post is behind a paywall, so I’m sharing a slightly expanded list below.

5 Israeli creator economy startups to watch

  • Lightricks – video and image editing mobile apps
    • Why is it interesting: started in 2013, Lightricks rose to fame with Facetune, a ‘selfie’ editing app as Instagram was becoming popular. It became the perfect “companion” app – edit your pictures before sharing them. It has since built a lucrative business and crossed the $100M in annual revenue. The company recently raised $130M in September, but also came under scrutiny with the recent Facebook reports on Instagram’s impact on teens self esteem.
The growing app portfolio of Lightricks: from Facetune to small businesses, Lightricks wants to be the mobile photoshop and video editor
  • Riverside – an online podcast and video interviews recording studio. 
    • Why is it interesting: I believe that audio is under optimised and that creators will leverage podcasts and social audio as an important channel to engage their audience. The tools in this space are still lacking and normally require a hodgepodge of software and hardware for editing and post production. Riverside streamlines the process online and is getting rapid adoption in the podcasting community. 
The full suite tools for podcasts and video casts (source: Riverside.fm)
  • Nas academy – an online creator school – live classes, feedback sessions and community
    • Why is it interesting: founded by world-renowned Palestinian-Israeli video creator, Nuseir Yassin, better known as Nas Daily, Nas Academy taps into one of the biggest needs in the creator economy – education for more creators to enter the space. It turns creators into educators. This picks and shovels approach has the potential to rise with the tide in the entire creator space, as more enthusiasts and hobbyists consider becoming creators.
Learn from experts on how to develop skills to become a better creator (Source: Nasacademy)
  • Wisio – A Follower-to-Creator platform that enables followers to receive personalised video advice messages and services from their favourite creators. 
    • Why is it interesting: monetisation is the key for unlocking creativity. Wisio monetises attention by enabling creators to share their wisdom with their followers via 1:1 paid video consultations. Fans can book a chat with their favourite vocal coach, astrologer or ASMR artist and receive an exclusive video, tailored for their question.
Get 1:1 private interactions with your favourite creator (Source: Wisio)
  • Audiolabs – building monetisation and engagement tools for social audio creators
    • Why is it interesting:: Clubhouse put a big bullseye on social audio (see my blog post) and every major platform is experimenting with the format. Monetisation for social creators remains an unsolved problem, and Audiolabs wants to do for this emerging space what Stream Elements, who recently raised $100M to continue to grow their suit of production and monetisation tools for gaming streamers.
udAudiolabs offers tools for both audio creators and brands (source: Audiolabs)

There are many more worth mentioning, I’ll showcase another batch next!


Remagine Ventures is a seed/pre-seed fund investing in the future of where consumers spend their time and money. We focus on the intersection of tech, entertainment, gaming and commerce with a spotlight on Israel and the UK. If you’re an Israeli founder building solutions for the creator economy, let’s chat!

The post 5 Israeli Creator Economy Startups to Watch appeared first on VC Cafe.

Longtime VC, and happy Miami resident, David Blumberg has a new $225 million fund

Blumberg Capital, founded in 1991 by investor David Blumberg, has just closed its fifth early-stage venture fund with $225 million, a vehicle that Blumberg says was oversubscribed — he planned to raise $200 million — and that has already been used to invest in 16 startups around the world (the firm has small offices in San Francisco, New York, Tel Aviv, and Miami, where Blumberg moved his family last year).

We caught up with him earlier this week to talk shop and he sounded almost ecstatic about the current market, which has evidently been good for returns, with Blumberg Capital’s biggest hits tied to Nutanix (it claims a 68x return), DoubleVerify (a 98x return at IPO in April, the firm says), Katapult (which went public via SPAC in July), Addepar (currently valued above $2 billion) and Braze (it submitted its S-1 in June).

We also talked a bit about his new life in Florida, which he was quick to note is “not a clone of Silicon Valley,” in case we had that idea. Not last, he told us why he thinks we’re in a “golden era of applying intelligence to every business,” from mining to the business of athletic performance.

More from our conversation, edited lightly for length and clarity, follows:

TC: What are you funding right now?

DB: Our last 30 to 40 deals have basically been about big data that’s been analyzed by artificial intelligence of some sort, then riding in a better wrapper of software process automation on rails of internet and mobility. Okay, that’s a lot of buzzwords.

TC: Yes.

DB: What I’m saying is that this ability to take raw information data that’s either been sitting around and not analyzed, or from new sources of data like sensors or social media or many other places, then analyze it and take it to all these businesses that have been there forever, is beginning to [have] incremental [impacts] that may sound small [but add up].

One of our [unannounced] companies applies AI to mining — lithium mining and gold and copper — so miners don’t waste their time before finding the richest vein of deposit. We partner with mining owners and we bring extra data that they don’t have access to — some is proprietary, some is public — and because we’re experts at the AI modeling of it, we can apply it to their geography and geology, and as part of the business model, we take part of the mine in return.

TC: So your fund now owns not just equity but part of a mine?

DB: This is evidently done a lot in what’s called E&P, exploration and production in the oil and gas industry, and we’re just following a time-tested model, where some of the service providers put in value and take out a share. So as we see it, it aligns our interests and the better we do for them, the better they do.

TC: This fund is around the same size of your fourth fund, which closed with $207 million, seemingly by design. How do you think about check sizes in this market?

DB: We write checks of $1 million to $6 million generally. We could go down a little bit for something in a seed where we can’t get more of a slice, but we like to have large ownership up front. We found that to have a fund return at least three x — and our funds seem to be returning much more than that — [we need to be math-minded about things].

We have 36 companies in our portfolio typically, and 20% of them fail, 20% of them are our superstars, and 60% are kind of medium. Of those superstars, six of them have to return $100 million each in a $200 million fund to make it a $600 million return, and to get six companies to [produce a] $100 million [for us] they have to reach a billion dollars in value, where we own 10% at the end.

TC You’re buying 10% and maintaining your pro rata or this is after being diluted over numerous rounds?

DB: It’s more like we want 15% to 20% of a company and it gets [diluted] down to 10%. And it’s been working. Some of our funds are way above that number.

TC: Are all four of your earlier funds in the black?

DB: Yes. I love to say this: We have never, ever lost money for our fund investors.

TC: You were among a handful of VCs who were cited quite a lot last year for hightailing it out of the Bay Area for Miami. One year into the move, how is it going?

DB: It is not a clone of Silicon Valley. They are different and add value each in their own way. But Florida is a great place for our family to be and I find for our business, it’s going to be great as well. I can be on the phone to Israel and New York without any time zone-related problems. Some of our companies are moving here, including one from from Israel recently, one from San Francisco, and one from Texas. A lot of our LPs are moving here or live here already. We can also up and down to South America for distribution deals more easily.

If we need to get to California or New York, airplanes still work, too, so it hasn’t been a negative at all. I’m going to a JPMorgan event tonight for a bunch of tech founders where there should be 150 people.

TC: That sounds great, though did you feel about summer in Miami?

DB: We were in France.

Pictured above, from left to right: Firm founder David Blumberg, managing director Yodfat Harel Buchris, COO Steve Gillan, and managing director Bruce Taragin.

Israel’s maturing fintech ecosystem may soon create global disruptors

“Even with its vast local talent, it seems Israel still has many hurdles to overcome in order to become a global fintech hub. [ … ] Having that said, I don’t believe any of these obstacles will prevent Israel from generating disruptive global fintech startups that will become game-changing businesses.”

I wrote that back in 2018, when I was determined to answer whether Israel had the potential to become a global fintech hub. Suffice to say, this prediction from three years ago has become a reality.

In 2019, Israeli fintech startups raised over $1.8 billion; in 2020, they were said to have raised $1.48 billion despite the pandemic. Just in the first quarter of 2021, Israeli fintech startups raised $1.1 billion, according to IVC Research Center and Meitar Law Offices.

It’s then no surprise that Israel now boasts over a dozen fintech unicorns in sectors such as payments, insurtech, lending, banking and more, some of which reached the desired status just in the beginning of 2021 —  like Melio and Papaya Global, which raised $110 million and $100 million, respectively.

Over the years I’ve been fortunate to invest (both as a venture capitalist and personally) in successful early-stage fintech companies in the U.S., Israel and emerging markets  —  Alloy, Eave, MoneyLion, Migo, Unit, AcroCharge and more.

The major shifts and growth of fintech globally over these years has been largely due to advanced AI-based technologies, heightened regulatory scrutiny, a more innovative and adaptive approach among financial institutions to build partnerships with fintechs, and, of course, the COVID pandemic, which forced consumers to transact digitally.

The pandemic pushed fintechs to become essential for business survival, acting as the main contributor of the rapid migration to digital payments.

So what is it about Israeli-founded fintech startups that stand out from their scaling neighbors across the pond? Israeli founders first and foremost have brought to the table a distinct perspective and understanding of where the gaps exist within their respective focus industries —  whether it was Hippo and Lemonade in the world of property and casualty insurance, Rapyd and Melio in the world of business-to-business payments, or Earnix and Personetics in the world of banking data and analytics.

This is even more compelling given that many of these Israeli founders did not grow within financial services, but rather recognized those gaps, built their know-how around the industry (in some cases by hiring or partnering with industry experts and advisers during their ideation phase, strengthening their knowledge and validation), then sought to build more innovative and customer-focused solutions than most financial institutions can offer.

Having this in mind, it is becoming clearer that the Israeli fintech industry has slowly transitioned into a mature ecosystem with a combination of local talent, which now has expertise from a multitude of local fintechs that have scaled to success; a more global network of banking and insurance partners that have recognized the Israeli fintech disruptors; and the smart fintech -focused venture capital to go along with it. It’s a combination that will continue to set up Israeli fintech founders for success.

In addition, a major contributor to the fintech industry comes from the technological side. It is never enough to reach unicorn status with just the tech on the back end.

What most likely differentiates Israeli fintech from other ecosystems is the strong technological barriers and infrastructure built from the ground up, which then, of course, leads to the ability to be more customized, compliant, secured, etc. If I had to bet on where I believe Israeli fintech startups could become market leaders, I’d go with the following.

Voice-based transactions

Voice technologies have come a long way over the years; where once you knew you were talking to a robot, now financial institutions and applications offer a fully automated experience that sounds and feels just like a company employee.

Israel has shown growing success in the world of voice tech, with companies like Gong.io providing insights for remote sales teams; Bonobo (acquired by Salesforce) offering insights from customer support calls, texts and other interactions; and Voca.ai (acquired by Snapchat) offering an automated support agent to replace the huge costs of maintaining call centers.

Israel’s DiA gets $14M to expand AI-driven ultrasound analysis

Israel-based AI healthtech company, DiA Imaging Analysis, which is using deep learning and machine learning to automate analysis of ultrasound scans, has closed a $14 million Series B round of funding.

Backers in the growth round, which comes three years after DiA last raised, include new investors Alchimia Ventures, Downing Ventures, ICON Fund, Philips and XTX Ventures — with existing investors also participating including CE Ventures, Connecticut Innovations, Defta Partners, Mindset Ventures, and Dr Shmuel Cabilly. In total, it’s taken in $25M to date.

The latest financing will go on expanding its product range and going after new and expanded partnerships with ultrasound vendors, PACS/Healthcare IT companies, resellers, and distributors while continuing to build out its presence across three regional markets.

The healthtech company sells AI-powered support software to clinicians and healthcare professionals to help them capture and analyze ultrasound imagery — a process which, when done manually, requires human expertise to visually interpret scan data. So DiA touts its AI technology as “taking the subjectivity out of the manual and visual estimation processes being performed today”.

It has trained AIs to assess ultrasound imagery so as to automatically hone in on key details or identify abnormalities — offering a range of products targeted at different clinical requirements associated with ultrasound analysis, including several focused on the heart (where its software can, for example, be used to measure and analyze aspects like ejection fraction; right ventricle size and function; plus perform detection assistance for coronary disease, among other offerings).

It also has a product that leverages ultrasound data to automate measurement of bladder volume.

DiA claims its AI software imitates the way the human eye detects borders and identifies motion — touting it as an advance over “subjective” human analysis that also brings speed and efficiency gains.

“Our software tools are supporting tool for clinicians needing to both acquiring the right image and interpreting ultrasound data,” says CEO and co-founder Hila Goldman-Aslan.

DiA’s AI-based analysis is being used in some 20 markets currently — including in North America and Europe (in China it also says a partner gained approval for use of its software as part of their own device) — with the company deploying a go-to-market strategy that involves working with channel partners (such as GE, Philips and Konica Minolta) which offer the software as an add on on their ultrasound or PACS systems.

Per Goldman-Aslan, some 3,000+ end-users have access to its software at this stage.

“Our technology is vendor neutral and cross platform therefore runs on any ultrasound device or healthcare IT systems. That is why you can see we have more than 10 partnerships with both device companies as well as healthcare IT/PACS companies. There is no other startup in this space I know that has these capabilities, commercial traction or many FDA/CE AI-based solutions,” she says, adding: “Up to date we have 7 FDA/CE approved solutions for cardiac and abdominal areas and more are on the way.”

An AI’s performance is of course only as good as the data-set it’s been trained on. And in the healthcare space efficacy is an especially crucial factor — given that any bias in training data could lead to a flawed model which misdiagnoses or under/over-estimates disease risks in patient groups who were not well represented in the training data.

Asked about how its AIs were trained to be able to spot key details in ultrasound imagery, Goldman-Aslan told TechCrunch: “We have access to hundreds of thousands ultrasound images through many medical facilities therefore have the ability to move fast from one automatic area to another.”

“We collect diverse population data with different pathology, as well as data from various devices,” she added.

“There is a Phrase ‘Garbage in Garbage out’. The key is not to bring garbage in,” she also told us. “Our data sets are tagged and classified by several physicians and technicians, each are experts with many years on experience.

“We also have a strong rejection system that rejects images that was taken incorrectly. This is how we overcome the subjectivity of how data was acquired.”

It’s worth noting that the FDA clearances obtained by DiA are 510(k) Class II approvals — and Goldman-Aslan confirmed to us that it has not (and does not intend) to apply for Premarket Approval (PMA) for its products from the FDA.

The 510(k) route is widely used for gaining approval for putting many types of medical devices into the US market. However it has been criticized as a light-touch regime — and certainly does not entail the same level of scrutiny as the more rigorous PMA process.

The wider point is that regulation of fast-developing AI technologies tends to lag behind developments in how they’re being applied — including as they push increasingly into the healthcare space where there’s certainly huge promise but also serious risks if they fail to live up to the glossy marketing — meaning there is still something of a gap between the promises made by device makers and how much regulatory oversight their tools actually get.

In the European Union, for example, the CE scheme — which sets out some health, safety and environmental standards for devices — can simply require a manufacturer to self declare conformity, without any independent verification they’re actually meeting the standards they claim, although some medical devices can require a degree of independent assessment of conformity under the CE scheme. But it’s not considered a rigorous regime for regulating the safety of novel technologies like AI.

Hence the EU is now working on introducing an additional layer of conformity assessments specifically for applications of AI deemed ‘high risk’ — under the incoming Artificial Intelligence Act.

Healthcare use-cases, like DiA’s AI-based ultrasound analysis, would almost certainly fall under that classification so would face some additional regulatory requirements under the AIA. For now, though, the on-the-table proposal is being debated by EU co-legislators and a dedicated regulatory regime for risky applications of AI remains years out of coming into force in the region.

Governments should invest in their diaspora founders

We are brainstorming a new solution to a widespread challenge in many countries: How to develop a self-sustaining, independent local tech ecosystem. We propose that governments should systematically support funding for their diaspora founders, not just founders locally.

There are three main players in any tech ecosystem:

  • The first are founders who want to build companies and need funding. In many ecosystems outside of the major tech hubs, founders face cultural, legal, reputational and other hurdles to building a successful tech company. As a result, many of them emigrate to the U.S. Immigrants contribute to the success of the U.S. innovation economy at a vastly disproportionate rate.
  • Next are VC firms looking for founders. In a very small number of geographies, there is no shortage of VC funds (NY, CA, Boston, Israel, Beijing). But in most cities in the world, there is only a relatively small number of VC funds.
  • Then you have national and local governmental organizations interested in promoting economic growth and job creation. They particularly want to see a thriving tech ecosystem generating high-paid jobs.

Our proposal is that many governments that are not major tech hubs (i.e., most countries excluding the U.S., China, Israel and India) should stop restricting themselves to supporting locally domiciled VC funds.

Many countries’ governments (Canada, France, etc.) have created or supported funds to invest in local VC managers. Usually, governments have a two-part goal: Achieve good returns and generate jobs. However, in many cases, these VC funds have failed on one or both counts.

There is a reason the definitive book on the topic has such a depressing title: “Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed — and What to Do about It,” by my former professor, Josh Lerner, head of the entrepreneurial management unit and the Jacob H. Schiff Professor of Investment Banking at Harvard Business School.

Silicon Valley, Singapore, Tel Aviv ― the global hubs of entrepreneurial activity ―all bear the marks of government investment. Yet, for every public intervention that spurs entrepreneurial activity, there are many failed efforts that waste untold billions in taxpayer dollars … [The book] reveals the common flaws undermining far too many programs ― poor design, a lack of understanding for the entrepreneurial process, and implementation problems.

Our proposal is that many governments that are not major tech hubs (i.e., most countries excluding the U.S., China, Israel and India) should stop restricting themselves to supporting locally domiciled VC funds. Instead, they should consider investing in VC funds that invest in their diaspora.

We argue that this benefits the home country in three ways:

Remittances: Entrepreneurs will send money home to their families.

Brain gain: If you look at the leaders of the tech ecosystem in most countries, you will see a very disproportionate number of people who have education and work experience abroad, especially in the U.S. Diaspora entrepreneurs bring the knowledge and understanding acquired outside the country that may help them see possibilities not apparent to people who have not lived elsewhere. On the other hand, these entrepreneurs often encounter entrenched attitudes, resentment from non-migrants, and administrative barriers in bringing money, materials and equipment from abroad.

Job creation: Even if a French emigrant starts their business in New York, when they expand, France will be a logical place for a European HQ. In addition, as the firm grows, there are many functions they may set up in their home country, such as engineering, QA and customer support.

The private sector has already identified this opportunity. In New York City, there already exist numerous VC funds with particular interest in certain diasporas. For Israel, we have Elevator Fund, Hanaco, Innovation Endeavors, JANVEST Capital Partners, Pereg Ventures, Team8, numerous others. See “The ultimate guide to US investment in Israeli startups.”

For the Canadian diaspora, you have iNovia Capital and HOF Capital for people from MENA, while ff Venture Capital looks at Poland.

Governments could model these efforts on leading global public/private organizations that have supported diaspora entrepreneurs in many other ways.

Networking, mentoring and training: Governments can offer opportunities for diaspora and local business leaders to meet one another and discuss potential business and investment opportunities in the homeland. Many of these groups also offer startup services such as market research, business plan advisory, matching with seasoned executives and registering a business. A few such groups are the African Diaspora Network (ADN), The Indus Entrepreneurs (TiE) (Southeast Asia), Advance (Australia) based in New York, C100 (focused on Canadian tech leaders), GlobalScot, Irish Executive Mentorship Program and Red de Talentos Mexicanos.

Investment (almost entirely in the home country): Investment is typically in the form of pooled private and public funds, or matching grants, and typically requires a physical presence in the home country. A few such organizations include:

  • The African Foundation for Development (AFFORD) was founded in 1994 as a nonprofit organization by Africans living in the U.K. to help expatriates there create wealth and jobs back home. Its investment activities include the Diaspora Finance Initiative (DFI), AFFORD Diaspora Grants and the AFFORD Business Club.
  • Moldova has a Pare 1+1 program that offers funding and entrepreneurial training to immigrants (and returnees) into Moldova.
  • Chile Global Ventures (part of Fundación Chile) finances startups through its network of over 100 influential Chileans living in the U.S., Canada and Europe. They invest in Chilean startups or companies abroad founded by Chileans.
  • Ecuador’s Fund El Cucayo provides risk capital in a matching-funding format, 50-50 or 25-75, to returning Ecuadorian entrepreneurs in Ecuador.

Recruiting new citizens: The Canadian Startup Visa Program is great for recruiting international talent. This is an enormous opportunity for Canada to further leverage its historic openness to immigrants. From my point of view as an American, our history of welcoming immigrants (including my French father) is one of our greatest advantages compared to our geopolitical rivals. We’re fools if we don’t aggressively leverage this unique asset.

So here’s our question: Which forward-thinking governments are open to the idea of supporting funding to their diaspora? In our conversations with some senior government officials outside of the U.S., what we’ve heard is, “We love the idea, but it would be difficult to get political support for anything that involves sending money abroad.”

Who can surmount this challenge?

Early-stage benchmarks for young cybersecurity companies

We’re quick to celebrate the extraordinary victories of Israel’s multiplying cybersecurity unicorns, but every success story must start somewhere. The early days of any young startup decide how successful it can be, which is why we’ve developed a focused, value-add program to support cybersecurity founders during this most critical stage and maximize their potential in building market-leading companies.

However, the early stages of cybersecurity company-building are often shrouded in mystery, only coming into the light for fundraising and feature announcements. This leaves many entrepreneurs we speak with asking what exactly cybersecurity companies are achieving behind the curtain to earn these huge victories.

Though every company’s journey is unique, we can tease out trends and patterns to establish performance benchmarks for the cybersecurity ecosystem as a whole. To most entrepreneurs, however, the sensitive data required to understand the early success of a company is often unavailable or obscured. Moreover, the industry has yet to formally define proxies for growth and momentum beyond fundraising — leaving cybersecurity founders aiming for landmarks without guideposts.

Entrepreneurs require guideposts to aspire to when building large companies, and critical customer and revenue expectations can be best established by looking at what already successful cybersecurity companies have accomplished. Such metrics have been previously established for wider areas of technology, such as SaaS.

Leveraging our experience and resources, we collect this knowledge to keep our founders informed with the most up-to-date cybersecurity-specific metrics for long-term and large-scale growth. We hope that sharing these unique insights into early-stage cybersecurity companies — based on our own portfolio companies’ average performance — will help entrepreneurs in the wider Israeli ecosystem more confidently build their budgets and roadmaps with industry evidence.

Benchmarks for early-stage cybersecurity companies

Image Credits: YL Ventures

What should revenue look like over the first few years?

Though today’s investors are growing more aggressive, $500,000 in annual recurring revenue (ARR) is a traditional baseline requirement for a successful Series A from strong investors, and hitting that mark quickly should remain every entrepreneur’s goal. Hitting this target indicates product-market fit and customer willingness to commit to your solution.

When it comes to contracts, timing can provide important insight into the quality and performance of the sales pipeline. On average, successful companies will have closed their first paying customers in the U.S. within 12 months of their seed round.

Discounting variances in pricing, the best companies we’ve seen are able to reach the $500,000 benchmark in less than 18 months. From there, top-performing companies can expect to gain momentum and reach $1 million in ARR in 18 to 24 months. Such momentum is contingent on a number of factors for Israeli cybersecurity entrepreneurs, but growth is mainly reliant on how well founders connect with relevant customers outside the Israeli market.

Siga secures $8.1M Series B to prevent cyberattacks on critical infrastructure

Siga OT Solutions, an Israeli cybersecurity startup that helps organizations secure their operations by monitoring the raw electric signals of critical industrial assets, has raised $8.1 million in Series B funding.

Siga’s SigaGuard says its technology, used by Israel’s critical water facilities and the New York Power Authority, is unique in that rather than monitoring the operational network, it uses machine learning and predictive analysis to “listen” to Level 0 signals. These are typically made up of components and sensors that receive electrical signals, rather than protocols or data packets that can be manipulated by hackers.

By monitoring Level 0, which Siga describes as the “richest and most reliable level of process data within any operational environment,” the company can detect cyberattacks on the most critical and vulnerable physical assets of national infrastructures. This, it claims, ensures operational resiliency even when hackers are successful in manipulating the logic of industrial control system (ICS) controllers.

Amir Samoiloff, co-founder and CEO of Siga, says: “Level 0 is becoming the major axis in the resilience and integrity of critical national infrastructures worldwide and securing this level will become a major element in control systems in the coming years.”

The company’s latest round of funding — led by PureTerra Ventures, with investment from Israeli venture fund SIBF, Moore Capital, and Phoenix Contact — comes amid an escalation in attacks against operational infrastructure. Israel’s water infrastructure was hit by three known cyberattacks in 2020 and these were followed by an attack on the water system of a city in Florida that saw hackers briefly increase the amount of sodium hydroxide in Oldsmar’s water treatment system. 

The $8.1 million investment lands three years after the startup secured $3.5 million in Series A funding. The company said it will use the funding to accelerate its sales and strategic collaborations internationally, with a focus on North America, Europe, Asia, and the United Arab Emirates. 

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