In February, the Fung Global Retail & Technology team went on a four-day innovation technology tour to Israel. We met with more than 25 startups and led panel discussions on innovation at the 2017 OurCrowd Global Investor Summit. The trip impacted how we are thinking about innovation and what is happening in retail right now. Here are the three things you need to know about Israel and retail tech innovation:
- More money was invested Israeli high-tech startups in 2016 than in Silicon Valley companies
The Israeli retail technology startup scene is booming. Really booming. More than $4.8 billion was invested in Israel-based high-tech startups in 2016, a record total—and more than was invested in Silicon Valley companies. This was a 120% increase over 2013. Due to the disruption from Amazon, retail technology is one of the greatest areas of focus for the country. Some of the top trends driving investment are the mainstreaming of artificial intelligence and machine learning, virtual reality (VR) and augmented reality (AR) becoming critical business tools, and the development of voice recognition, image recognition, digital health and agriculture technology.
Source: 2017 OurCrowd Global Investor Summit Presentation
The growing Israeli startup ecosystem is being driven by investments from Alibaba, Apple, Facebook and Walmart, among others. The Israeli government is also offering tax breaks and incentives. According to Jerusalem Mayor Nir Barkat, four years ago, there were 250 technology companies in Jerusalem, but today there are 600. Barkat also said that there are great opportunities in Jerusalem for young companies that want to locate and grow their operations in the city.
2. Multinational companies are innovating with Israeli startups
Executives from a number of multinational corporations, including Honda, HSBC, Merck, Porsche, Shell and Tyco, are partnering with Israeli startups to find solutions, as startups can breathe life into companies that have not previously focused on innovation. Shell has approached innovation with an eye on the future of energy consumption and an “innovate or die” mentality. The company is looking at consumer and market behavior regarding energy consumption, and its innovation models include in-house, external and hybrid solutions. Using external partners, the company created the FarePilot app, which helps taxi, Uber and Lyft drivers find riders faster. The app pulls data from social media and weather sites, and combines that information with other analytics.
Honda has announced a partnership with OurCrowd to work with Israeli startups in the Israeli car tech ecosystem. Innogy, a German energy company that was facing severe challenges, has explored startup options in AR, VR and artificial intelligence.
3. Adidas and GE are hosting accelerators in order to innovate
Adidas launched the LeAD Sports Technology Accelerator in partnership with OurCrowd. The accelerator is designed to discover high-potential innovation in sports-related products and services on a worldwide scale. LeAD’s accelerator program is built on the legacy of Adidas founder Adi Dassler and aims to “create tomorrow’s legacies,” while building on the core competencies and history of the company.
Other companies, including General Electric (GE), are also launching their own accelerator programs. “Israel is an easy place to do this,” says Oded Meirav, Manager, Israel Technology Center, GE Global Research. GE has launched numerous innovation programs in Israel, including GE Digital Israel, GE Industrial Israel and GE Global Israel. The company has had to reinvent itself twice, once in the aftermath of 2001 and then again since 2008, and it is leveraging startups to become more agile and nimble. GE recognizes that it is not the only game in town, so it is partnering with startups that excel and take risks and is looking to inject that spirit into the entire enterprise. It has already launched its own industrial Internet of Things by partnering with 16 other companies.