Israel is often called the second most important location for tech start-ups in the world, after Silicon Valley, but why not shoot for the top? That’s the question Zack (Tzachi) Weisfeld, senior director and manager of Microsoft Ventures Europe, asks. “Israel has lots of resources for building a successful start-up, but we’re still behind Silicon Valley,” Weisfeld said Wednesday in Tel Aviv at Demo Night for the members of the fourth session of the Microsoft Ventures Israel accelerator. To fix that, he said, “we decided to look at what Silicon Valley has that we don’t.”
Like Silicon Valley, Israel has angels and venture capital firms that can fund early-stage companies and help them grow. But Israel doesn’t have the access to markets that a start-up in California would have, said Weisfeld. It also lacks the diversity found in Silicon Valley. “You have the same graduates of Unit 8200 and the other elite Israeli army units who become entrepreneurs. We want to see more people of other backgrounds — women, Haredi Israelis, and Israeli Arabs join Israel’s start-up ecosystem. We have been working on this, and will continue to do so,” Weisfeld said.
If any organization is capable of pushing Israel to the next level as the Start-Up Nation, it’s Microsoft. After two years in the accelerator business, it has one of the most impressive records in readying young firms for the marketplace. “In the US, 59 percent of graduates of the top accelerators get funding within a year of graduating from their programs. For Microsoft Ventures, the average number of firms that get funding during that period is 85%, a significantly better figure,” said Weisfeld. On Wednesday night, before the four month-program was officially over, he said, 77% of the 13 companies in the fourth round of the Israel program had already gotten a first funding round, he said.
The Microsoft accelerator program is unique in other ways which might be surprising for a multinational like MS. The Microsoft Ventures Accelerator program is a four-month program that provides targeted assistance for start-ups, helping them develop products and services for a global marketplace. The 13 participating companies in the Tel Aviv accelerator program were carefully chosen from among some 400 globally nominated companies.
Microsoft Israel started its accelerator program two years ago. The idea caught on like wildfire in the company, to the extent that there are now six accelerators around the world, in China, India, Germany, France and England. All are modeled after the Israeli accelerator.
Microsoft provides office space, access to services such as software and cloud storage, and mentorship from some of the top figures in Israeli tech. When a company’s tech is ready, Microsoft introduces them to its business partners and customers around the world. There is a pool of several hundred thousand in all possible areas of commerce to choose from. In return, Microsoft asks for nothing. No rent, no equity, no percentages, nor anything else. Companies don’t even have to use Microsoft products, said Hanan Lavy, head of the Microsoft Ventures Accelerator in Tel Aviv. “For us, it’s about discovering new technologies and helping new start-ups succeed,” he said.
Microsoft would be happy if a start-up would partner with it to sell a new product or service, a move that would make a lot of sense for the start-up as well, said Lavy. “One of the ideas behind the accelerator is to enable us to build relationships with the world’s top entrepreneurs, the ones who are are able to get into the program. In this way we are realizing our goal of expanding the markets for Israeli start-ups.”
Microsoft is serious about encouraging diversity in Israeli tech. “In the program, we have companies run by women, by Hareidim, and even one by an Arab resident of Ramallah who comes to our Herzliya accelerator every day,” said Lavy. “We also have companies from abroad, one from Ghana and one from Russia, who were invited to be part of the program and are doing their development work at our site.”
The start-ups themselves are a diverse group as well. Ramallah-based AidBits provides a cloud-based platform aimed at helping the non-profit sector manage data more effectively and transparently; Intendu provides a platform for neurocognitive rehabilitation, based on adaptive natural-interaction video games; Ghana-based mPharma provides governments and pharmaceutical companies in Africa with real-time access to data on physician prescription habits and patient drug consumption; Trainica has a system to train salespeople using computer intelligence; and Selfpoint, run by a group from Kfar Chabad, enables companies to quickly deploy online grocery stores.
“We’re clearly doing our bit for diversity, and for market expansion,” the two things missing from Israel’s tech ecosystem, said Lavy. With those elements in place, Israel can achieve greater heights in technology. “The achievements of the start-ups in this batch, as well as the increase in the number of global companies participating and the amount of capital that has been raised, all testify to the growing success of the program,” said Lavy. “The next batch of our accelerator program will place an extra effort on connecting the start-ups to the market through focusing on internationally focused topics and working with international partners to solve them.”