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Startup Nation Israel: Dispatches from the Beating Heart of Middle Eastern Fintech

Written by Ronnie Lavie (Contributing Editor)

Israel is a small country with a population of just under 9 million people. Despite this, in recent years it has become a global leader in tech advancements and exports, with Waze and Taboola being just a couple of successful examples.

Where innovation is happening, the money usually follows. Q1 of 2018 saw $115.1m of investment come in to the Israeli fintech market, which was a rise of 49.1% compared to the previous quarter, and double the same time the previous year.

So, what’s the secret? Is it something in the water? The air? The beaches? Well, sort of. Israelis have a number of factors that put them ahead of the game. To start with, education is considered very important, and most Israeli children grow up being encouraged to do well in school, and pursue higher education after their obligatory army service.

Without involving politics, the IDF is considered to be one of the most advanced army forces in the world, and its intelligence, technology and engineering divisions are the stuff of legends. Many of those who go on to develop successful startups and tech companies learn the ropes during their army service, with the elite intelligence unit 8200 being a regular feature on CVs.

So, in short, most Israelis spend the first quarter of their lives undertaking some sort of educational or vocational training. However, that is only the outer layer of what drives innovation in the country. Sure, having the know-how is important, but risking everything to start a company takes more than book-smarts. The fact of the matter is, growing up in Israel isn’t always easy (which I know from personal experience), but it also makes you brave – almost fearless. What’s more, anyone who has had both business and private dealings with Israelis know we are a direct bunch, with strong opinions and more than a little Chutzpah.

All of this activity needs somewhere to happen from, which is probably why there are around 70 co-working spaces in Tel Aviv alone (plus a few more in other cities around the country). On a recent visit, I had a look around a couple of the more prominent hubs, to hear about all the exciting things that are happening in this booming market.

My first stop was the local offering of the global chain, Mindspace. With five floors and impressive sea views, Mindspace also plays host to the Israeli branch of Barclays’ Rise, complete with its accelerator programme. Fintech Innovation Manager, Blake Korman, showed me around the impressive building, which is currently operating at full capacity.

The partnership with Mindspace is unique to Israel. “It’s great to be a part of Mindspace and get the benefit of their facilities and the contact with the companies that sit there”, Blake said. “They are a really cool space. No other Rise has that – they all have their own building”.

Barclays’ UK management is very interested in the activity of its Tel Aviv resident companies, who also enjoy support from the bank’s mentors and investors.

And it’s not just Barclays who are paying attention – a representative from Chinese giant Ant Financial recently spent a month as a resident in the building, looking for promising Israeli companies to partner with.

A Manhattan Native, Blake believes the work/life balance is much better in Tel Aviv. “You work to live, not live to work”, he said, “and it helps that the beach is just next door!”

Another option for Tel Avivian companies looking for a base is Urban Space, which currently has three locations in Israel and one in Paris. With a gym, relaxation room, and yoga on the terrace, this boutique location is quite a different proposition than the cool and stylish setup of Mindspace and Rise. Daniel Rubin, Urban Space’s VP of Operations and Growth, gave me a tour of the newest edition to the company’s property portfolio, and explained that the good thing about the wealth of co-working spaces in the city is that companies get a choice of spaces to suit their needs.

Urban Space houses a combination of agencies, startups and solo contractors like lawyers and accountants. They are constantly developing their offering to residents, including an upcoming partnership with Bloomberg, which will see their members get free access to advice from Bloomberg consultants.

Daniel said hello and good morning to every person we passed and seemed to know everyone by name. This is another way in which the Israeli industry is different – because the country is so small, not only can you visit a bunch of companies in one day, it’s easy to make connections.

Whatever the reason is for the success of Israeli companies both locally and across the world, it doesn’t seem to be slowing down. It’s exciting to see this tiny country help shape the world around it, and watch new companies as they emerge to make their mark.

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