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Punching Above Your Wheat: How Israel Became a Hub for Agtech Startups

December 24, 2018

Editor’s Note: Ofir Schlam is CEO and cofounder of Taranis, the Israel-headquartered imagery analytics tools for farmers. Here he writes about Israel’s agtech startup ecosystem. 

Even before the state of Israel’s founding, pioneers emphasized cultivating the land through innovative and efficient agricultural work – 70 years after statehood, the fruits of Israelis’ labor in the fields and in the labs have been born out in the country’s flourishing agtech sector.

Amid a new wave of global agtech development, Israel is at the forefront of the innovative solutions enabling farmers and agronomists to optimize crop management and feed the world, with 750 active startups and companies operating in the food tech and agtech sectors. Drawing on its vibrant tech ecosystem, the Startup Nation has harnessed its technological prowess to develop some of agtech’s most successful solutions and companies.

How is this small country punching so high above its weight? And with next-gen farming just beginning to take root, how will the entry of multinational companies into the Israeli market impact local innovation?

Consolidating Knowledge

With an eye toward making the desert bloom, Israel’s founders instilled a mindset that, combined with the country’s impressive innovation networks, has fueled success in the agtech domain. Thirty-nine years before Israel achieved statehood, early pioneers founded the first kibbutz, a collective community focused on agriculture, in 1909. The kibbutz mentality was centered around sharing the land, pooling together and effectively managing scarce resources, and tackling the toughest farming challenges, from irrigation to efficient production. To this day, Israel’s kibbutzim have given rise to some of the country’s most prominent agtech companies, including Gal Yarden’s Beeologics, which was dedicated to bee health and the future of honey pollination, and Algatech, which cultivates algae for human and ecological benefits, including liver health and nutrition. 

Given Israel’s position as an isolated country that could not rely on neighbors for trade, Israelis had no choice but to develop their own inventive agricultural solutions– highlighting the deep links between survival and innovation. Inspired by a patriotic vision of developing the land, Israel invested in research and development to create new drip irrigation systems and other mechanisms for sustainable agricultural ecosystems.

The Volcani Agriculture Institute, for example, a branch of Israel’s Ministry of Agriculture and Rural Development, supports Israel’s agricultural development by offering research and educational opportunities to Israeli scientists, farmers and researchers. Another example is The Hebrew University of Jerusalem’s Faculty of Agriculture, Food and Environment. This institute of higher education was founded even before the State of Israel, to ensure Israel’s wellbeing, economic strength, and agricultural productivity. Both aforementioned institutes are pillars of the Israeli agriculture sector, in addition to being important drivers for the advancement of agricultural technology. 

Many famous scholars have come out of Hebrew University, including revered professor Oded Shoseyov, who is renowned as a nanotech pioneer. Shoseyov founded more than 10 companies based on his own inventions and technologies, including  Futuragene, which develops plant technologies to improve global sustainability; the company was sold for $100M.

Concentrated Capital

Israel’s agtech success has roots beyond the kibbutz or the classroom – even beyond agriculture itself. Given the country’s mandatory conscription policy, young Israelis are exposed to cutting-edge technologies and strategic thinking from early on in their careers. The IDF’s cybersecurity and intelligence body, Unit 8200, for example, has nurtured some of the country’s top tech talent, with veterans going on to found and lead companies in a wide range of sectors. Throughout the entire military, conscripts’ daily exposure to risk-taking and teamwork is well-suited to high-tech culture.

My story, for example, is a common one in Israel. I come from a background deeply rooted in agriculture. My family relocated to Israel in 1910 where they established one of the first agricultural farms in the country. Four generations later, they expected me to continue on their path of farming, however, I chose to study computer science instead. Several years later I felt ready, together with Taranis’ executives, to merge our skills to form Taranis.

Moreover, while Israel’s tiny size makes its massive influence in tech and innovation all the more remarkable, there’s a clear link between the country’s geographic smallness and innovative greatness. The proximity of a variety of top-tier academic, research, and corporate institutions creates a formidable, closely linked base of human capital, helping entrepreneurs build networks and experiment with creative strategies on a small scale before implementing them globally.

With both the highest amount of VC dollars invested per capita, and the highest dollar value of exits per capita, it is undebatable that Israel’s close-knit network works. The country has earned its title as the Startup Nation by attracting more VC money than any other EU country.

Big Investments, Big Choices

With all the success of Israeli agtech, global investors are looking to get a piece of the pie. Amid more than $24 billion in acquisitions and over $5.2 billion in startup fundraising in 2017, Israeli tech is in hot demand, and agriculture is no exception. In a landmark deal, China recently signed a $300 million trade agreement to increase Israeli exports of environmental-friendly agtech innovations. ADAMA Agricultural Solutions offers another case study in the global market’s interest in Israeli agtech. The world-leading crop protection company has developed an innovative mixture fungicide for soybean rust and is the first such company to be publicly traded on the Chinese stock market.

As Israeli companies attract more foreign capital, the recognition and visibility afforded by major investments and acquisitions is helping smaller companies scale up. At the same time, the entry of foreign capital has created an identity crisis for many startups, torn between maintaining their scrappy, anti-bureaucratic ethos and capitalizing on their success. While scaling means job creation, more value for the economy, and diversification in skills and experience, it also calls for the evolution of the Israeli startup itself. But local companies seeking to make an impact while staying independent and avoiding high-profile exits have little choice but to mature. Even companies that are not absorbed by multinational corporations will need to align their processes and business models with the needs and expectations of global players.

The Takeaway

While the tough choices faced by Israel’s agtech startups reflect the unique dilemmas that come with being a small country with an outsized impact on innovation, Israel’s record of punching above its weight is not the paradox it may seem. Precisely because Israel is a small country with relatively few natural resources of its own, it has stressed the development of forward-thinking, highly advanced agricultural solutions.

Like Israel’s agricultural development, the emergence of its renowned tech ecosystem reflected both a culture of ingenuity and the need for this tiny country to build a competitive advantage in the global marketplace – and Israel’s agricultural and tech ecosystems have developed a symbiotic relationship, giving rise to world-leading agtech companies. As multinationals enter the local market, Israeli agtech startups should embrace the opportunity to scale their impact. It will require maintaining a relentless commitment to entrepreneurial and technological dynamism, while also calibrating their strategies to suit the needs of a global market that’s craving Israeli innovation.

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