The role of global corporations is key for the success of the Israeli ecosystem, according to the new “Corporate Innovation in Israel” Report, launched by Mind the Bridge in occasion of the Digital Scaleup Summit Israel 2020 and Climate Policy Forum (organized by the European Commission – DG for Research and Innovation and the EU Delegation in Israel).
“An “army” of over 40,000 thousand people from 155 multinationals is hunting innovation in Israel – commented Alberto Onetti, Chairman of Mind the Bridge – The reasons for such a massive presence are easy to explain if we look at the numbers the Israeli innovation ecosystem has been able to produce: over 1,600 scaleups able to cumulatively raise $39B+. That equals to 18.4 scaleups every 100,000 inhabitants. Excluding Silicon Valley, there are no other places in the world with such a high Scaleup Density. Similarly, the Scaleup Investing Ratio (capital raised compared to GDP) is the second highest in the world.”
Global companies have been operating in Israel for decades, mostly through an R&D approach. During the last few years, they strongly shifted towards a leaner approach and the use of open innovation mechanisms. More companies are increasingly experimenting with different partnership models, making innovation more cost efficient, in a similar way to what has been happening in Silicon Valley since 2010.
“The gap with Silicon Valley, anyway, remains big”, added Alberto Onetti.
Not so much of number of corporates on the ground (155 vs 222) rather in terms of Corporate Venture Capital investments: approximately less than one third of the amount of average deals per year (167 vs 566), and one ninth of the capital invested ($2.2B/year vs $23.9/year).
Digging into Data
The Report tracked 198 outposts from 155 companies: 27 companies have multiple presence, while 128 companies have a single outpost.
One out of two corporates are from the North America (80 out of 155 – 79 of which from US) clearly showing the strong connection between the two countries around innovation practices. Europe (with 50 companies, 32%) and APAC (23 companies, 15%) do follow with German (14, 9%) and Japanese (10, 7%) companies leading the pack. Still limited, although on the rise, is the presence of China (4 companies, equal to 2,6%).
Which Industries?
Electronics and IT&Software are at the core of corporate outposts in Israel with 28 and 27 companies (18% and 17,4% respectively). Finance & Banking (17 companies, 11% of total), Automotive and Manufacturing (both with 14,9%), Telecommunications (10, 6.4%) and Biotech, Life Sciences & Pharma (9, 5.8%) follow. The Report tracked also a growing investments by corporates in Cleantech (4% of all the deals in 2019 vs 1% in 2015).
Innovation Outposts: what and where
“Israel is known for its large number of skilled professionals across a broad range of sectors and international companies have been channelling, for decades now, this pool of talents to fuel their research and developments efforts – added Alberto Onetti – It is not a surprise, then, that more than half of the outposts we found are R&D centers”.
In addition to the 107 R&D Centers, the Report tracked 45 Corporate Innovation Labs, 39 CVCs and 7 Corporate Innovation Antennas.
Around half have structured operations with teams larger than 50 people, 58 of which with more than 200 people. Conversely, around one-third of the outposts (62) is organised in small and lean teams of less than 10 people, in the form of either a Corporate Innovation Antenna (7), CVC Of ce (39) and small Innovation Labs (15). Around half of the Corporate Innovation Labs have decided to have a team between 10-50 people, and only 5 labs have grown to larger teams.
The R&D centers, in particular, have been almost doubling every 10 years since 2000, confirming Israel has been recognized for decades now as a strategic ecosystem where to establish research & development activities. Innovation Labs, managing a broader range of activities related to corporate innovation, are even particularly interesting as their number has been doubling over the last 5 years only. Furthermore Corporate Innovation Antennas have started growing too, with 6 out of 7 outposts of this type established over the last 5 years. Finally, CVCs are also widening their presence with their number growing three times over the last 10 years, from 13 to 39 outposts.
The largest cluster for corporate innovation in Israel is, with no surprise, Tel Aviv, with more than one-third of the innovation outposts located there (74, 37% of the total) and 5 out of 7 Corporate Innovation Antennas. However, innovation-related activities are spread all around the Startup Nation and concentrate in a series of pulsing hubs like Herzliya (26 outposts, 13%) and Ra’anana (13%), Petah Tikva (11%) and Haifa (8%). While in Tel Aviv and Herzliya it’s possible to find a mix of outpost types, most of the other hubs show a predominance of R&D activities structured around larger teams and operations.
