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Why Israeli business feels abandoned by its government, and what the CEO can do

4 April 2020
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel, Jerusalem

Governments around the world have had to tackle the corona virus on two – at times, seemingly contradictory – fronts; the protection the health of its people and protecting their economy.

The former started through trial and error. It would be unwise to criticise the mistakes of some leaders. Who was to know better? But when it comes to the economy, some nailed it from the get go, and some did not. Sadly, Benjamin Netanyahu’s team in Jerusalem is firmly positioned in the second grouping.

A table in an Israeli weekend newspaper surveys 13 countries, including the USA, UK, Germany, Hong Kong and South Korea. All have pumped cash directly to companies and individuals. Keep people employed. Enable them to purchase from shops. So far, that tack has had an effect, without being able to stave off a recession.

The prime Israeli response revolves around handing out loans. Listen to leaders of Israel.Inc, business pundits, head of a Kenesset supervising committee, my clients, C-Class execs I have spoken to and they all repeat the same four points:

  • Why loans? They still need to be paid off
  • The paperwork is cumbersome
  • The banks have not stuck to government interest rates
  • The approval process is taking too long.

And after approximately six weeks into the crisis, not one special loan has been approved.

The government has also promised a two-phase grant to self-employed traders. Sounds good. There are tens of thousands of such people in the country, so I do not know them all. However, as a business mentor and coach in the Jerusalem area, not one of my clients is eligible, including myself.

Why? There are four key criteria, each containing a sting. For example, the starting base has to be less than 240,000nis income in 2018. This is not very high, relatively. Fine. Yet, one customer of mine received much more than that, only their expenses were also very high. They will end up with zilch, despite being in a desperate situation.

To make matters worse, the Israeli government has not allocated handouts to employ people. A company told me after laying off 25% of its staff, their is no immediate nor obvious help in sight from the distributor of taxpayers’ money.

As I wrote last week, these policies have been created by senior civil servants and politicians, who generally have never created a business nor even worked in commerce. They are not living under the threat of having their salary cut, as companies try to save themselves. They have not had colleagues sacked, even though unemployment has crossed the 20% barrier. What do they know about what people need?

Let me offer there practical and effective pieces of advice for any CEO reading this.

  1. Complete you tax returns for 2019 right now. Most of you will be due a rebate. Go and get it now, rather drag out the submission until the second half of the year, as often happens.
  2. If you want to secure a loan, obtain the help of somebody who knows the system. Do not waste your valuable time, by trying to do it by yourself.
  3.  I have written previously about corona offering business owners a chance to “reset” their company. Actually, it is more than that. For many, matters are so bad that this is when you can realise just how free you are to do what you want. You no longer have to abide by the old rules and restrcitions.

I am sure the Israeli government does care. However, we have Prime Minister in Jerusalem, who has to spend as much time fighting corona as he does in preparing to answer four charges of corruption. The Health Minister is deemed inept by all people I know and all media I read. The Minister of Finance has little clout, as he is about to leave politics.

So who in Israel has time for the small independent businesses, that make up 95% of all commerce, and can really make a difference? So far, nobody has answered the call and that is unacceptable.

Have the rich in Israel won the war against corona?

2 April 2020
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel, Jerusalem

An international ranking released on 1st April placed Israel as the safest country in the fight against corona. Certainly, it may be that there is a decrease in the rise of new cases in the Holy Land, but it is too early to be optimistic.

On the economic front, the economy is struggling to avoid shutdown mode. It is an accepted fact by most that Israel has not had a strong Minister of Finance for about 18 months. Unemployment has now shot up from 4% to over 23% in a month, but it can be argued that is an effect to be found around the world.

What does really irk me is what I wrote earlier today on Facebook

We all know of somebody who has been laid off, took a salary cut etc.

We have yet to hear of politicians taking a pay cut. In fact, I hear that MKs even got a pay rise from 1.2.20. And guess what? They can’t even meet at their place of work. So what are thy doing all day?

The Israeli government has allocated a massive amount of money to small businesses through loan schemes etc. I have spent much of my time this week explaining to clients why they may not be eligible for help or how slowly the sums might come through. But that pay rise….

One last question. It seems that we may have a new Israeli cabinet / government by next week. These get-togethers of men in suits have been as bloated as a fat whale in recent years. Do you think we have seen any sign of their numbers being cut?

But that pay rise….

Yesterday, I heard a story of a bakery that had ben barely surviving by making deliveries. A small boutique outfit, it employs about four people. The local council turned up without warning, deemed the premise to be an unnecessary business and closed it down on the spot!

That means that all four people are to be added to the jobless total. The owner has to throw out a week’s supply of raw materials. And as the business is relatively new, the loan schemes probably do not apply to him. For good measure, unlike other countries like Australia, there are no grants to keep staffed in employment.

The good news? The powerful men in suits (and a few token women) around the government table will still have their cakes at their next meeting.

Why a small business owner can feel abandoned at the time of corona

30 March 2020
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel

It ain’t fun running a small business these days. As a friend of mine and branding genius, Jonathan Gabay, highlighted the point in a powerful short video. You can feel so lonesome, even when there are others around to help.

A few days ago, I wrote about how I had been left disgusted by my landlord, who would not consider lowering the rent of my office temporarily. He is likely to get a discount for municipal rates. And the owner belongs to one of the strongest commercial groups in Israel. (I am still arguing for now). Upsetting.

It makes you wonder if you are fighting by yourself.

And then there is the government – both the politicians and the civil servants. In Israel, we are still waiting for a full package to support the small biz sector that makes up about 95% of commercial activity. What is that taking so long?

I refer to a post from senior Bloomberg correspondent, Matthew Kalman, who posted on LinkedIn:

Why are governments mailing cheques to people who need cash, now? The VAT, sales tax and income tax payments database could be reverse engineered overnight to deposit the emergency cash straight in people’s accounts, using RPA like the systems developed by Kryon and others.
The same goes for farmers now stuck with too much/too little produce due to shattered supply chains. The computers that operate their milking and other systems can be tweaked to talk to other producers’ computers, and then to the computers of logistics, wholesale and retail companies to move local food around fast to the places where it’s needed.

But is any of that forthcoming? When? How? Answers are in short supply from our leaders, who tell us that they know how to govern and from the bureaucrats groomed in the culture of planning (for the sake of planning?).

Meanwhile, you can understand why the small, individual, insignificant biz owner feels a tad upset.

You own a small business, and the corona virus is at your doorstep. Why your government is behind you – too far behind!

27 March 2020
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel

Point 1: There is one clear advantage to lockdown and isolation. You receive a rare opportunity in our 24/7 society to think and ….. to listen. You can reflect on what you have got right and wrong, and how you can make a positive difference. once things are back to normal.

Point 2: Name the country and SMEs – small or medium sized enterprises – comprise about 95% of the economy.

Yesterday, Thursday, the UK announced a series of wide-ranging measures to help the owners of small businesses. Some statutory payments will be waivered. Money will be put into the enterprises. And most loans will be interest free.

All fantastic. However, most of the key benefits will only kick in from the month of June!

Over the pond in Washington, Trump’s men are preparing a US$2 trillion package. Great, and this calls for money for the SMEs. However, there are few concrete or practical details how this will impact or when on small commercial operations.

In Israel, we have been promised a set of measures for most of the past week. So far, the only true policy to have been implemented is a massive loan programme. It has been so successful that thousands have already applied, including those who do not really need the safety net.

How the system will evaluate the really needy cases and rapidly, I have no idea. And many of the loans will require interest to be paid. Ouch again.

So what help do people need? I take myself as an example. I have a small office, in a building owned by one of the richest families in the country.

I asked for a reduction in the rent. My request was refused, politely but firmly. I guess they need the money to finance the construction of yet more offices opposite where I am located! They did offer to delay some of the payments, but this does not really help when you do the long-term maths of a cash flow chart.

Bottom line: I am currently paying full rent in Jerusalem for a premise that I cannot use.

Last night, we learnt in Israel that the Prime Minister had just locked up his short term political future. That means he can continue to sleep at night in his rent-free premises, but not in lockdown. And he is about to appoint a new Finance Minister, who has no obvious track record in business or in helping the community.

Is anybody listening? Does anyone know how to listen?

Israel’s economy – when the virus gets at the decision makers

26 March 2020
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel

When decision makers at Israel’s Ministry of Finance first tried to deal with the corona issue, most of the initiative (ie funds) went into creating a new quick-fit loan scheme. Brilliant. All this does is permit extra debt for the SME sector, which is usually already in debt.

Move forward two weeks with unemployment at 20% and nothing much has changed. The Bank of Israel will borrow money, but there is little immediate help for the individual. The government – well, it is a one-person outfit and is not functioning.

Let me give you one example, but so wide-ranging in its implications.

Ami Appelbaum is Israel’s chief scientist and chairman of the Israel Innovation Authority. He is encouraging high-tech companies not to lay off staff, particularly at the small start ups. However, on survey has shown that “five percent of Israeli tech companies have already fired workers, and 64% have frozen new hires”.

But this is what is really crazy. Appelbaum appreciates that overseas sales’ trips are not possible. Much of the FDI has dried up from international VCs. However, monies promised by the government………….?

…….budgets have been put on hold. Indeed, the Innovation Authority in January said it would be halting the grants it provides startups for research and development projects due to the lack of approved funding. Appelbaum said he hoped to soon be able to finance the grants that have already been approved.

You must be kidding! How many people have to be laid off needlessly because the politicians and / or bureaucrats cannot work out a solution?

That approach is unacceptable. The Israeli public deserves better from the people whose salaries are paid for by the public themselves!

Innovation does NOT stop with Corona

25 March 2020
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel, Jerusalem

I have referred before to a tremendous article called “Titans of Transformation“. I love the opening section, which is so pertinent in the age of corona.

When it comes to disruption on the modern business landscape, company size is no safeguard. 88% of Fortune 500 companies in the 1955 -2017 period 1 have either gone bankrupt, merged with other firms, or dropped off the list for other reasons. What’s more, it’s estimated that digital disruption will wipe out 40% 2 of today’s Fortune 500 companies in the coming decade.

The message is clear. You do not know when something is going to come along that will knock you off your commercial pedestal – competitor or ‘the force’ like a virus.

A prime part of my working life is playing the role of business coach and mentor. I have been rushing around my clients – phone, zoom and the rest – over the past few weeks. The typical conversation starts of with a despondent review from their side but often ends up with a cautiously optimistic outlook.

Why? Well, as someone said to me: Corona is offering us all a chance “to press the reset button”. So true!

For example, I was speaking yesterday with Oded Barel-Sabag from the Jerusalem Development Authority. He told me that there are at least a dozen companies in the city working on a solution for the corona virus, several of them have either switched direction or just opened their eyes what their tech could do.

This morning, I had a new Facebook feed about a fruit seller from Jerusalem’s main street market. As old fashioned as they come. If you had asked him a couple of months ago to contemplate home deliveries via WhatsApp, I can only assume he would have laughed at you. But this week ……

I can give you anecdotes from numerous service providers and high-tech companies who have begun to rethink their strategies. Many of them are using outside consultants. And the reason for this is that it can take a fresh or neutral approach in order to rediscover that spark of hidden genius.

And this applies equally to the field of geopolitics:

Palestinian health care professionals have received training in Israeli hospitals. Israeli labs have analyzed Palestinian COVID-19 diagnostic tests, and doctors on both sides are sharing data…..The collaboration on the Coronavirus includes the health ministries of both governments, along with the Israeli military liaison. Israel in recent days delivered 250 virus test kits to the West Bank and held training sessions for Palestinian medical workers on how to protect themselves. Israel’s Civil Administration, the military-run authority in Palestinian areas of the West Bank, promised to supply medical equipment and training as needed

Corona is awful. The health, financial and social impacts will only be fully understood with the passage of time. That said, we can use the opportunities that it presents to make our commercial lives that bit stronger.

Corona is not an excuse to stop moving forward. It should be your motivation towards further innovation.

 

In the time of corona, some inspiring news from Jerusalem

19 March 2020
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Categories: Afternoon Tea in Jerusalem, Blog, Israel, Jerusalem

This is a period in our lives, when we are waking up, turning on the news and hearing numbers thrown at us. And what they all add up to is that more people have been infected by an anonymous virus, thousands more have been tested, and a few are actually dying. And it is the elderly, who seem to be most at threat.

So let me tell you about a little story of an old man in Jerusalem, who until this week was practically unknown, but who is now a hero of numbers. (For my information, I rely heavily on press releases from official sources).

Our story starts in 1918, when the Hebrew University of Jerusalem was founded by visionaries including Albert Einstein and Sigmund Freud. To date, HU faculty and alumni have secured eight Nobel Prizes.

17 years later, Hillel Furstenberg popped into the world in Berlin. The family survived Kristallnacht and managed to flee in 1939. In America, Hillel became a mathematician. When one of his earliest academic papers was published, rumors began to circulate that “Furstenberg” wasn’t an individual but rather a pseudonym for a group of mathematicians.

He emigrated to Israel in 1965 and helped to consolidate the Hebrew University as a world class institution in his field. He won many prizes over the years.

This week, Furstenberg, along with Gregory Margulis from Yale University, secured the Abel Prize from Norwegian Academy of Science and Letters. This is the equibvalent of the Nobel Prize in mathematics. The citation mentions their “pioneering the use of methods from probability and dynamics in group theory, number theory and combinatorics”.

Ironically, Russian-born Margulis shared a similar background to Furstenberg. He was also heralded as a leading mathematician from a young age. And being Jewish in the Soviet Union meant that Margulis was unable to secure a job at Moscow University and eventually emigrated, also to the United States.

We are facing enormous global adversity. These gentlemen have shown what can be achieved, despite everything. They have also illustrated to us mortals have numbers can be used for happier subjects.

Take a moment to bask in their triumph. Wishing everyone well and safe.

The WOW story about Israel and the corona, and it’s not just about the numbers

18 March 2020
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel, Jerusalem

As I write, about 350 people have been identified in Israel as corona virus carriers. Five are in serious condition. Thanks goodness, nobody has died.

The numbers are expected to rise, unfortunately, but there is another side to this story, one that the country can be proud of and others can learn from.

In some ways, it was best summed up by a headline from Bloomberg: “The End of the Jaffa Orange Highlights Israel Economic Shift”.

Since peaking in the early 1980s at 1.8 million tons a year, Israeli citrus production has dropped almost 75%….. Just 1% of Israelis now work in agriculture, down from 18% in 1958, while the tech sector has shot up from virtually zero to 10% of jobs today…..

In fact, there are some 200 companies involved in agritech and related fields, as if the wheel has turned full circle.

However, Israel is particularly strong in the field of biotech and pharma. It seems that this is one part of the global stock market that has at least partially managed to resist the steep fall in share prices. Yesterday it emerged that three Israeli medical companies had just raised, on the same day, US$125million between them.

There are those that argue that Israeli high-tech is well positioned to weather the economic push back from the corona virus fallout.

The fact that most of its products are virtual, which has also contributed to bringing the Israeli tech industry to its current thriving self, could help it get back on its feet more quickly following this crisis. Additionally, unlike the dot-com crisis of two decades ago, the coronavirus crisis meets most Israeli companies at a good place business-wise, with stable business models, real market needs, and paying customers around the world.

Personally, I think this is wishful thinking. That said, I could not fail but to be amazed at a most powerful statement from Jon Medved, the CEO of Our Crowd Funding in Jerusalem. Describing how his teams are changing their work habits in these strange times, he mentioned that:

……..some two dozen companies on OurCrowd’s portfolio develop technologies that pertain directly to the corona crisis, from a company developing remote patient monitoring technologies to a company creating new kinds of disinfectants.

Staggering!

The rise of Jerusalem’s new economy

24 February 2020
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel, Jerusalem

Jerusalem’s economy is changing, and quickly. It is no longer centred around government offices or even tourism. The Our Crowd Summit  earlier this month – featuring thousands and with attendees from over 180 countries – is just the tip of a growing iceberg.

Only last week, I was invited to a new Fintech forum. This was on the back of one of my clients in the field receiving a massive overseas investment. At the same time, Crossriver, which only opened its R&D facility in Jerusalem a year ago and already employs about 60 people, has announced that it will build a brand new complex in the city. This will allow it to expand its activities far more quickly.

At the Our Crowd Summit, I was able to have a look at the wonders of Labs02. This is a hub of about a dozen companies. It is located in a revamped building near the former Jerusaelm railway station and which used to house the country’s money printing press.

These firms are handpicked. They are given an 18 month grace period and wrapped in the arms of brilliant tech mentors like Menachem Sheffer.

One that caught my eye is IntellAct. The concept is brilliant. We all know about the need to change a tyre in Formula 1 races within micro-seconds. This company applies the same principle to the ground services at airports. By smart-mapping the various suppliers – food, cleaning, refueling, onboarding, etc – the company saves the airline critical time, which adds up to a lot of big bucks.

Moving away from high-tech for a moment, I was struck by a joint effort of the Ministries of Foreign Affairs and Agriculture, located in the Holy City. For decades, Israel has been sharing its agritech with countries in Africa and elsewhere.

In Ethiopia, about 85% of its 110 million people live in small farming communities, and usually poor ones at that. Over the past three years, an Israel sponsored scheme called TOV – Good in English – has trained thousands to grow strawberries, tomatoes, avocados and cabbage. These are considered local staples and relatively profitable. In addition, there are many instances of new cooperatives, allowing for greater economies of scale.

If there is a sting in the tail of these success stories, it is the rest of government officialdom. Benjamin Netanyahu has been Prime Minister for 11 years consecutively. Despite his promises to counter the problem, Israel has consistently fallen down the international ratings when it comes to regulation and bureaucracy. For example, when it comes to flexibility and efficiency, the country has dropped twenty places to 69th.

Imagine what could really happen in Jerusalem if there was a Prime Minister who would let government free?

 

 

 

So Arab countries boycott Israel in 2020? Let’s get real

21 February 2020
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel, Palestinians

For decades, Arabs boycotted Israel, at least on paper. They encouraged companies like Pepsi or Asian car manufacturers to do the same.

And today? Well, I challenge you to name me one large automobile outfit that is not present in Israel with an r&d centre. Did you know that participation requests were received from 22 Arab countries to attend the Our Crowd Investment Summit in Jerusalem two weeks ago?

Why continue to ask for a boycott? On behalf of the Palestinians or the Israeli Arabs? Have a look at these news items from this month.

Start off with J.P. Morgan, which is beginning to expand its presence in the Holy Land on a very prominent scale. Their head of tech in Israel, Dr. Yoav Intrator, observed that:

……we have set a target of increasing the diversity of the human element in the center’s work teams. We have already begun taking steps to achieve this target, both by including women in our teams and by including Arab staff, mainly Israeli Arabs. I think that the lack of diversity in this area is one of the main problems in the Israeli economy, and there is potential for redressing the situation. For example, there is currently a high proportion of Arab women among engineering and computer science students at universities in Israel.

Similarly, Bank Hapoalim is heavily involved in the development of the Arab incubator in Nazareth.

However, most striking for me is the news that “Israel and the Palestinian Authority appeared to have come to an agreement to end a major trade dispute in which both sides placed sweeping restrictions on some of each other’s goods.”

It appears that:

Palestinians exported around $100 million in agricultural products in 2018, including dates and olive oil. About half went to Israel while the rest was sent to other countries, according Abu Laban. In contrast, Palestinians imported approximately $300 million in agricultural goods from Israel in 2018.

Imagine how that can figure can grow. And we all know that trade usually improves bilateral relations between sides. Why boycott in the first place?

And why continue to advocate for a boycott when the people on the ground – those involved – clearly do not advocate for it?

One quick lesson in how to handle the disgusting service of credit card companies in Israel. The 4 Bs!

19 February 2020
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel

We all know that you have to check your credit card bill every month, just in case.

I had a VISA card. It was issued via a supermarket chain, which until recently operated a branch near where I lived. They promised me all sorts of things, most of which I forgot. The branch closed. I had no use of the card, but I was charged 15.90nis (US$4.5) for …..something. (I suppose the cost of sending me an electronic message that I had not used the card!)

I decided to cancel the card.

VISA has a comprehensive website. Nowhere could I find a link to ‘cancelling’. To cut a long story short, I tried about three phone numbers, several times, and eventually got through.

And then the fun started.

The first offer was that if I did not cancel, the monthly admin fee would be wavered, providing I made at least one purchase a month on the card of a least 1 shekel. As I am a boring a person and keep all my expenses on one card, an alternative card, I turned down the opportunity.

Suddenly the kind lady made a second proposal. If I stayed on, she would return all the previous charges of 15.90 nis. About 4 months. Sounds good. But I was annoyed.

I asked: “Why didn’t you offer that the first time round”. To paraphrase the response. “Becasue most people accept the first offer”. The implication is that they are stupid suckers!

In other words friends: Apply the rule of the 4 Bs.

Be persistent, be firm, be polite, bite your lip and your credit card company will stop ripping you off.

No, I did not accept the second offer. Why? Because in a year’s time, the deal will end and they will start to charge me again. I decided that what I had paid out has already gone, but I would not lose any more.

Now go check your own monthly bills……, which are usually sent online and most people cannot remember their password! More easy money for the credit card companies.

 

Just what makes Israel’s economy so incredibly interesting and attractive

24 January 2020
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel, Jerusalem

Yesterday, I reported on Jerusalem’s miraculous economic turn around. As for Israel’s national economy, well:

  • Over 50% of the country is a desert, and yet it is a high-tech powerhouse.
  • The country was born in a geopolitical mess and has remained there ever since.
  • The electorate is burned by an over zealous political system, now facing its third general election within 12 months.

Now get this:

As reported by Bloomberg, the Tel Aviv stock market rose to a record high this week.

The TA-35 … extended its increase in the past 12 months to 15%. The benchmark is mostly composed of financial, health care and real estate companies, and Israel’s is the only equity market in the Middle East classified as developed by major index compilers.
……. A combination of low interests rate and optimism over economic growth is helping stocks, analysts said.

Eyal Dabby is the head of equity research at Bank Leumi Le-Israel in Tel Aviv.

GDP is expected to grow above 3%, and inflation is very low. Unemployment is also at the lowest level. It is a strong economy with fair pricing and very low interest rates. The combination of all these parameters is supportive for the equity market…..It is difficult to predict what will be the exact market performance in 2020, but if nothing special happens, especially in the U.S., to which the Israeli market is highly correlated, the equity market could continue to deliver between 8%-10% gains on average.

These statements come on the back of a very strong year for the high-tech sector in Israel.

The total value of Israeli exits in 2019 reached $21.7 billion in 138 deals including the $6.9 billion acquisition of Mellanox by Nvidia, which is still subject to closing. This figure is up sharply from $12.6 billion in 2018. The total value of exits of up to $5 billion in 2019 was the highest ever, with $14.84 billion in 2019, compared with $12.63 billion in 2018.

Now imagine if there had been a stable and effective government in power for the past 18 months. Would that have improved things even further?

The wonders of Jerusalem’s miracle economy.

23 January 2020
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel, Jerusalem

Freezing cold in late January in Jerusalem. The threat of snow is in the air. And nearly 50 of the world’s biggest leaders have descended on the city in order to honour the 75th anniversary of the liberation of Auschwitz Concentration Camp.

As traffic snarls up to ensure clear passage for the celebs, all around them a major economic transformation is in process. The Jerusalem economy is emerging from its slumbers, previously branded as a city for religious tourists – Jewish or otherwise – and civil servants. Jerusalem is moving towards Palo Alto, so to speak.

Mobileye may be a one-off story, the proverbial commercial unicorn rising out of the holy city, but it does represent the start of something new. It was purchased for over US$15 billion dollars by Intel. It had planned a 30 floor high HQ in Jerusalem.  It has since decided “to amend the NIS 950 million ($274 million) plan for a more modest group of five buildings, each nine stories high…”

About five kilometers away are the offices of Our Crowd. Their rapid rise to success as arguably the most successful global investment crowd funding platform has ironically paralleled the rise to fame of Mobileye. Next month, they will hold their annual event in Jerusalem.

Their press release today points out that: –

OurCrowd reports that 32 of the startups presenting at the past four summits had an exit or IPO within 12 months. The 2019 OurCrowd Summit featured 7 startups that later exited, including:

Beyond Meat: Biggest IPO in a decade, May 2019
Magisto: Acquired by Vimeo for $100 million, April 2019
Wave: acquired in June 2019 by H&R Block
Prior years’ Summit featured many startups that later exited, including:

Jump Bikes 2018, acquired by Uber two months later
Briefcam 2018, acquired by Canon six months later
Invertex 2017, acquired by Nike three months later
Mobileye 2017, acquired by Intel for $15.3 billion two months later
Crosswise 2016, acquired by Oracle three months later
Replay 2016, acquired by Intel two months later

Oded Barel of the Jerusalem Development Authority has also listed some of the investment highlights of 2019, featuring local corporates on the go. For example:

  • 🦄 Lightricks raised $135M and became a unicorn. If that wasn’t enough, it also won both Apple’s and Google’s best app of 2019 awards.
  • 👁️ Orcam’s MyEye has been selected as one of Time Magazine’s best innovations.
  • 🏡 Hometalk raised $15M to expand their DIY content platform.
    🧠 CNVRG raised $8M to expand to NYC and help enterprises adopt machine-learning.
  • 🚗 C2A raised $6.5M to develop its end-to-end cybersecurity platform for cars.
  • 🏥 Pepticom raised $5M to accelerate drug-discovery using AI.
  • 🍣 Bitemojo won the UNWTO global competition for gastronomy tourism startups.
  • 👋 Mellanox, Via, Taboola and Vayyar have all announced they are opening R&D activity in Jerusalem. Welcome, fellas.

Gathering together stats from various reports, there are around 41,000 business enterprises in Jerusalem. Nearly 4,000 new ones opened up in 2018, although a further 3,000 closed down. Interestingly, both this rate of growth and the relatively low turnover is better than the national average. One reason for this is clearly the strong presence of NPOs like MATI, which promotes Biz Dev amongst some of the weaker parts of the local community.

What next? Ask the 50 world leaders visiting us this week. They may have been here to discuss the Holocaust. I can assure that business and trade were also close to the top of the private agendas.

Israel’s economy – limping or striding towards yet another election?

1 January 2020
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel, Jerusalem

Israel’s third general election within 12 months will take place on March 2nd. Everyone knows that political uncertainty is rarely good for a sophisticated economy. So how has the country managed to ride this wave of political intrigue?

It would seem that the Israeli economy grew at a rate of 3.3% in 2019, pretty good compared to other countries. And as for trade, at a time when China and the USA are threatening global instability: –

Figures for Israel’s trade and capital flow show an increase in the surplus, which supports further strengthening of the shekel against foreign currencies. Israel had a $9.8 billion trade surplus in 2019, compared with a $4 billion surplus in 2018. The balance of payments current account had a $14.8 billion surplus in 2019, compared with a $9.5 billion surplus in 2018.

Incoming tourism increased yet again in 2019, this time by 10%. Start ups raised a record US$350 million in December 2019 alone. And global companies like Tesla continue to set up offices in the Holy Land.

So where is the proverbial “but”?

Let’s look at those start ups. “5,313 new startups were founded in Israel between 2011 and 2018, but 2,387, or 45%, closed or froze their operations by 2018. In total, 4,363 startup companies were active in Israel in 2018, a 6% drop from 2017”. Hmmm.

Now let’s consider the budget deficit, which the government has sworn blindly for over a year is under control. The gap has already mushroomed to nearly 4.0% of GDP, way above all targets. New taxation is almost a given, when a government if eventually formed in the early summer.

And this budgetary hole is rarely a good sign, just when unemployment rates are beginning to turn upwards, admittedly from a low figure of less than 4%. In other words, the glory of numbers showing a strong economy is really not that genuine.

Roughly 18 months ago, the then governor of the Bank of Israel, Carmit Flug, took the hint and decided not to seek re-election. She had advocated that the fiscal policy of the Minister of Finance was irresponsible. She bitterly opposed the moves to reduce taxes. However, she was to lose the battle.

Is it any wonder that the head of Israel’s Tax Authority is currently looking for ways to raise taxes? First up on the list is the imposition of VAT on fruit and vegetables, a direct hit on the poorer sections of society. However, this decision will not be made until after March 2nd, thus protecting the government’s core base voting community.

Hmmm.

362 reasons why Israel is called The ‘Start Up Nation’

30 December 2019
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel

Israel is known as a ‘start up nation’, the high-tech powerhouse of the Middle East. It has 20 unicorns, only beaten by China, USA and the UK.

A new research report detailed just how far Israel has come in three decades in encouraging overseas investors to trust what was once a bankrupt and insular economy – whose best export was the Jaffa orange.

The key number is 362 – 362 multinationals are active in the Holy Land. “Intel is the most active corporation in Israel (2014–2019): Intel Capital has participated in 52 investment deals; Intel corp. acquired 5 companies totaling $17.5B.” Google and Microsoft have purchased ten and eight businesses respectively.

And the growth rate continues. “51 Multinational Corporations opened new R&D activity in Israel between 2017 and 2019.” The three top technology clusters in MNCs in Israel are: Machine Vision, IoT and Cyber Security.

What is this worth to the Israeli economy?

  • Hightech employs about 15% of the workforce. The largest number of employees is in a manufacturing facility (Intel Fab in Kiryat-Gat) and not an R&D center. Interestingly, no other High-Tech facility in Israel comes close to this scale, other than the Intel R&D center.
  • Israeli based MNCs are about to pay nearly $8.85 billion in 2019.
  • This amount is equivalent to approximately 2.6% of Israel’s estimated GDP for 2019 (in fixed prices, assuming 3.1% GDP growth this year), and 18% of the total income from direct tax, which is expected to be $48 billion this year.
  • The median tax payment per MNC is expected to be $7.125m in 2019.

The report from the IVC et al makes for fascinating reading. You can see what your country can learn from this innovative approach to building an economy from scratch.

It’s Christmas. Are there still Christians in the Holy Land?

25 December 2019
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Categories: Afternoon Tea in Jerusalem, Blog, Israel, Jerusalem, Palestinians

Today is 25th December 2019. It is Christmas. In Israel, this special Christian holiday has become politicised over the years. President Abbas is always seen attending a service in Bethlehem. The PR team at the City Hall in Jerusalem ensure that all the press knows how many free Xmas trees have been handed out.

To summarise one wag on Facebook today, Jesus could not have been a Palestinian, because the term was only coined 200 years after he died.

Israeli spokespersons have pointed out for a few years now that And please note that the largest section of those numbers are affiliated with the churches of East Europe.

The British-born journalist, Matthew Kalman, has cited numbers from Israel’s Central Bureau of Statistics.

There are 177,000 Christians living in Israel at Christmas 2019, 2% of the population. Their number grew by 1.5% in 2018, compared to 2% the previous year. Among the 855 Israeli Christian couples that married in 2017, the average age of the groom was 30.1 years old, while the average age of the bride was 26.0. The average number of children aged under 17 in Christian families is 1.87, compared to 2.37 for Jewish families and 2.77 for Muslim families.

As for me, I am spending the season in Australia. I have been wished Happy Hanukah by Christians, and I have wished so many others Happy Christmas. So, as they say here down-under, I wish all my readers “happy holidays”.

How much will a 3rd general election cost Israel?

16 December 2019
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel, Jerusalem

Israel is to hold its third general election within 12 months in March 2020. Does this political impasse have an significant impact on the economy?

Remember: Israel has always had a coalition government. Yet somehow, parties have found a way to come together. This time, there is a secondary elephant in the room – the investigations into corruption surrounding the Prime Minister and now his indictment on three separate accounts. Benjamin Netanyahu has made no secret that his best line of defense lies in clinging to power.

Thus, the political impasse did not start on the day of the first general election this Spring. It began in the run up to that vote, commencing in the Autumn of 2018. And it is likely to continue through to the early summer of 2020, as the vested parties will seek to outmaneuver each other in the expected coalition talks.

In other words, we are talking of an almost two year period, when the economy (and other policy issues) have received no central direction!

Does this really matter? After all, the economy is holding up.

Against all that cheer, there is a very worrying undercurrent. As one journalist calculated:

The price tag for the next election is NIS 3.8 billion and the cumulative cost for all three national ballots is an estimated NIS 10 billion – enough to raise old-age stipends for one million pensioners in need.

Meaningless assumptions? One leading national charity has stated that:

Government policy tools directed at the issue are generally limited and insufficient to diminish the problem substantially, to which has been added stagnation in government and political instability because of the two elections a short time apart in 2019, leading to the loss of an entire year in the ability to deal with prevention and reduction of poverty and rescue from it.

It is known that:

  1. The national deficit is growing, as the government has no mandate to lower spending nor to raise taxes.
  2. New opportunities to attract overseas investors are going begging, as they require government approval.
  3. I was told by one pensioner that his drugs and tablets are in short supply, and he has heard of other cases.
  4. Specific stipends, such as for soldiers without parents, have run out of money.
  5. Start ups, relying on government funding, have been laying off workers, as there has been ‘no legal process’ to grant the transfer of funds.
  6. And………….

In other words, at the micro level, the immaturity of Israel’s politicians is beginning to hurt. But who cares?

The political uncertainty only impacts on the electorate but not those who consider themselves wise enough to make the laws.

 

BibiGate and Israel’s economy – who wins?

26 November 2019
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel

For over two years, Israel’s Prime Minister, Benjamin Netanyahu, often called Bibi, has been investigated first by the police, who then passed on their recommendations on to the Attorney-General. Both teams were led by Bibi appointees. Both believe that Bibi has to answer charges in court on three separate accounts, involving bribery and breach of trust.

Bibi denies it all. And he realises that his best line of defense requires him to hang on to power. In a country where governments are always dependent on fragile coalitions, this has resulted in two inconclusive general elections within six months. Further, as the political stalemate continues, another walk to the polls looks likely in March 2020.

Where does that leave the economy? Ostensibly, not too bad. For example, “Moody’s senior credit officer Evan Wohlmann believes that Israel’s economic growth has outpaced most other advanced industrial countries over the past decade.” The credit rating remains at A1.

In parallel, FDI is strong. Unemployment is low at just under 4%. UK’s Pret A Manger restaurant chain is looking to enter the Holy Land. So, all-in-all, not a bad report, you might think.

Look again, much deeper.

GDP growth for Q319 may have clocked 4.1%, but this was based on one item. There was a freak one-off huge rise in car imports. Even worse is the fact that the greatest growth generator of the Israeli economy is also the main obstacle of economic growth—the endless traffic jams that decimate millions of work hours for the Israeli workforce.

How the Bank of Israel will react to these unreliable figures is to be determined. Israel’s top monetary experts must be worried by the fact that this year’s budget was cobbled together at the last moment. There is a clear gap in public spending programme. Further, there is no way that a budget for 2020 has been prepared, and there is no clear thinking how it could even be passed in the near future. That is a bright red warning light for the international financial markets.

Even that stunning unemployment stat is clouded with uncertainty.

Despite the record low in unemployment, the state of the labor market in Israel is not clear cut. The number of available jobs in Israel has been declining in recent months, a figure likely to indicate a slowdown in the expansion of economic activity.

What next? Bibi has always proclaimed his innocence and is determined to stay where he is. He still controls his political party, the Likud, just. So long as that plank of support is in place, the country remains paralysed.

As either Minister of Finance or Prime Minister, firend and foe will agree that Bibi can be credited for much much of the success of Israel’s healthy economic performance since 2001.

As we close off 2019, the economy will continue to plod along due to its own core strengths – the high tech sector, innovation, export sales to new markets, etc. However, that drive cannot remain in high gear for ever. When that slowdown eventuates, regardless of their political persuasion and ethnic background, the electorate will begin to ‘feel it’, which could determine how people will vote next time. Ironic?

 

 

 

Here’s what Israel’s economy and society are telling its politicians.

13 October 2019
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel, Jerusalem

Israel held its second general election almost a month ago, and there is no sign of a government in formation.

Incumbent Prime Minister Netanyahu has a reputation of being a winner, usually. It seemed he had won back in April, only for one of his expected coalition partners (Yisrael Beiteinu) effectively to ditch him. Back to the electorate in September and he has actually ended up with a slightly worse set of cards to play with.

Today, he is a wounded race horse. The biggest evidence for this are those individuals, such as Gidon Sa’ar and Nir Barkat, in his own Likud party, who are beginning to announce that they are prepared to replace Netanyahu – of course, only if and when he resigns.

The same is true overseas. Assumedly one of his biggest fans, President Trump, has failed to do anything about recent Iranian aggression towards Saudi Arabia. Then last week, the Americans withdrew military protection from their Kurdish allies in northern Syria. Both items have sent shudders throughout the Israeli security services. (I remind you that one of Netanyahu’s key election posters included a photo of himself and his chum Trump, smiling together).

For good measure, Netanyahu’s supposedly close relations with President Putin are also being tested this weak. So far, Netanyahu’s words are having little impact.

Everyone knows that Netanyahu is facing legal accusations on at least three separate issues, involving bribery and the perverting of the course of justice. Many argue that the proverbial elephant in the room for both elections was Netanyahu’s desire to remain as Prime Minister for as long as possible. The law for removing a PM, if and when he has been formally charged, is unclear. It seems that technically he can stay where he is.

And what does this impasse mean for the average Israeli?

  1. The Bank of Israel has already issued a strong warning regarding the budget deficit, which has been out of control for nearly a year. Painful cuts are urged.
  2. The Bank of Israel has also reduced its estimates for economic growth in 2020 by a full half of one per cent to 3.0%.
  3. Reforms and incentives are held up. I have a client that wishes to apply for a government grant, which will help their company invest in new machinery. This will create employment and thus fulfill new export orders. The grant programme ran out a few months ago, and can only be extended when the Kenesset (Parliament) begins to work again. Meanwhile……
  4. Everyone accepts that the budget for the Ministry of Defense is large, relatively and absolutely. Including American support, it stands at 72.9 billion shekels (almost US$21 billion). Of this, 7.9 billion shekels (11%) is handed out in pensions. By way of comparison, the Ministry of Education is appropriated 6 billion shekels and the Ministry of Welfare 9.5 billion shekels annually. Disproportionate?
  5. As for the Ministry of Health, if you do not live in the key population centres, hospital services are simply poor. Pardon the pun, but I am sick and tired of seeing pictures of patients waiting in beds in hospital corridors. Unacceptable!

Aside from Netanyahu, there are at least three other politicians from the outgoing government awaiting for the Ministry of Justice to decide if they should be prosecuted. One of them includes the Minister of Health, Ya’akov Litzman, The Israeli political system is unwell, and most patients are demanding a new doctor be placed in charge.

Do I need to change my business model?

11 October 2019
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Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel, Jerusalem

Two Israeli Unicorns and both leading viral content distribution companies, Taboola.com Ltd. and Outbrain Inc., have agreed to combine forces.

Taboola was founded in 2007, has 1,400 employees and has raised over US$160 in a decade. Outbrain: founded 2006, 800 workers, and has raised US$150. Having spent years snipping at each other, they are now seeking to combine forces to take on Google. All change.

But most companies are not that global. Whatever the financial headlines, business is dominated by SMEs – individuals or small groups of people struggling daily to hit their targets in their own local neighbourhoods.

I recently was called in to three such operations in the Jerusalem area.

The first one was a relatively simple affair. The owner wanted to sell. I was asked if he was making the correct decision. Given the state of his business, his private situation and the offers received, the answer was a clear yes.

The good news was that here was a person that was prepared to put aside all his established thought processes, look beyond the jungle of clashing thoughts, and realise what needed to be done. Mega kudos points.

In the second scenario, I appreciated that the founder needed help, but that they could not be told out right what to do. So, I created a time line as to what would or would not happen, depending on their actions, carefully choosing a specific date months in advance.

I cannot say that the process was smooth. The initial meetings were accompanied by much resistance and the old-fashioned weapon of choice, ‘procrastination’. However, three months into the battle and we have a clear path forward and a completely new face to the marketing strategy. Quite literally, it is as if the CEO has discsovered a new language, judging by the way they are talking.

In case study number three, the story is more complex. Shortage of space forces me to narrow down the bare facts. This is a person, who is so caring that they will do anything for anyone. And this is the constant excuse why they cannot help themselves, because others need their attention.

The business model, such as it is, is truly weak, Nothing will change that pattern until they are able to comprehend that the damage they incur on themselves will eventually impact on those that they love.

We are taught that change is often seen as a threat. As a business coach and mentor, almost every week I try to show CEOs how in fact change can be such a fun, if not invigorating, challenge. Otherwise, we end up like approximately 80% of the Fortune 500 companies from  about 50 years ago – they are no longer around.

 

 

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