Accelerators Let Startups Hit The Gas

By Tali Tsipori Globes, Tel Aviv, Israel.

Although Israel's high-tech industry is already quite mature, and being a start-up entrepreneur is not really an innovative idea, founding a company, let alone a company that will survive, is not easy.

Moreover, the process is liable to turn out to be quite hard as time goes by, with the pace of technology innovation almost as fast as a Formula 1 racing car.

This is the main reason why every entrepreneur, even one for whom this is not his first start-up, needs support and advice, as well as office space to work in, and it is the reason technology incubators and accelerators are flourishing.

There are both private and government incubators -- incubators supported by the Office of the Chief Scientist. In Israel at least, the accelerator program is a structure that is much more suited for new outstanding companies and offers programs that are usually shorter than those of incubators.

Below, "Globes" reviews the four incubators and accelerator programs which are participating in the SmartUp3 competition.

8200 EISP: not just military intelligence 8200 EISP, the Entrepreneurship and Innovation Support Program, is one of Israel's oldest and most successful accelerator programs, by amount of capital raised, participating in the SmartUp3. Managing director Guy Katsovich says that the program is not intended only for veterans of the IDF Military Intelligence Unit 8200. Veterans of this unit account for a substantial proportion of Israel's information security entrepreneurs.

"Each year, we admit to the program 20 companies out of 400 applicants. We do not invest in these companies, but only provide them office space, marketing, business, legal, and other advice. This is not a for-profit program," says Katsovich, adding that the program receives financial support from sponsors, such as Battery Ventures LP, Bank Hapoalim (TASE: POLI), and Ernst & Young Israel.

"Our program is for early-stage companies. An entrepreneur can come with only a preliminary idea and PowerPoint presentation.

That does not mean that we are not seeking quality," says Katsovich, emphasizing that the program stresses the entrepreneur's personal potential and the quality of his team. "We're one of the few accelerators that accept individual entrepreneurs. Of the 20 companies admitted this year, four were individual entrepreneurs." He admits, "The entry threshold for ventures falls as time goes on."

EISP 8200's offices are located on Dubnov Street in Tel Aviv, just 15 minutes walking distance from the Azrieli Towers. Katsovich says that the program does not restrict itself to any particular industry, noting, "In the past year, cyber companies dominated the 400 applicants, but the range of the companies' businesses is quite broad."

Explore.Dream.Discover: an Israeli veteran Explore.Dream.Discover was founded 16 years ago as a government incubator, and was privatized in 2011, when it acquired its current character. Co-founder and CEO Duby Lachovitz says that the incubator focuses on Internet, mobile, and new media companies. "Each year, we receive more than 1,000 inquiries, out of which we accept just ten. Above all, we seek extraordinary entrepreneurs, followed by companies in our area of expertise. It is important for us that the entrepreneurs will be determined and mature people, who have a experience in high tech. It's not easy being an entrepreneur. You have to know how to work under pressure, to be isolated, and make dramatic changes."

Six companies have joined Explore.Dream.Discover since the beginning of 2015, and Lachovitz says that there are a growing number of Internet of Things (IoT) companies, and fintech ventures.

Nielsen Innovate: for Nielsen clients Nielsen Innovate was the first Israeli incubator established jointly with a multinational, Nielsen Holdings NV (NYSE: NLSN), which has a market cap of $16 billion. Nielsen Innovate specializes in market research, consumer behavior, data analysis, and marketing and advertising solutions; the start-ups it seeks must operate in these fields. "This is an incubator with a bit of the character of a venture capital fund, because it has private shareholders besides Nielsen," says Nielsen Innovate CEO Esther Barak-Landes.

"We are not just seeking companies operating in the same fields as Nielsen, but also companies which can help Nielsen's 24,000 clients worldwide, including Alibaba Group Ltd. (NYSE: BABA) and Unilever plc/NV (NYSE: UL, UN: LSE: ULVR; Euronext: ULA)," says Barak-Landes. "Every year, 400-500 companies contact Nielsen Innovate, which admits six or seven of them. Since the beginning of 2015, the incubator has admitted two companies and two more are waiting approval of the Chief Scientist.

"Many companies admitted to our incubator change their business direction as a result of working with us, even as their technology remains the same. That is the incubator's objective: to help companies target their solutions." She emphasizes that the incubator avoids single-entrepreneur companies, because it considers that to be a disadvantage. "It is important for every organization to have several officers, each of them with a different expertise. Ultimately, this is an investment in people, and if it impossible to know from the outset who are the people you're investing in that's an opening to problems."

Moneta Seeds: a fund, not an incubator Moneta Seeds is new to the SmartUp program, as it was founded just this year. Co-founder and managing partner Adoram Gaash says that the venture capital fund manages $20 million and makes two main types of investments. The first is investing as a private incubator (without the Office of the Chief Scientist), making an initial capital investment in a venture and mentoring it. The second is a classic venture capital investment, leading seed rounds of up to $1 million in companies that do not participate in the incubator.

"Our areas of investment focus on fintech, but we also look at Big Data. We have strategic partnerships with banks all over the world; i.e. joint investment agreements in which the banks participate in the pre-investment review of a venture, and rely on the fund's managers to handle the investment process and sit on the venture's board of directors," says Gaash. Moneta Seeds has invested in four companies since it was founded. Two of the companies are in the very early stage, without a product or income, and two companies are more than a year old and have presented a beta stage product and have initial income.

"We do not give priority to entrepreneurs with an exit under their belts. We spend many hours with entrepreneurs before investing in order to gain an impression about their ability to carry the heavy burden of lifting a new business. Often, young and energetic entrepreneurs without success in a previous venture are hungry and have the ambition that compensates their lack of experience," says Gaash. "Our objective is not to replace the accelerators, but to complement their capabilities. We are an investment body and we'll be pleased to meet companies at the accelerators. That is why we raised money and launched only after we linked up with strategic partners. In this way, a small fund can have a big impact and lead a $1 million seed-stage investment in an expedited process."

Business cards 8200 EISP/accelerator * Founded: 2011 * Nature of activity: accelerator program to support high-tech ventures by veterans of Military Intelligence Unit 8200 * Number of companies admitted to date: 95 * Total amount of capital raised by participating companies: $250 million * Maximum number of companies admitted annually: 20 * Number of exits to date: 4 * Head of program: Inbal Arieli * Managing director: Guy Katsovich

Explore.Dream.Discover/incubator * Founded: 2011 * Nature of activity: an incubator that supports Internet, mobile, and new media start-ups * Number of companies admitted to date: n/a * Total amount of capital raised by participating companies: n/a * Maximum number of companies admitted annually: 10 * Number of exits to date: n/a * Co-founder and CEO: Duby Lachovitz

Nielsen Innovate/incubator * Founded: 2013 * Nature of activity: an that collaborates with multinational Nielsen Group to support start-ups in market research, consumer behavior, data analysis, and marketing and advertising solutions * Number of companies admitted to date: 12 * Total amount of capital raised by participating companies: n/a * Maximum number of companies admitted annually: 7 * Number of exits to date: none * CEO: Esther Barak-Landes

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