The capital offers opportunities for tech innovation and private equity investors.
By ABIGAIL KLEIN LEICHMAN‘Made in Israel’(photo credit: New Spirit)
At a December Beera-Tech event at Mike’s Place bar, a couple of hundred young entrepreneurial hopefuls raised a glass with reps from Silicon Valley accelerator Singularity University and Yanki Margalit, founder of Aladdin Knowledge Systems, chairman of SpaceIL and partner in the micro-VC Innodo.You’re picturing Dizengoff Boulevard? Guess again.The bimonthly Beera-Tech takes place at the Jaffa Road branch of Mike’s Place. It’s a program by Made in Jerusalem, a voluntary initiative founded by Jerusalem Venture Partners (JVP) investment associate Hanan Brand and Internet entrepreneur Uriel Shuraki to develop and support Jerusalem’s growing innovation ecosystem.“Two years ago, when I started at JVP, I would go to Tel Aviv events two or three times a week and find startups, and I asked myself why we didn’t have these things in Jerusalem,” says Brand. “Every start-up here thought they were the only ones. It was time to bring them all together.”Some big names, such as Dov “Disk on Key” Moran, have spoken at events organized by Made in Jerusalem, which serves as an aggregator for the city’s start-up service providers, investors and those all-important networking events.“Jerusalem is such a great brand, and everybody in the world knows it,” says Brand. “We’re trying to show it’s not just old buildings and holy sites but a place evolving for creativity and innovation, too. We have top-ranked institutions such as Bezalel [Academy of Art and Design] and Hebrew University, so Jerusalem can be the capital of the start-up nation.”Though that title is firmly held by Tel Aviv and probably will be for some time to come, Jerusalem can indeed boast recent success stories such as Umoove, a pioneer in eye-tracking; Orcam, groundbreaking artificial vision technology; ThetaRay solution for cyber security/big data; Zula and Glide, both 2013 TechCrunch Disrupt Finalists; Wishi, named by Business Insider as one of the 20 hottest start-ups in Israel; and Facetune, which reached the top of the paid app list on the App Store.Another sure indication that the start-up culture of Jerusalem is steadily gathering steam is two new venture capital funds established within a year of each other.At one end of the spectrum is OurCrowd, founded by serial entrepreneur and venture capitalist Jon Medved in October 2012 as an equity crowd-funding platform for vetted investors in Israeli start-ups. As of September, it had raised more than $20 million for 26 portfolio companies, with an average deal size of half a million dollars.At the other end, and more finely focused on Jerusalem entrepreneurs, is Jumpspeed Ventures. Launched by transplanted New York lawyer/entrepreneur/business development executive Ben Wiener in October 2013, Jumpspeed is the first micro-fund and early-stage product accelerator in the capital city. Start-ups in the digital media space can apply for investments of $50,000 to $150,000.
The funding comes from several private investors in the United States, with room for others. “They are all high net worth individuals who agree that Jerusalem presents a tremendous opportunity for tech innovation and that there’s a gap in funding in the VC private equity market,” Wiener says. “Jerusalem has at least two classic VC funds: JVP and Van Leer Ventures Jerusalem. We have a good relationship with both of them and expect to bring some of our companies to them for funding rather than competing with them.”In the accelerator realm, Jumpspeed also fills a different niche.“Most accelerators are focused on the beginning of the start-up process, the raw idea or even the pre-idea stage. Entrepreneurs who finish accelerator programs still need more assistance when they have their product developed,” says Wiener. “There is a long road ahead to get that product into the market and to get market traction and then follow-on funding. My efforts with founders will be tremendously focused on taking the product to those milestones. That’s the ‘white space’ thatmany investors have moved away from because they can wait for a company to get traction before investing.”In the coming months, Wiener will announce the initial three portfolio companies, all of which propose to make software for digital media.“I know that industry best, and it can move the fastest with the funding we can give them,” Wiener explains.While not automatically rejecting applicants from outside Jerusalem, Wiener is philosophically and practically partial to locally based businesses. The founders of each company accepted in the Jumpspeed portfolio will be required to go to his office twice a week to meet with him and investors, mentors and “thought leaders” he will bring on board.“I want to expose them to the best and brightest people,” he says.Wiener rents an office for Jumpspeed inside PICO, a year-old shared workspace in the Talpiot industrial zone.Venture capitalist Elie Wurtman and telecom executive Isaac Hassan founded PICO (People-Ideas-Community- Opportunities) to forge a link between creativity and entrepreneurship in Jerusalem. In addition to hosting and mentoring startups, PICO provides exhibition space for young artists in its converted warehouse.Other co-working spaces are popping up in the city – another sign of the strengthening start-up culture of Jerusalem.The Jerusalem Hub on Hillel Street, a “social workspace” for entrepreneurs and freelancers, locals and travelers, is a project of the Israeli branch of PresenTense, a global community of innovators, entrepreneurs, thinkers, creators and educators investing in revitalizing established Jewish communities.Jerusalem Startup Hub, the Center for Entrepreneurial Innovation in Jerusalem on Shlomzion Hamalka Street, opened in March to host breakthrough technological start-ups from all over the world, 24/6. Managing partners Gadi Isaev, Levy Raiz, Roman Gold and chairman David Wolfson also intend it to serve as a “window” into the Israeli field of innovations for international investors.BioJerusalem, launched in 2006 by the Jerusalem Development Authority, plans to establish a 1,000-square-meter laboratory complex in Jerusalem for biomed start-ups. Some 43 percent of Israel’s basic biomed research and more than half of the clinical trials in Israel take place in Jerusalem.“The new solution offered here, which enables companies to rent lab and office space for short- or longterm periods, is unique in Israel and is based on similar models in the US and in Europe,” says Udi Ben-Dror, vice president of finance and business development for the JDA. “Companies in the early seed stages usually can’t afford to have all the services and equipment they need in-house, so we want Jerusalem to provide that and create an even better environment.”The next big news in start-up hubs may well come from an unexpected sector. Yshai Cohen, 18, a recent graduate of the three-year Middle East Education through Technology (MEET) program sponsored by the Massachusetts Institute of Technology for Israeli and Palestinian Arab Jerusalem teens, says he and several other MEET alumni have begun a venture lab and aim to build a hub in east Jerusalem. He’s hooked up with Made in Jerusalem to help him make this happen.“Made in Jerusalem is about two main things: collaboration and community,” says Cohen, who is building an application called SmartBus. “I joined in order to work on youth and Arab-Israeli collaboration.Involving youth in the start-up community is important to the entrepreneurial culture, and we want to use our connections to build new start-ups from east Jerusalem.”Early-stage accelerators, too, are on the rise in the capital city.Van Leer has a new partnership with Xenia Venture Capital to operate an incubator called Van Leer Xenia Ventures, or VLX Ventures for short. VLX’s technological incubator in Jerusalem is initiating and building up companies specializing in information technology, medical devices and industrial applications.About 20 start-ups have so far found a launching pad at SifTech, the Jerusalem Entrepreneurship Center, established in 2012 on the Mount Scopus campus of the Hebrew University of Jerusalem to connect between the private business sector and academic institutions in Jerusalem and to enable entrepreneurs to establish their initiatives in the city.The Jerusalem College of Technology, the Azrieli (Jerusalem) College of Engineering and Bezalel Academy also have recently begun accelerators for student and graduate entrepreneurs.In addition, the new Forum for Young Entrepreneurs in Jerusalem was established by the Jerusalem Center Young Association and the MATI Jerusalem Business Development Center. Monthly meetings at the Morasha-Musrara community center feature talks by leading professionals in various fields meant to introduce new tools and concepts, as well as encourage networking.Made in Jerusalem’s Brand predicts that this trend will help stem the flight of Jerusalem-educated engineers and artists to Tel Aviv once they finish their schooling and are ready to go into business.“In my position at JVP, I see about 700 Israeli companies a year,” says Brand. “Two years ago I looked at how many of them were from Jerusalem, and it was only around 10. Last year, surprisingly, there were more than 60. Of course, we don’t invest in all of them, but there is something happening here, and we’re happy to see it.”Avigail Frij, an executive board member of the sevenyear- old Jerusalem Business Networking Forum, says this is the main reason JBNF was founded.“Jerusalem has all the potential to be a great commercial and start-up center because we have all the talent needed. But a lot of these talented people who want to live in the Jerusalem area are often forced to travel far to find employment, and that is the problem,” she says.She sees Made in Jerusalem and other rising ventures as direct results of JBNF’s efforts since 2007 to raise the profile of the city through networking events that have attracted members and guest speakers such as Brand and Wiener.“It all points to the fact that we’ve been working hard to bring attention to the resources that can be developed here in Jerusalem,” Frij says. “Many of these new initiatives focus on particular niches, while our focus is broad, encouraging more of everything and encouraging everyone to succeed.”Made in Jerusalem, running on zero budget, is joining all the strands of the start-up ecosystem by bringing aboard principals from every one of the initiatives mentioned above, plus other investment funds and Jerusalem-based companies and schools such as Hadassah College and the Ma’aleh and Sam Spiegel film academies. It’s a one-stop shop for Jerusalem innovation, says Brand.“Everyone comes together as volunteers, in their free time, to promote Jerusalem as a whole,” he says.“What’s unique here is that nobody is competing with each other. If we promote each other, we all benefit.”Perhaps surprisingly, his model is not Tel Aviv but Berlin.“The tactics of how we do things here are part of something happening globally,” Brand explains. “The parameters to generate a creative class are similar in every ecosystem. Jerusalem has most of those parameters.One of our models is the city of Berlin, which evolved recently as one of the best start-up capitals of Europe, even though it has no hi-tech or big companies. It does have a lot of art students and hipsters, and so it became a really good place for start-ups. Jerusalem has the potential to become the Berlin of the Middle East. And it can evolve very, very quickly.”
