Simultaneously with the growth of the mobile industry, a vibrant local market has developed in Israel - accelerating the development of young start-ups in an unprecedented way. Companies less than a year old have dozens of customers and are gaining traction as time goes on.
We explore how the mobile market has changed in recent years and why the local market so important.
Growth of the Israeli Start-up Market
The discourse surrounding the tremendous growth of the high-tech industry over the past two years has focused on large-scale capital raising, new unicorns, and tough competition for employees. But this growth has also changed the relationships between Israeli, young, and old start-ups - and made the local market more relevant than ever for them.
"Our main markets were the US and Asia, and until about two years ago our revenues from Israeli companies were about 10%," says Hilit Mioduser, VP of Growth at YouAppi, a company that has developed tools to improve the business performance of applications in areas such as gaming, online commerce, entertainment, and more.
"Following the growth of the industry in Israel, we made a strategic decision to enter the local market more significantly," says Mioduser. "At the end of 2021, revenues from the Israeli market grew to 25% of our total revenues."
The entire management of YouAppi is based in Israel, as are the operations and finance personnel. "The ability to get out of Zoom from time to time, have coffee with a startup and do a brainstorm together is irreplaceable," says Mioduser.
For a seasoned company like YouAppi, which was established about 10 years ago, the growth of the local market entails new business opportunities; But for start-ups, this growth completely changes the picture - it can dramatically accelerate the construction of the company, and significantly increase its revenues at very early stages.
"The first customers we sold to were Israeli companies - like Fiber and Jfrog," says Itamar Giovanni, co-founder and CEO of PayEm, a fintech company founded in 2019 and developed a platform for managing purchasing expenses in organizations. "A vibrant ecosystem has been created here that has complex needs, and the ability of a young start-up to connect with a growth company and understand through it what the problems of that field are is significant," he adds.
"At a very early stage, when we were only a few people in the company, we already talked to financial teams of large local public companies. We understood their needs and challenges, and they helped us understand the solution required. Even before the first round of recruitment, we already served 50 well-known Israeli companies.”
Giovanni says that PayEm currently has hundreds of customers in Israel. "There's another advantage here - once you work with a reputable company, your name already runs in a WhatsApp group of purchasing managers. Everyone talks about you. It gave us a very strong backwind. Looking at the industry is always at eye level - even when the startup is young and not yet recruited a lot of money".
"There are start-ups that have grown with us."
"There is a revolution here," says Eyal Itzkovich, managing partner at Pitango. "In the past, local companies that developed good technology had to look for companies that would experience their product in places where they had no previous connections, and that was difficult. Today, there are no less good multinational companies in Israel than American companies."
"As a result, we see companies established less than a year ago and already with a very significant number of customers. And that accelerates them. Because once the company has 10-20 recognizable logos in its customer list, it is already considered in line with advanced companies growing in Silicon Valley.
Value of Corporate Culture
The bonus is that the corporate culture of growth companies in Israel is significantly different from that of the American corporations that start-ups once tried to target - because their entrepreneurs are looking for innovation, and more people can make decisions to use new products. "Locally, this is happening today with every company that reaches a certain size."
David Wirzer, a leader in the field of cloud infrastructure in Monday, says that every week he meets with a local start-up and young entrepreneurs who come to consult with him. "Many times they want to learn from our experience, introduce us to the product, or offer us a try. If the product has added value for us, we start using it very quickly," says Wirzer, who estimates that Monday uses more than 300 start-up products. Different noses. "Inquiries from start-ups have multiplied over the years because the market has grown and so have we," says Wirzer, "and there are start-ups that have grown with us over the years."
Monday says that to make sure the use of a new product is efficient and fast, they have developed a simple procedure that includes filling out a form by one of the company's employees - it could be from R&D, personnel, design, sales and more - and a team that includes IT, purchasing, legal and security department Confirms the use of the product. "The connection with the local market is important, and once we understand that the technology is right for us - we run with it," say Monday.
"This is how Silicon Valley was created."
David Drey, who founded Anodot in 2015, which deals with business information monitoring, after selling the startup Cotendo to the American company Akamai, clearly points to the climate change in which the start-ups operate in the local industry.
"Fifteen years ago, when I founded Cotendo, there was an unwritten formula according to which the first users of the product would be Israelis. They would experience, and suffer from the bugs - and in return receive a floor price for using it. In recent years this has changed, the demands of the domestic market from new products have gone up, and accordingly, the companies have learned to pay fair prices, ”says Drey., ”says Drey.
Israeli companies, such as Outbrain and eturo, were among Anod's first customers, and Anodot itself also uses quite a few Israeli start-up products. Dray estimates that more than 10% of the company's customers are Israelis. "The local market is no longer the playground of start-ups. It has become a significant customer," he says.
Prof. Niron Hashai, Dean of the Arison School of Business Administration at Reichman University, has been researching the growth of Israeli high-tech for 20 years. "Why is a local market such an important thing? When we talk about start-ups, we need to check every dollar that goes into development, how much goes into marketing, distribution, etc., because that's an expensive thing. And since the market has always been in North America, it has been a milestone in the growth of Israeli high-tech for years. Now, if the company has a mass of Israeli customers, it is easier to change and improve the products, the cultural proximity is very helpful, and it is easier to get feedback. "
He says, "The Israeli market will never replace the American market, and yet - if a significant local market does develop here, it is a 'game changer'. This is how Silicon Valley was created, clusters of companies in similar fields, which began to Themselves are businesses. "
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