The coronavirus (Covid-19) pandemic has created an economic crisis unlike anything the world has ever seen. For many Israeli startups that will mean the beginning of the end. Those who do make it will have done so due to a combination of aspects, including receiving help when they needed it most. One of the places providing that key assistance and guidance during this crucial time is the Israel Economic Mission to the West Coast, which operates out of San Francisco. The mission's vast network of contacts in Silicon Valley and throughout 17 U.S. states is often critical to Israeli startups searching for investors and clients, especially during a crisis. According to Moran Zilbershtein, the Head of the Economic and Trade mission to the West Coast, the pandemic is taking its toll on Israeli companies. She says there are still plenty of opportunities out there, but mainly for startups with a product tailored for the current bizarre times.
"There are companies that don't quite have a product that fits the current situation and they are facing many challenges," Zilbershtein told CTech last week. "The first challenge is recruiting new clients. That is something we are hearing from everyone. They all talk of the physical distance being a challenge and that video meetings are no substitute for a physical meeting, certainly when trying to close a deal. Even deals that were already in the works are being held up. A second challenge for many startups is trying to raise money. Many VCs are being more cautious and are taking more time than before to sign deals. Startups have also seen their valuation suffer a blow. This is a real trend."
According to Zilbershtein, these are anxious times also for companies that believe they can provide innovative solutions during the current crisis. "Companies that have a product that is ideal for the current situation aren't concerned, but they are also under pressure to make the most of this window of opportunity which has opened up for them," Zilbershtein explained. "They are really apprehensive about us connecting them to as many companies as possible before the window closes, but we try and tell them that things aren't going to return to the way they previously were. In these types of situations, we are trying to ensure we don't come off as insensitive when trying to connect them with local companies. We'll make sure they have a working product and other clients before connecting them with American companies so that it doesn't seem like we are trying to take advantage of the situation and the difficulties here to promote our technologies."
Delegations from Israel are no longer visiting San Francisco and as one of 44 economic missions operated globally by the Ministry of Economy and Industry, Zilbershtein and her team are doing their utmost to find substitutes for face-to-face meetings. "As soon as the lockdown began here and the flights from Israel stopped, companies found themselves far from their target market," she noted. "They can't meet face to face with clients, partners, or investors and that has been the biggest impact. There is still some significance to face-to-face meetings in the world we live in and the companies we are talking to have pointed this out as one of the major difficulties they are facing. It is very difficult to find investors in the current situation and this is where our economic mission can play a role. You need a warm introduction to reach companies right now and that is something we can do."
But even with a warm intro, many VCs and companies are not interested in hearing about innovation at this time. "Most companies are currently in survival mode and innovation has taken a back seat. Companies are focusing on their current products and how to survive the current situation. Israel's main export to this region is high tech companies that provide innovation and technology so they were immediately impacted by this," Zilbershtein said. "When you are physically far from your target market it is difficult to reach out to a new company and talk to their CFO or CEO. Investors tend to base much of their decision on whether to invest, on their relationship with the founders. It is part of their due diligence and if they can't meet and talk to the CEO and the team it is tougher for them to make a decision."
Despite the lockdown, Zilbershtein says the mission has been as busy as ever. "Our job during normal times is to act as a bridge and connect Israeli companies with the market here. We mostly do that through exhibitions, roadshows, or delegations who come here and we arrange meetings for them. So like most companies, our entire mode of work has been transformed due to the pandemic. We have moved completely to digital tools," she explained. "Our main advantage is our network of connections. We have thousands of connections on the West Coast, not only in Silicon Valley, but also in other states like Washington, Oregon, Nevada, and Utah. At this time, companies won't look in your direction if you don't have a smart contact who is regarded as a trusted referral. This is where the mission provides added value for Israeli companies because our warm intros provide an opportunity to arrange a meeting with a potential client or investor. We have been quite successful in doing that recently. We are doing things differently due to the pandemic, but our activity hasn't suffered as a result."
Zilbershtein noted that there are even some advantages to the current situation, with some senior executives actually having more time to talk as they aren't busy flying and taking part in conferences. She says that VCs in Silicon Valley are talking about how the digital revolution that was meant to take 10 years will now only take one year, making industries like telehealth and EdTech more attractive to investors. For the time being though, much of the West Coast, including San Francisco and Silicon Valley, are still operating in crisis mode, a reality that seems likely to continue for the foreseeable future.
"It is very difficult to predict when the new normal will begin here. We are currently still on lockdown and the Governor has announced clear parameters to determine when things will open up. We are certainly in crisis control mode and our job as a mission is to understand everything that is going on," Zilbershtein added. "We have access to many companies and we are talking to them all the time to understand the current trends, needs, and business opportunities. We are not magicians. We can't create business from nothing. We need to understand what opportunities exist in the market. There are opportunities during a crisis, albeit different ones."