32 European large corporates are present in Israel with 41 innovation outposts.
While antennas and investors dominate in Silicon Valley, 60% of the outposts in Israel are R&D Centers. Engineering, Electronics and Life Science dominate the country.
There is no doubt Europe is looking into Israel as the next tech hotspots after Silicon Valley. Today Mind the Bridge launched a new report in Tel Aviv at the opening of European Innovation Day, the central event of the first edition of SEC2IL – Startup Europe Comes to Israel. The report shows information on 32 European Corporations that have a presence in Israel. And of that group, 7 have a multiple presences with a combination of R&D and CVC outpost, or R&D and Lab*, for a total of 41 European Innovation Outposts in the country.
“Large corporations are increasing their efforts to find innovation and disruptive technologies in the world’s most relevant technology hotspots, and in this search they are branching out to innovation ecosystems to engage with the technology and talent there – commented Alberto Onetti, Chairman Mind the Bridge and SEP Coordinator – In September 2017 we analyzed the European Corporate Innovation Outposts in Silicon Valley, ‘the innovation ecosystem par excellence’. But Europe is also seriously looking into Israel as an innovation powerhouse. This report represents our effort to map these activities by European corporations in Israel with the goal of validating data and finding who’s who”.
EU Ambassador to Israel Emanuele Giaufret welcomed the initiative, saying: “Cooperation between the EU and Israel in the research and innovation sector has been a long standing priority, receiving considerable investment over the last 20 years through Israel’s participation in the EU’s extensive research and innovation programme. It is certainly fitting that Israel is the second place in the world, after Silicon Valley, in which the Startup Europe Partnership has brought its platform. Connecting the Israel and European innovation ecosystems is an obvious step forward in our ever-evolving friendship”.
According to the research, the 32 European Corporates mapped represent 9 European countries. France, Germany, and the UK, at the top of the scaleup economy charts, are by far the most present in terms of corporates in Israel. Germany leads with 10 corporates, followed by France with 7 and the UK with 6. Other countries with one outpost include Italy (Enel, beyond the French-Italian ST), Spain (Telefonica), Finland (Alcatel-Lucent, acquired by Nokia), Sweden (Ericsson), and The Netherlands (Philips).
Nearly half were founded in the last 5 years, despite there being a group of companies present that were founded before 2000 (Merck in the 70’s, SAP and Deutsche Telekom at the end of the 90’s).
The strong majority (24) are R&D Centers, a testament to the strength of the Israeli workforce and skills which make it so attractive for corporates looking for a non-European R&D Center. Making up the rest of the pack are 10 Corporate Innovation Labs, 4 CVC Outposts and 3 Corporate Innovation Antennae.
They represent 11 industries: Engineering and Electronics is the most active with 6 outposts, largely high tech manufacturers (ex. STMicroelectronics or Carl Zeiss AG), who are using R&D Centers in Israel to take advantage of the educated workforce and large numbers of skilled professionals. Other verticals with a strong presence include IT & Software (with 5 outposts), then Telecommunications and Biotech with 4 each.
“The strong presence of Life Science and Biotech is not surprising, and is weighted heavily with companies like Merck having multiple outposts, like 2 R&D Centers, 2 Labs, and a CVC office – Alberto Onetti added – Biotech is an industry that revolves around R&D, and Israel has spent the last two decades developing an education system that has made it one of the biggest life science talent hotspots in the world”.
Israeli vs Silicon Valley **
Despite the relative geographical proximity of Israel, which play into things like the time zone difference (1/2 hours vs 8/10) and ease of travel between European HQ’s and outposts, more European companies (over 50) have an innovation outpost in Silicon Valley compared to Israel (32). That being said, as an average, Israeli outposts are larger, while Silicon Valley outposts are leaner.
In addition, Israel is more focused on R&D Centers (60%) than on CVC (less than 10%) while in Silicon Valley CVC outposts are 25% vs 18% of R&D Centers. That seems to suggest that the raison d’etre in Silicon Valley is more transactional (investments and M&As), versus a more research/co-development approach in Israel. In Israel, R&D trend continues across verticals, however it is also clear that many of those companies with multiple outposts also have a lab or CVC outpost in addition to the R&D Center presence. The latests trend, similarly as reported in Silicon Valley, shows an increase of lean forms such as Antennas and CVC as corporates explore the potential benefits of the ecosystem.
Finally, while Automotive (20% of the total) and Finance are at core of Silicon Valley outposts, with IT & Software being the least present (2 outposts, 4% of the total), Engineering, Electronics and Life Science dominate Israel. Insurance vertical as a whole is totally absent, with no outposts reported, while multiple are present in Silicon Valley.
“Of course This report is a preliminary study. We followed the approach set in the previous year with our Silicon Valley Innovation Outpost Report, which has the same goal but for a different region – commented Marco Marinucci, CEO Mind the Bridge – Future reports will continue to track the differences, specifically among corporates who are present in one but not the other, such as Merck or Barclays, or differences in outpost form between the ecosystems. Stay tuned for continuing updates”.
“Corporate Innovation Outpost” (or “Corporate Innovation Center”)
A team of people and often a physical site that is set up by a corporation in a global technology hub to perform/support activities of: Technology Scouting, Open Innovation, Startup Investments, and M&As. A Corporate Innovation Outpost must have at least 1 full time person in the Bay Area in order for it to be taken into account.
“Corporate Innovation Antenna”
One to a few people in Silicon Valley bridging the corporate to a startup ecosystem and facilitating corporate cultural transformation. Typically the Antenna is hosted in a coworking space or third party innovation center.
“Corporate Innovation Lab”
Beyond bridging, Labs have an office tasked with innovation than can include startup incubation, acceleration, and strategic partnerships.
“Corporate R&D Center”
Beyond the above, R&D centers handle a critical component of initial production and MVP/prototyping as well as dedicated vertical research teams. Typically associated with hardware companies and deep enterprise software.
An outpost that hosts some partners/associates of the corporate venture capital fund.
** Data comparison with Mind the Bridge Report “European Corporate Innovation Outposts in Silicon Valley. The Who’s Who”, March 2017.