Israeli innovation in Silicon Valley taking a back seat to coronavirus
The only startups that seem to be weathering the current crisis are those that have products curtailed to combating the current coronavirus pandemic.
By ZACHARY KEYSERSilicon Valley(photo credit: FLICKR)
The Israel Economic Mission to the West Coast (IEMWC), which operates out of San Francisco's Silicon Valley, has seen a downtrend in innovation for Israeli start-ups following the economic crisis caused by the onset of the coronavirus outbreak in the United States, according to a report by CTech.The mission's main objective is to secure funding and venture capitalist (VC) partners for emerging Israeli start-ups, acting as a bridge connecting Israeli companies with the American technology market. Many of these Israeli innovators depend on the assistance of the IEMWC, part of the Israeli Economy Ministry's Foreign Trade Administration, in order to survive the minefields of Silicon Valley, even in normal economic climates.According to head of the Economic and Trade Mission to the West Coast Moran Zilbershtein, the only startups that seem to be weathering the current crisis are those that have products curtailed to combating the current coronavirus pandemic."There are companies that don't quite have a product that fits the current situation and they are facing many challenges," Zilbershtein told CTech. "The first challenge is recruiting new clients. That is something we are hearing from everyone. They all talk of the physical distance being a challenge and that video meetings are no substitute for a physical meeting, certainly when trying to close a deal. Even deals that were already in the works are being held up."A second challenge for many startups is trying to raise money. Many VCs are being more cautious and are taking more time than before to sign deals. Startups have also seen their valuation suffer a blow. This is a real trend."While companies who provide innovative solutions for the coronavirus pandemic have a better chance of survival, they have now been thrust into a situation where they are being challenged and expected to make the most out of the current window of opportunity that opened up with the onset of the outbreak."They are really apprehensive about us connecting them to as many companies as possible before the window closes, but we try and tell them that things aren't going to return to the way they previously were. In these types of situations, we are trying to ensure we don't come off as insensitive when trying to connect them with local companies," Zilbershtein noted. "We'll make sure they have a working product and other clients before connecting them with American companies so that it doesn't seem like we are trying to take advantage of the situation and the difficulties here to promote our technologies."However, many VCs are in survival mode at the moment, and don't want to be bothered with listening to pitches about new innovation, especially if it doesn't relate to the current crisis. Many are hunkering down for the long-haul, hoarding their funding and focusing on their current products until this all passes."Most companies are currently in survival mode and innovation has taken a back seat. Companies are focusing on their current products and how to survive the current situation. Israel's main export to this region is high tech companies that provide innovation and technology so they were immediately impacted by this," Zilbershtein told Ctech."When you are physically far from your target market, it is difficult to reach out to a new company and talk to their CFO or CEO. Investors tend to base much of their decision on whether to invest, on their relationship with the founders. It is part of their due diligence and if they can't meet and talk to the CEO and the team it is tougher for them to make a decision."
However, Zilbershtein says that not all the changes in operations surrounding the coronavirus were necessarily bad. Senior investment executives are more available, now that they are no longer travelling the country from meeting to meeting. Additionally, the "digital revolution" which was supposed to take a decade, will only take a year now - with telehealth and education technology becoming more attractive to venture capitalists operating in the valley.However, the bulk of Silicon Valley is still "operating in crisis mode." And with no end in sight, those in the technology sector must adapt or cease to exist. With Darwin's principle of natural selection or survival of the fittest applying fittingly to this situation, we can expect to see a "thinning of the herd" in future months - and while overall innovation will take a back seat, many sectors curtailed to the current pandemic and the lifestyle we expect to experience in its aftermath will flourish, sending the world in a different direction, not necessarily for the worse."It is very difficult to predict when the new normal will begin here. We are currently still on lockdown and the government has announced clear parameters to determine when things will open up. We are certainly in crisis control mode and our job as a mission is to understand everything that is going on. We have access to many companies and we are talking to them all the time to understand the current trends, needs and business opportunities," Zilbershtein said."We are not magicians. We can't create business from nothing," he concluded. "We need to understand what opportunities exist in the market. There are opportunities during a crisis, albeit different ones."
