Out of the Bubble
“Israeli high-tech succeeded because we've learned the language they speak in Silicon Valley”
CTech’s ‘Out of the Bubble’ arrives in Misgav to discuss the benefits and challenges of working in Israel’s periphery
“Israeli high-tech succeeded because we've learned the language they speak in Silicon Valley. We haven't invented anything new: we are using what they're doing in Silicon Valley. We are doing it here, in a different way, in our way, but we are using their language,” said Sivan Yechieli, CEO at i4 Valley when appearing on a panel for CTech’s Out of the Bubble series. Yechieli was joined in Misgav by Khalil Shawahna, Partner at MGTech, Steve Rhodes, CEO at The Trendlines Group, and Meirav Metzger Moshe, Former VP of Business Growth & Marketing at Bar Lev High Tech Park.
Each of them spoke to CTech about some of the challenges and benefits of working in a high-tech community in one of the periphery regions of Israel.
Why are we here today in Misgav?
“Misgav is part of Beit HaKerem Valley, it is a region that has Karmiel and different towns and cities,” explained Sivan Yechieli, CEO at i4 Valley, an incubator for Smart Industry, also known as Industry 4.0. “What you're seeing here is the high-tech of this region: that there is high-tech and it is all around - that's where we are.”
Steve Rhodes, CEO at The Trendlines Group, told CTech that “what we're doing here is building companies. Trendlines starts companies in two areas: in medical devices and agrifood technologies.” The Trendlines Group was the host of the panel and today has a portfolio of more than 50 companies. “We are doing it here because this is where we live, this is where the opportunities are, where great people are, and because we believe very much in the development of the region,” he added.
“I'm really excited that you will see today, and realize, that there is high-tech in the area, and it is growing,” said Meirav Metzger Moshe, Former VP of Business Growth & Marketing at Bar Lev High Tech Park. The park is a high-tech complex located in the Western Galilee heights. “What we are doing is assisting high-tech companies from the center to go out and do geo-mobility and find these advantages of the north that can help them and assist them to get over their challenges.” According to Metzger Moshe, the park helps with the recruitment of new employees, benefits and grants, and investments from the government and other investors. “And cooperations with the academies,” she added. “We have a lot of academies in the area. We see it growing and succeeding. It is really exciting.”
Khalil Shawahna, the final panelist, is a Partner at MGTec, a program promoting high-tech and entrepreneurship in Galilee. “We are in the center where the Misgav authorities are located,” he explained. “It is a social community-based initiative and the local authorities joined to promote our area. So our vision is to build a local and original ecosystem - a connected one - a really engaging one and build the pipeline for entrepreneurs and high-tech people to have their opportunities here and stay in the area. Then, \[the plan is to\] connect the whole area and its resources and opportunities in the Galilee. This is our vision and we believe in our community and the resources that we have: that we should promote and be discovered.”
It's a pleasure to be here outside of the normal Tel Aviv tech scene we are normally in. Can we talk a bit about some of the challenges that may be faced by folks and companies that are up here, as opposed to some of the more conventional areas where people historically tend to travel to?
“I think it is important to note that when you are in the periphery, and when you talk about regional development and high-tech in the periphery, you face a number of challenges,” said Yechieli. “The first is the fact that we don't have the same density of population that you have in the center, and therefore you haven't got external influences. There are not a lot of companies that can affect each other. So part of our work is to connect the region and build on the organic assets of the region.” An example he gave was the partnership between six industrial companies that i4 Valley has in the region. “Fifty percent of the industry of Israel is in the north, and so what we are focusing on is Industry 4.0, harnessing the other assets into the high-tech community and providing technology that will serve manufacturing industries over here and throughout the world.”
He continued: “I think one of the most important things when governments want to influence the periphery, many times they built synthetic programs. These programs work as long as you pour money into them. But it is not built on organic assets, and therefore it is not sustainable. I think what we are trying to do, and I think that's true for all of us, is build upon organic assets and therefore create sustainable high-tech ecosystems within this region.”
Rhodes agreed. “It is a big challenge, developing high-tech in the periphery. Part of the problem is that the ecosystem isn't naturally here, and so we have to create that ecosystem and help build that ecosystem. Trendlines has recently added a cleanroom to our facility… in the past, our companies had to go to Tel Aviv to have access to a cleanroom. We added chemical laboratories and food laboratories, so we are providing the facilities in helping build the ecosystem in order that they can get everything they need from here. When you are in Tel Aviv, an investor says ‘let's meet’. So \[usually\] they come to meet you or you get in a car and you're 15 minutes away and you meet with them in Hertzliya or Tel Aviv.”
Rhodes addressed what he called a “hidden tax” for those that live in regions in the north. “For us, we pay a hidden tax. When an investor says ‘let's meet’, they don't say they're going to come and see your office. You have to go down and spend a full day going to Tel Aviv and back to see them. There are lots of hidden challenges, on top of which there is the challenge of personnel. Our children, naturally, are attracted to where the jobs are, and most of the jobs are in the center of the country. Finding great talent is always a challenge. Fortunately, we are successful because we draw from a very talented pool of people. We have even seen people from the center of the country move up to the north in order to be in some of our great companies - but it is very challenging.”
“I couldn't agree more with my colleagues,” affirmed Metzger Moshe. “Another point of view is that there is a market failure. First, we are 1 and 1/2 hours from Tel Aviv by train, bus, or car. The roads are much easier, but if I go back to a few years ago, it was a challenge to get here. The market failure is that the government spends and creates a lot of nice programs. I think they will get better with grants, support, and benefits for companies that grow in the periphery, but it is not enough. On the other side, there are the companies from Tel Aviv where there are a lot of barriers for them to go out of Tel Aviv, even to Herzliya - sometimes you need a passport. There is a demand… but you need assistance for things to happen.”
Metzger Moshe elaborates on some of the challenges faced by companies in big hubs like Tel Aviv. “In day-to-day life, they cannot deal now with getting to another location and opening a branch - it is a real issue. You need the overhead for it, you need expert teams, and you need to know the area. It is a lot of unknowns. So there are a lot of barriers before they get up in the morning to say they are going to open a branch. Sometimes it is even easier for them to go abroad. We keep saying the minute before you go abroad, see what is an hour and a half away from you. I believe that we need to give the assistance and create expertise in this area - and this is what we have been doing in the past 2 1/2 years in Bar Lev. We create the expertise and we know what's happening here and we see some of it. It makes things happen much easier.”
Shawahna: “If you ask a business organization, let's say investors, they are looking for deal flow - good deal flow. All the time they are talking about the deal flow. We believe and we know that we have a good deal flow but it is not covered or exposed in a good way. We believe that our initiative has to start bottom-up. It means we make it by different levels. The first level is to connect the community, to bring the community and make it engaged. The second level is to connect the industry and academy that we have in our region. The third one is to then bring and get the government support. We believe we have to start in the community building bottom-up and then we can meet the government programs. We also need more exposure and awareness about the resources and about our area. This is very unique with a lot of opportunities and resources.”
Rhodes notes specifically the work of support networks in the region, such as the Israel Innovation Authority. “I mentioned the cleanroom that we built... we built that with assistance from the Israel Innovation Authority. Our portfolio companies get great support from the government, and when our companies aren't looking to raise money, they are often able to get support through grants the government makes available. There are challenges, but we have a partner and an important partner in the Innovation Authority and that is important to mention.”
Yechieli: “First, we have great support from the government and that is very important. I think that's a government's role and I don't think we would be able to do what we are doing without them. That's a given. The second thing... I've lived in the north since the early 1990s and I have worked at various high-tech companies - most of them are American. Not one of them were Israeli, all of them were traded on the U.S. stock exchange, and they were all here in the north. There is an ecosystem of high-tech in the north and companies that were here, some of them over the years went to the center. I would think that there is a point to make: there is a difference, a social-economical difference, and an exposure difference, between the Arab communities and the Jewish communities in the north. Misgav is the same kind of population you would find in Tel Aviv, Herzliya, or anywhere in the center, the same as where I live in Kfar Vadim. Israeli high-tech succeeded because we've learned the language they speak in Silicon Valley. We haven't invented anything new: we are using what they're doing in Silicon Valley. We are doing it here, in a different way, in our way, but we are using their language. I think that what you see is that within the Arab communities, that language or those skills are still not enough. Therefore, a lot of the human capital that is there is not being utilized. A lot of opportunities are being missed. I think the regional challenge today is to bring communities from the Arab communities, and skills and talents into the high-tech arena and let them flourish.”
“We have started our program of MGTech which is a cooperation between Misgav and Sakhnin,” explained Shawahna. “Misgav has a Jewish local council authority and Sakhnin is one of the biggest cities here in the Galilee. You are connected also to the Arab cities in the area. Because of that, in the last years, you have more organizations in the Arab sector that promote and try to fix this gap, meaning having Arab students and Arab youths in employment in high-tech and growing successful startups. We believe we have to make this connection and work together. If we have young people in the Arab community which now is more than 30% in the Technion, for example, and about 20% of all academic institutions in Israel studying high-tech, there is a gap in employment and seeing successful Arab startups. Because of that, we believe we have to work together. Here in Galilee, we have a life together. It's about 50/50 between the communities, Arabs and Jewish… This is what we are doing and what we started here. And we hope we succeed in that, also with our partnerships with i4valley and Bar Lev park and here at Trendlines.”
“I was visiting Sakhnin a few months ago and I was told that one of the tech classes at the high school has a majority of women students,” said Metzger Moshe. “Also in the Technion, you can see a majority of women Arab students. It is pleasing to hear, and I think this is the future. If we spoke about it as a challenge, it is also an advantage of the area. Because you cannot find a lot of places like the Gallilee with such a variety of population. Everyone is collaborating with everyone and everyone can see more high-tech professionals from the Druze, Muslims, Christians, Jews, and Haredim. It is really exciting because you go into the park and you see and go around all the high-tech companies and you can see this mixture. This is something the companies in the center are missing, this variety of population and this inclusion and diversity that assists so much for the companies to grow up. Here we have it and it is an advantage.”
It is always a pleasure to be here and meet all of you. We are approaching the end of our time, unfortunately. But I do want to hear a final word from all of you. For those that are watching this from Herzliya, or Tel Aviv, what would you say to get them to come up and meet you? What's your main message?
“i4Valley is new, we are only two years on the ground \[but\] we have seen over 500 companies up to now,” said Yechieli. “Great companies, amazing companies, in the field of Industry 4.0. We are investing in some of them, others are working around us and I think that there are great opportunities in Industry 4.0. I think the ecosystem around here is outstanding… I think that is a great opportunity and I think that young entrepreneurs should come over - they will have a good time.”
“We should take the advantages and the local benefits and properties of the area and start from it,” concluded Shawahna. “Not just to look at Tel Aviv or another ecosystem. We have to figure out what is unique here and start from it. The second thing is to have a strategy for the whole of the Galilee. Even if there are different areas, we have to work as one strategic area for the Galilee. I believe we should work here and be connected and build our unique ecosystem in a different way - even from other ecosystems, even from Jerusalem, Tel Aviv, or other countries in the world. We will succeed in it. We are working and we are going forward.”
Metzger Moshe: “I think that each high-tech company in Tel Aviv should try and enjoy the benefits that they have here. It is not ‘instead’, it is a complimentary area and you can find here things you cannot get in the center that can make the change and assist you to go over your challenges. We are here for you - you don't need to go it alone, we are in reality a net of collaborations and every one of us is working daily, on a daily basis together. It is very beautiful. Come and try - it is worth it.”
“It always amazes me,” Rhodes concluded in the final remarks of the panel. “People I've known for years but I've only met in Tel Aviv or talked to on the phone, when they finally come up and visit, they're blown away. They cannot believe it. They say they finally understand, they never got it before. They thought they understood but they didn't. Seeing is believing, and they should come and see it. It takes as long to drive from Raanana to Misgav or Karmiel as it does from Raanana to Tel Aviv in the morning. It is not a distance issue, it is a mindset issue. You don't need a Visa anymore to come to the Galilee, they should come and visit us whether they're from Tel Aviv, Herzliya, or investors from overseas, this is an area with a lot of energy, smart people doing amazing things and I encourage everyone to see for themselves.”