The Silicon Valley of the East

When someone mentions Israel, what comes to mind? Is it violence, war, and terrorism? How about desert, camels, and sand? If these terms are spot on, you are not alone.

Unfortunately, the former group of terms dominates world media, and the latter comes from assumptions based on Israel’s geographic region. Believe it or not, one of Israel’s many unknown qualities is as a hub for startups, particularly those centered in technology. In the era of Web 2.0, these startups naturally include businesses focused on developing and improving social media.

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 An impressive number of these ventures have managed to succeed, gaining a reputation as experts of innovation and drawing the attention of the world’s leading corporations. In the past few years, technological giants have acquired countless R&D projects and entire companies originating in Israel.

As you may have heard from my Tweets or from other news sites, the most recent of these acquisitions came from Facebook, Inc. who purchased the Israeli company Onavo just last week. The company specializes as a mobile data-saving app creator, likely acquired by Facebook in attempts to reduce data usage by its applications to expand its ability to offer its services in lower-income and less-developed countries.

This recent acquisition is of particular interest because Facebook has announced that it will not uproot Onavo’s staff to Palo Alto, where most of their operations have been consolidated. Instead, Onavo will become Facebook’s first R&D center in Israel, and is believed to be the first of a string of upcoming acquisitions by Facebook in Israel. This $100 million acquisition by Facebook is the largest by that company in Israel to date. With this move, Facebook joins tech giants Apple, Google, and Microsoft (as well as others) as companies with a physical foothold in Israel.

Technology Excerpt from “Israel Inside”

For those of you who are long-time iPhone users, I’d expect many of you are familiar with the mobile application “Waze.” If you don’t know it, this is an extremely popular, free application that offers a social networking version of a navigation application, using crowdsourcing as a key tool for analyzing traffic and more. I, myself, began using the app before the iPhone had a built-in navigation app, saving me from the loss of Google Navigation when I ditched my Droid. It took over a year, until I became involved in Israel activism, to realize that the app was in fact Israeli.

During the spring, both Apple and Facebook were looking to purchase Waze to build their social networking and mapping capabilities in order to compete with Google. Facebook struck up a deal with the Israeli startup, but negotiations failed when Facebook refused to allow the company to maintain its headquarters in Israel. This decision soon proved to be a crucial mistake for Facebook, when Google struck up a deal to purchase Waze for about $1 billion in June this past summer. Google has since kept their navigation applications separate, but used the capabilities from each to improve the other.

It seems as though Facebook learned its lesson and decided to get with the times, purchasing Onavo and allowing its employees to remain in Israel. Only time will tell how the acquired technologies will be implemented by Facebook, and what other acquisitions the Social Media Champ will make in Israel, ‘The Silicon Valley of the East.’

Sources:

http://www.haaretz.com/business/.premium-1.552430

http://news.cnet.com/8301-1023_3-57595620-93/google-reveals-it-spent-$966-million-in-waze-acquisition/

 

Posted Monday night accidentally to “self” blog

11 comments

  1. Really interesting article Mike! I had no clue Israel had such a strong entrepreneur and technology start-up background. With all the violence and war that is going on in Israel, I wonder how many other companies will make that move to the East. I think companies need to take into consideration what government polices and patents that might affect their business strategy if they move to Israel. For big businesses like Facebook and Google, there may not be as big of a risk because they have extra capital to fix their problem if it does occur. I agree with your statement that time will tell if these acquired technologies will make a difference in today’s society, but if it does there will be great first-mover advantages for companies such as Google!

    1. Stanton,
      Great point to bring up regarding government policies and how they may affect these decisions. For instance, 2014 will bring a full EU boycott of products from the Israeli territories captured in their 1967 war (let’s avoid the politics of that, shall we?). It’s a risky region, but Israel is believe it or not the most stable place for a business base to work with the rest of the Middle East.

  2. Awesome post! Such a different topic than anything we have discussed in class, and Stanton raises a really good point about government policies and patents. I thought you discussed two really interesting social media platforms, Onavo and Waze, and was so intrigued by Israel’s solid technological background.

    With your involvement as an Israeli activist and research for this post, were you able to find out why exactly Israel has such a strong reputation for start-ups? I am not too familiar with Israeli business, and I was wondering what reasons have contributed to this tech-hub.

    Also, in response to Stanton’s comment.. I am very intrigued what the future of Israeli start ups will look like. Although Onavo wasn’t relocated to the US, it will be interesting to see if potential instability in Israel and the Middle East in the future will affect businesses. Overall, great post and I would love to hear more about this topic!

    1. Katie,
      See my response to Stanton for your related thoughts.
      Israel has a strong reputation for start-ups seemingly just for the reasons described in the “Israel Inside” excerpt I linked to in my blog. They seem to be built into the DNA of the people of Israel, leading to their huge success. Unfortunately, there isn’t a more scientific and definite answer.

  3. Mike, so interesting! And love the clever title. While I knew the Middle East is a growing area of entrepreneurship, especially in the tech field, I didn’t realize to what extent. I more so thought that they were trying to improve in it, and I had no idea that they were already so specialized and successful!

    I just looked up some other cool apps and startups that began in Israel, and there are several that are so clever and useful. GetTaxi is essentially an Uber alternative that actually has begun expanding into London and New York, an app called Fiverr is an online marketplace where everything is bought and sold for $5, and then there’s Moolta which I think is such a hilarious and awesome idea. It calls itself an app for daredevils and a mix between KickStarter, Vine, and reality TV. Users post dares/challenges on the app and whichever daredevil is up to meeting the challenge does so and posts a picture of them completing it. And not only that, but users also have the option to include donations in their challenges – for example, you can raise money for a charity by running a marathon. There are several other startups that I came across that originated in Israel, but these were especially interesting and successful business ventures.

    And, of course as Katie and Stanton said above, I agree that business abroad in such an unstable and tumultuous area of the world can pose great challenges. It’d be interesting to research a bit more about that and how companies who are already there find it to be.

    Loved the post!

    1. Taylor,
      GetTaxi like you said is a lot like Uber, but I think it came first. I was using it in Israel and it was really incredible, working in every major city and even outside of them. Their rating system for drivers is extremely extensive and creates a really comfortable experience.
      I’m glad you told me about Moolta. I actually had never heard of it. I have to check it out!

  4. Nice post. I am surprised about how entrepreneurship has really gone global. Not really surprised, I guess, but just amazed at how flat our world has become.

  5. I also had no idea about the success of start ups and tech companies in Israel. These are some seriously big names between Google and Facebook. While reading this post I had a similar question as Katie, what is it specifically that makes Israel a hot spot for start ups? I also wonder if it’s mainly Israeli’s working in these start ups or if it is a combination of cultures like we often see in the United States? Lastly I wonder if the education over there focuses on different aspects than our educational systems. I’m sure there are differences simply because it is a different country but I wonder if creativity is a particularly important aspect that allows these start ups to flourish? Just some food for that. Great post!

    1. Jamie, see above response to Katie.
      Also, a lot of the ventures are simply Israeli, but some come from work with Arab groups in cooperation to try to reach the dual objectives of peace and cooperation along with innovation. There are also some ventures that are being taken with cooperation of nations from a greater distance such as India.

  6. This is a very interesting post Michael. Before reading your blog, I had no idea of what was going on in Israel in terms of technology and start ups.
    All the guys who posted before me made really good point about the possible downsides of the choice of not relocating this company (war and political disorders first of all). But I think that there could be lots of positives implications rising from this choice. We all know that some apps went viral only in specific states, regions or areas of the world. While the big companies such as Facebook and Google can take advantage of the capabilities of the acquired companies by allowing them to remain in Israel (or in other parts of the world) they can also build a bridgehead on the other side of the Ocean. This can be really helpful to feel the pulse of the international market.
    I hope to hear more about this topic!

    1. Stefano,
      see above responses
      Also, loved the last point. Companies have been choosing Israel as a bridgehead for business with nearby nations, particularly Turkey, and hope to expand further in the event the region finds new stability.

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