Author: Sean Toobi, Graphic: Rose Lee
The BRB Bottomline: As the hottest startup hub for early stage companies, Israel cultivates an environment of high-tech innovation that attracts investors from around the world. In an interview with the Founding Partner and Co-CEO of a prominent Israeli VC firm and platform, we explore emerging industries and promising Israeli startups within each space.
Imagine a country the size of New Jersey leading the world in the total number of startups and value of venture capital investments per capita.
With a population of only 9 million people, there is 1 startup for every 1,500 people.
Sounds crazy, right?
Well, this is Israel.
The New Silicon Valley
Also known as the “Startup Nation,” Israel is renowned for its culture of spirited entrepreneurship and technological innovation. Leading the world in R&D expenditure as a share of gross domestic product[1], this tiny country has become an attractive investment hub for both established and emerging industries. As a result, Israel is now being dubbed Silicon “Wadi.”
Many theories attempt to explain how and why Israel has earned this nickname. Is it the compulsory military service that trains skilled cybersecurity experts? Or the Israeli “chutzpah” to innovate amid the country’s historic lack of resources?
Rather than focus on why, investors instead focus on what: the reality is that Israel is the world’s most capital-efficient startup ecosystem for early stage investors.
Investing in these startups is not limited to individuals and firms based only in Israel. In fact, investors around the globe can gain access to these opportunities thanks to a modern development:
Venture capital platforms
All About Angels
VC platforms and angel networks are communities of angel investors that seek to invest in exciting business ventures. These networks open niche markets to angel investors all around the world, solving two critical problems: access to sufficient funding for startups, and access to attractive investments for angel investors.
Venture capital firms put substantial time and effort into examining startups, markets, and teams in order to make smart investments. But what if you are an angel investor without the necessary time to complete extensive research or sufficient capital to enjoy the rights afforded to VCs?
Enter iAngels, a hybrid VC and angel investment firm, which enables global investors to invest in Israeli startups. In an exclusive interview with Shelly Hod Moyal, the Co-CEO of iAngels discusses the advantages of investing through a VC platform and examines disruptive companies in industries with high growth potential.
Dealflow and Diligence
The iAngels team conducts due diligence on hundreds of companies every month, assessing the market size, industry growth potential, technological developments, competitive landscape, business model, and more. This arduous process shrinks a large pool of applicants into a select few of the most exciting opportunities. These startups enter the iAngels platform, where angel investors in different countries can invest in the startups’ funding rounds. Consequently, iAngels leverages its comprehensive dealflow to democratize investing in Israeli tech companies, hence the company’s tagline: “Your team for investing in the future.”
“We spend a lot of time analyzing the team dynamic and understanding the backgrounds of the entrepreneurs, and also learning about the markets that they’re trying to tap into,” says Hod Moyal. “Contrary to investing in other asset classes like public markets, here it’s not a one time investment; it’s a long term partnership that usually spans between 7-10 years as well as several investments across the company life cycle.”
The investments available on the iAngels.com platform also receive an investment from iAngels’ fund, iNgenuity, where the iAngels General Partners have also invested. This builds trust in the angel investors on the platform, knowing that iAngels is not only presenting opportunities to investors but investing in them as well.
iAngels takes a tailored approach by offering two modes of portfolio management: the iAngels Managed Account and Self-Managed Account. Investors on the platform can choose a more hands-on approach of self-management on a deal-by-deal basis to build their own customized portfolio. Also, investors can rely on the expertise of iAngels to manage their portfolios with a managed account or by investing in the fund. Per the best practices of venture capital investing, the iAngels team encourages creating a portfolio of 20+ startup investments, diversifying within the asset class to increase expected returns.
“In venture capital, you are reliant on the outliers in the portfolio to generate most of the profits and make up for losses. In contrast to other asset classes, you would be lucky to see 20% of your investments have successful outcomes. Therefore you need to be involved in enough carefully selected opportunities to increase the chances to have an outlier.”
“I am proud that after 7 years, 50% of the funds that were deployed through iAngels are in our top ten companies. This goes to show that most of the investors’ money has been invested and then re-invested in the companies that have grown and are showing the most promise.”
Emerging Industries
According to Hod Moyal, “one of the most important aspects of investing is finding market opportunities that have a lot of growth potential, so oftentimes this would mean investing early in the innovation cycle.” This drives Hod Moyal and her team to constantly research market trends and new technological developments that have the potential to disrupt business sectors. In our interview, Hod Moyal highlights some of the fastest growing industries, including high-tech Israeli companies in each respective space that have received funding through iAngels.
Digital Health
As one of the largest industries in the world, healthcare is plagued with antiquated technology and practices. Although healthcare accounts for an average of 10% of the world’s GDP[2], drastic shortages in physicians and medical equipment put increasing pressure on both developed and underdeveloped nations. The arrival of COVID-19, coupled with a growing and aging population, has accelerated the pursuit for innovative solutions to meet the demand for healthcare and treatment. Consequently, the digital health industry has experienced rapid growth over the last few years due to the applications of technological advancements in the medical field.
“Digital health,” says Hod Moyal, “is a huge market, and is ripe for disruption in light of emerging technologies such as AI, IOT and APIs making it easier to create better and more efficient products.”
In fact, the global digital health market size is expected to grow from $86.4B in 2018 to $504.4B in 2025[3].
Hod Moyal identifies trends among companies to deliver solutions that are “more transparent and accessible” for people and medical institutions as opposed to existing methods.
“Today, the whole notion of value-based care is incredibly important, whereas in the past healthcare was much more transactional. There are greater opportunities to create a more personalized experience for patients.”
Binah.ai, one of the most exciting companies in Israel, allows you to measure your vital signs using video from a smartphone camera. By analyzing the human face, Binah.ai uses signal processing to determine heart rate, mental stress, respiration, blood pressure and more. This innovative approach takes advantage of Remote Photoplethysmography (rPPG), a low-cost, non-invasive method that detects blood volume changes at the skin surface, which is widely used in smart watches.
Binah.ai revolutionizes the manner in which healthcare professionals can monitor and diagnose patients, allowing measurements to be taken without physical contact. This technology can even enable doctors to triage and monitor COVID-19 patients remotely, which is currently being tested at the Jewish General Hospital in Montreal.
Agtech & Foodtech
In 2020, the global population hit roughly 7.5 billion people, and that number is expected to surpass 9 billion by 2040[4]. This increase puts pressure on farmers and food providers to meet the rising demand while optimizing agronomic methods.
“People are understanding that the resources we’re taking advantage of from both animals and in general are being depleted,” says Hod Moyal. “We need to find solutions for the sustainability of mankind and our environment.”
Now, firms and investors have identified a vast market opportunity in the solutions provided by agricultural technology (agtech) and foodtech companies. Startups in this space are leveraging artificial intelligence in order to maximize crop output potential in a sustainable manner. In 2019, agtech and foodtech together raised a record $20B[5], following a successful IPO from Beyond Meat that led to a company valuation of $9B.
BeeHero, a startup in the iAngels portfolio, developed the world’s first user-friendly platform for smart hive monitoring. We are in an era where pollination influences nearly 35% of global crop production, yet bee populations have been dying at staggering rates. This endangered species threatens to cause an ecological imbalance that will dramatically harm agriculture and crop yields. In light of this issue, BeeHero leverages machine learning to provide beekeepers with real-time insights into their beehives. As a result, farmers optimize their maximum output potential during pollination cycles, which can increase crop yield by 30% while keeping beehives healthy.
Another iAngels portfolio company, SeeTree combines AI and computer vision in order to provide a SaaS solution that examines tree health and predicts crop disease. There are over 250 million acres of permanent crops around the world, and the global orchard market is estimated to be nearly $10B[6], which reveals a large and growing market. SeeTree employs drones and ground sensors to monitor orchard fields and provide actionable analytics for crop management. This can help farmers decrease costs in an environmentally-friendly manner, increasing the production of higher-quality crops.
Blockchain
As one of the most popular yet widely untapped technologies of the twenty-first century, blockchain has reached $4.3B in spending worldwide in 2020. Although the global blockchain market size stands at a modest $3B in 2020, it is expected to grow exponentially to $39.7B by 2025[7]. Blockchain technology has been popularized in the last decade due to the excitement over cryptocurrencies, like Bitcoin and Ethereum. However, the blockchain revolution has the potential to disrupt and transform countless other industries.
Blockchain serves as a decentralized database of ledgers that logs transactions in a secure manner. The prevalence of the technology reflects the growing “desire for more fairness and transparency” in the business world, according to Hod Moyal. As a result, tech giants and startups alike are launching new ventures to create blockchain solutions for various sectors. Examples of innovations include increased data protection for cybersecurity, streamlined management for supply chains, effective development of smart contracts for legal technology, and more.
Given her particular interest in blockchain, Hod Moyal and her partners at iAngels launched 21M Capital, an investment and advisory firm that specializes in startups that create solutions with blockchain technology. Like iAngels, 21M Capital allows investors around the world to invest in blockchain opportunities.
Take-Home Points
Due to a multitude of factors, Israel is renowned for its culture of developing high-tech industries. From digital health to foodtech, Israeli startups are revolutionizing existing industries with innovative technology solutions. Investors around the world can leverage angel networks like iAngels in order to gain access to these attractive investment opportunities. Silicon Valley has met its match; Silicon “Wadi” is redefining the future of the technological revolution.
Sources:
[1] Statista, “Top countries by R&D share of GDP worldwide 2019”
[2] The World Bank, “Current health expenditure (% of GDP)”
[3] Statista, Digital Health Dossier
[4] Statista, “Forecast about the development of the world population from 2015 to 2100”
[5] AgFunder, “Agri-FoodTech Investing Report”
[6] Food and Agriculture Organization (FAO)
[7] Statista, Blockchain Dossier