Claiming to be Israel’s first startup ventures, kibbutzim jump on tech bandwagon

Cooperatives are investing in startups, providing them test beds for their technologies, and setting up their own ventures

Shoshanna Solomon is The Times of Israel's Startups and Business reporter

Youth Aliya members from Germany dancing the hora at Kibbutz Ein Harod, 1936 (Kluger Zoltan/GPO)
Youth Aliya members from Germany dancing the hora at Kibbutz Ein Harod, 1936 (Kluger Zoltan/GPO)

Israel’s kibbutzim — the collective communities that were set up at the start of the 20th century and typically dealt in agriculture — are jumping on the startup nation bandwagon and setting their sights on new technologies.

“We are now strong enough to start becoming enterprising again,” Ofir Libstein, the CEO of the Kibbutz Industry Association, said in a phone interview. “In the last few years we have managed to develop a third pillar, alongside agriculture and industry: technology. We want to encourage kibbutzim to set up their own startup ventures, introduce technologies into their manufacturing processes and invest in startups. After all, we were Israel’s first startups.”

After playing a key role in founding the nation, Israel’s kibbutzim slid into social and economic malaise during a financial crisis that gripped the country in the 1980s. Disillusioned by the apparent failure of the economic cooperative model, many young members left for the cities, leading to concerns about the demise of what could possibly called Israel’s first startup venture.

But the kibbutzim made a comeback by shifting away from their socialist roots — setting up local industrial ventures, embracing differential salaries and undergoing some sort of privatization that allows members to work off the kibbutz and non-members to work on the premises.

Today, the country’s 270 kibbutzim account for some 50 percent of Israel’s agricultural sector and 9% of its traditional industry. Drip irrigation firm Netafim, founded in 1965 in Kibbutz Hatzerim, was acquired this year by Mexican firm Mexichem for $1.5 billion, and is perhaps the jewel in the crown of the kibbutz industry. But alongside Netafim, there are many other successful kibbutz enterprises, like armored vehicle manufacturer Plasan, in Kibbutz Sasa in northern Israel; optical lens manufacturer Shamir, in Kibbutz Shamir in the Upper Galilee; and Plasson Industries Ltd., of Kibbutz Maagan Michael, a maker of plastic fittings for plastic pipes.

A net greenhouse in Los Pinos, Mexico, the largest greenhouse tomato project in the country, developed with Israel’s Netafim drip irrigation and greenhouse technology (Courtesy Netafim)

“Since the crisis in the 80s, the kibbutzim have been in survival mode, to maintain their economic and social model,” said Libstein. Now, due to their model shift, they have largely stabilized and are ready to roar again, he said. And alongside their traditional manufacturing and agricultural enterprises, they are dabbling in new technologies.

Data provided by the Kibbutz Industry Association shows that the sales of kibbutz enterprises reached an all-time high of NIS 44.5 billion ($12.8 billion) in 2017, and there was a 46% increase in kibbutz investments in startup ventures, totaling some NIS 76 million, compared with NIS 52 million in 2016. These investments were made by 24 kibbutzim, which invested in 19 startup companies.

“This trend is expected to grow in coming years and will serve as one of the kibbutzim’s important future growth engines,” he said.

Ofir Libstein, CEO of Israel’s Kibbutz Industries Association (Courtesy)

The embracing of technology has multiple applications: encouraging existing kibbutz industries to use more technology in their production process; encouraging kibbutzim to set up their own tech enterprises in areas of interest to the cooperatives, such as solar power or agricultural technologies; investing in startups that operate in fields of interest, and mentoring them by letting them try out their technologies on the kibbutzim and giving them a space to work; and becoming a hub for startups, enabling new entrepreneurs who live nearby to set up their businesses on the pastoral kibbutz premises in return for rental fees and/or options in the firm.

Indeed, kibbutzim have some 200 underutilized public buildings and dining rooms that can be used as joint work spaces for startups and high-tech entrepreneurs. Earlier this month, Kibbutz Nir Am, in the Shaar Hanegev area, said it would inaugurate in the coming weeks a new high-tech joint work center that would replace its old communal dining room.

The center will be managed by the SouthUp Technological Incubator and will serve students and graduates of the Sapir College in Sderot, returning sons and daughters of the kibbutz, and entrepreneurs from the surrounding communities.

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